Medium-to-long term $Bond KPI options

Preamble: earlier this year the team at UMA decided to airdrop their KPI (key performance indicator options to a large number of governance active addresses. KPI in this case meaning that the payout (in UMA) depends on the TVL of their protocol. This was done both as a PR stunt to get the word out & to align incentives for the protocol’s medium-term adoption.
Giving stakeholders conditional upside exposure through call options is nothing new in traditional finance & tech, yet its rare in defi (in fact UMA is the only example of such an option distribution that I know of)

Concrete example
There are currently 3 ways to gain exposure in another DAO

  1. farm their coins with treasury funds/pool 2 migration to sushi/tokemak
  2. exchanging treasury $bond for their token at market value in order to gain immediate influence in the respective DAO
  3. exchanging european style options that would expire at a much later date with Barnbridge TVL as a payout variable

Example 1 is “free” but slow
Example 2 is immediate, but uncertain in achieving mid-to-long term aligned incentive & strong, mutually beneficial partnerships
Example 3 although experimental, might just be the balance between no immediate cost & long term strategic partnerships

This is all in the context of strategic partner acquisition but could also be expanded internally, e.g. paying liquidity providers & stakers partly in long-maturity options, reducing immediate dilution while incentivising community retention.

I believe option distribution to be a powerful yet underused tool for fostering cross- and inter-dao relationships that last & build upon each other.

Open questions:

  • yay or nay
  • what protocol to use
  • how much should be set aside, if yay, & general deal sizes