Propose to Accumulate BOND/ETH Liquidity with Olympus Pro

Summary
This proposal outlines a pilot proposal for the Barnbridge DAO to begin accumulating BOND/ETH liquidity on AMMs. At the time this proposal is written, there is approximately $1.5M in total liquidity for BOND/ETH between Uni ($1.2M) and Sushi ($0.29M) and most of the BOND liquidity is in the BOND/USDC Uni V2 pool ($26.6M). Barnbridge is incentivizing this liquidity over 100 week-long Epochs with 20k BOND emissions per week. 49 out of 100 weeks have been completed.

This proposal is born out of discussions with the team at OlympusDAO and aims to replicate their bond mechanics to offer bonds that sell BOND at a discount in exchange for BOND/ETH LP tokens. As a pilot Barnbridge can contribute 15k BOND towards these bonds for 1 month and assess the impact on liquidity accumulation and token price.

Motivation
Shift from the initial liquidity mining phase of BOND to reduce the supply per block and enable the DAO to own its own liquidity. Implementing bonds reduces the need for BOND incentives which only create temporary liquidity and persistent sell pressure. Importantly, bonds incentivize active Barnbridge members to participate in the program and help distribute tokens to these users.

Specification
For those unfamiliar with the Olympus bond mechanism, the bond contract essentially sells a token (ex: BOND) at a discount in exchange for assets (ex: BOND/ETH LP tokens). Bonds operate by initializing the price for LP tokens above market price and then applying a discount function that decrements price until a bond is purchased, which pushes the bond price back up. This mechanism allows the market to determine the optimal price for bonds. For reference, here is the average discount of OHM bonds with their extremely high APY:

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Olympus is offering to provide its expertise in bond contract management to support other DAOs interested in owning their own liquidity. This will include providing the UI for bonds and maintaining bond control variables to balance emissions with liquidity accumulation. In exchange for the implementation and community engagement, Olympus would take 3.3% of all BOND sold and use as backing for OHM. This will align the success of our communities and allow for cross-DAO governance participation.

Barnbridge’s bonds would be offered with a 7-day vesting period to ensure that discount buyers are incentivized to hold their positions. This helps align the goals of bond participants with the goals of the DAO. Bonds will be paid out in BOND in order to save users the gas cost of staking. In addition to purchasing BOND at a discount, bonders know that they are providing permanent liquidity to Barnbridge’s treasury. An additional benefit of bond programs is that they eliminate impermanent loss inherent in traditional liquidity mining and the discount is locked in at the point of purchase.

Proposed Bond Program:

  • Accumulate BOND/ETH liquidity on Sushi
  • Bond 15k BOND over 4 weeks
  • Vesting period: 7 days

For

  • Implementing bonds for BOND/ETH liquidity adds value to the DAO treasury
  • Protocol-owned-liquidity allows liquidity incentives to be tapered over time
  • Lower BOND emissions in the long-term should improve tokenomics

Against

  • Added BOND emissions via bonds in the short-term may cause sell pressure
7 Likes

fully support this proposal

I’d prefer us target the BOND/USDC pool and farm our pool 2 with the proceeds.

7 Likes

I agree with this. Getting a BOND/USDC LP token I think would be better. My guess is that a lot of people will prefer to swap USDC for BOND anyways over ETH. Plus it makes the discounted bond more attractive to purchase because the BOND/USDC pool has a pretty good APR.

DISCLAIMER: Not a pro investor so take it with a grain of salt.

1 Like

Hey everyone, I would like to present an alternative in the LP base token with G-UNI from Gelato. For those unfamiliar, G-UNI wraps Uniswap v3 positions to make them composable ERC20 tokens that auto-compound fees. The advantages of G-UNI include for users, they have the same experience as if they were providing liquidity to Uniswap v2, and for protocols, it aggregates liquidity from a wide range of sources into one concentrated position. To date, projects such Fei, Instadapp, and Float have used G-UNI for their liquidity mining programs while MakerDAO and Rari have G-UNI pools as collateral on their platforms.

After months of variations and adjustments, the Gelato team has come to the conclusion that the best strategy for volatile pairs such as BOND/ETH or BOND/USDC would be to have multiple fixed range G-UNI pools. What I propose is that BarnBridge sell bonds for G-UNI LP tokens that accurately reflect the price action of BOND.

Here is what an example of what that would look like; In week one, BarnBridge can sell bonds for G-UNI BOND/USDC LP tokens that have a fixed range between 10%-90%, week two the bonds could be sold for LP tokens at a range between 30%-80%, week three bonds are sold for LP tokens with a range between 65%-95%, and week four bonds are sold for LP tokens with a range between 3%-38%.

The benefits of this strategy include that the liquidity of BOND/USDC is sprinkled in a concentrated manner in a “brick by brick” fashion based on natural demand. This will ultimately give BarnBridge more flexibility and agency in how liquidity provisioning is directed, improving market efficiency overall for themselves and their token holders. Where I do see a possible issue is communicating what new bonds are being sold every week, but that is something that we can easily work together to overcome.

The Gelato team is standing by to help BarnBridge and Olympus with every step of this process. I open to feedback and am happy to answer any questions anyone may have on this. Thank you :pray:

2 Likes

100% in favour, IMHO.

I will for the proposal, should be a good partnership and encourage use via OHM community!

As mentioned above. I would prefer the BOND/USDC pair. In that way, we (BarnBridge) get to hold the LP of BOND/USDC, meaning we would fill up our treasury with USDC (if BOND becomes more valuable). I rather have a treasury of USDC than ETH.
In that case, if we ever need stables, the DAO could unstake the LP and spend the USDC.

2 Likes

I agree with Mike here.

I love your suggestion and am going to look into it. I think the immediate goal right now is to move quickly to get Barnbridge into the next cohort of Olympus Pro participants. It would likely take some tweaking of the OP bond contracts so doubtful that we could pivot. Keep in mind this proposal is just for a pilot to get things going. That doesn’t mean that we can’t get creative with it in the future.

1 Like

I like the thought process. In talking with Max about going with USDC vs ETH, he leaned a bit more towards ETH so that BOND could diversify it’s liquidity denominators. This would give BOND more upside as ETH appreciates and also help to minimize regulatory/centralization risk associated with USDC.

As to unstaking and selling, that may be a can of worms. The point is to deepen liquidity and to unstake and sell could have bad optics for everyone that purchased bonds with the understanding that they were creating a permanent liq. pool. Then again, Barnbridge has a great engaged community so if everyone got together and voted to unstake and sell a portion because it was the right move for the project then who’d really be mad right?

All that said, keep in mind this is just a pilot integration for now and anything can be changed in future iterations or extensions.

The eventual goal is to accumulate secondary liquidity for SA and SY product pools to balance Jr. dominance

2 Likes

I like the sentiment about diversifying liquidity denominators (with ETH) vs pursuing a second USDC pool. That said, the BOND/USDC alternative provides BarnBridge the opportunity to put BOND emissions back into the DAO’s pocket vs that of mercenary capital / whales, right?

If not now, this should be considered as a future proposal for better DAO control of emissions. We’ve already seen talks in Discord asking about whether Pool 2 could/should be stopped. Is accumulating BOND/USDC liquidity with Olympus Pro a more practical solution?

2 Likes

I understand why ETH. Honestly I don’t mind it. From a treasury perspective USDC makes more sense because if the project succeeds, the BOND-USDC pool would contain more USDC then BOND, thus treasury ends up with USDC.
Maybe selling the LP was a bit of an overstatement. We could borrow against the LP, and borrowing against LP with stable in the pair is much less riskier. Anyway, if the team wants to go with ETH, I am all for.

1 Like

In my opinion pool 2 should be stopped and used fully for Olympus Pro. We are paying massively (for liquidity) and the only reason to not go for Olympus Pro would be regulatory. Since we are talking about it (joining them with ETH), this may not be an issue anymore.
If this is successful we could have a DAO vote to half the rewards of the LP BOND/USDC and use them for Olympus Pro.

1 Like

I d love to see some of BOND liquidity in our treassury. And since there is no option to somehow change the LM program for LP pool, i d prefer BOND/USDC as well.

+1 Agree with Mike987.

Correct me if I’m wrong, but if the value of BOND rises significantly v USDC, even though the DAO would then have a significant amount of USDC, wouldn’t the DAO also suffer significant impermanent losses? That might be minimized if we expect ETH to rise significantly, as well. I’d vote for BOND/ETH, all else equal, but I’m a bit uncertain given the USDC pool incentives …

Mike987 is right… BOND/USDC would be a great choice