The Agora Dispatch — Weekly Newsletter — Wednesday 25 January 2023
Welcome to the Agora Dispatch — news and views from around the econOHMy
Summary:
- Editorial — Grinding up
- Marco round-up
- Around the econOHMy
- DAI Savings Rate — 1% but it’s honest work
- Wartull Thread
- More FRAX — deploying $2M to Fraxlend?
- TAP-19 deposit to UP TO 100% to AURA of our Balancer pairs
- First set of composable OHM bonds expire
- Potted Thoughts — On liquidity
Editorial — Grinding up
For OHM it will most likely always be a grind to move up, as people deleverage and as OHM lending comes online . Speculation will reign — but to paraphrase Potted from his class with Asfi last week — it is those same speculators that would be the force causing us to trade above liquid backing in future if we do.
Most of us are sitting easy though, leaving the games to the speculators.
We also launched a new pod called Agora Offisiders with WAGMIcapital, Stablino, and Shark11 — where they round-up the week that’s been (a few sound quality issues this week but will be better next week). Check it out:
Marco round-up
- US Treasury General Account (TGA) kept increasing net issuance — which was as expected owing to the US debt ceiling and Congress not yet approving an increase (as recommended by WAGMI we are following Dharmatrades to keep track of this)
- What the US Gov does is important but global liquidity is a much bigger pie
- And just in time, we see Canada giving the signs of the first major western gov to move to interest rate hike pause
Around the econOHMy
- Frax Flywheel boyz seeking $200K in funding for the 2023 year — we are big supporters of the work they are doing!
- Redacted x Jones partnership proposal — Redacted to be initial large depositor into jUSDC
- Klima passes a proposal for retirement bonds. This will allow it to sell the carbon tonnes in its backing at the current market price of KLIMA with a spread — think of it as similar to OHM inverse bonds
- We saw the first new OHM fork come onto the scene, OrionFi, running up to 12K followers in the first week of launching its twitter — which could signal a change in market sentiment — NOTE WE DO NOT ENDORSE OR HAVE KNOWLEDGE OF WHO IS BEHIND THIS FORK — IT IS PROBABLY A RUG
DAI Savings Rate — 1% but it’s honest work
TAP-18, the proposal to deposit $77M of the Treasury’s DAI into the MakerDAO ‘ risk-free rate’ sailed through governance.
It only pays 1% apy but given we don’t have a better stablecoin or low-risk rate for DAI atm, it is prudent to grab what we can. In future, we will probably be looking at more decentralized USD’s like CRVUSD, DINERO, etc.
The deployment of our DAI though, highlights the growing risk Maker and DAI are taking on — in pursuit of a strategy to lend against real-world assets. Follow Chris Blec for RWA complaints.
Wartull Thread
Wartull hit us up with an awesome thread on twitter — highlighting what might be in store for the Ohmies in 2023.
Of particular note was a secret sauce ETH LSD plays with OHM liquidity — where Olympus provides one side of a pair as OHM and the ETH LSD holder provides the other. This would allow the LSD holder to maintain their exposure to ETH price and keep their yields.
Check it out:
Proposed new compensation structure for the DAO
Shadow came down to the forums to put out the proposal to restructure the Olympus DAO comp structure.
The biggest takeaways were that the bonus for contributors would be capped at $1M — split between completing 3 major projects a year on time.
The budget including bonus would be $5.2M with an additional $780K for audits, legal, etc.
It looks pretty competitive and values aligned to us.
More FRAX — deploying $2M to Fraxlend?
The Agora Contributors started a discussion on whether to deploy $2M FRAX from treasury to Fraxlend gOHM/FRAX pair.
The issue we were trying to address was that we urgently need holders to be able to borrow at useful rates — otherwise, they will be forced to liquidate holdings of OHM in order to pursue opportunities — this is a top concern for the community.
Interesting discussions are being had on the incremental risk of holding and not deploying FRAX into Frax protocol products — and whether the deployment would fuel 9,9 mania.
TAP-19 deposit to UP TO 100% AURA our Balancer pairs
The DAO is ready to move our Balancer pairs to AURA to keep earning out that sweet BAL/AURA yield.
As Abi says:
Now that Aura is well established and proven to be a solid and reliable protocol, paired with the fact that the contracts are a direct fork of the convex contracts, the Policy team is comfortable depositing 100% of POL (like was done with the Sushi POL) into Aura.
We agree!
Tap-16 — Opyn Crab, gets snipped
Unsurprisingly, given how the vote was going, this proposal did indeed get snipped with 90% voting against it.
It seems there was a sentiment that being short volatility isn’t the play in the current markets.
First set of composable OHM bonds expire
We saw the first set of composable bonds come to maturity this week — the 30-dayers.
You can keep track of the secondary markets for Bonds on this fine Dune Dashboard created by spoys P — thanks spoys!
Also thanks to bond hype man thoma3,3covell(🥃,🥃) for the countdown to expiry and for being an all-round bond enthusiast.
The next questions are:
- When new bonds?
- What next steps?
- How analyze?
Potted Thoughts — On liquidity
One of the more interesting aspects of moving applications to the blockchain is a rethinking of the way we interact with them. Running code that changes the state of a public ledger is expensive and developers need to find new ways to work around it. Many “crypto natives” probably haven’t fully wrapped their head around this big shift even though it’s what crafts their experience.
The bid-ask system known as an order book, common to many trading platforms, doesn’t fit neatly into this model. As a result, automated market makers (AMM) were introduced, which reprice themselves based on buying and selling and are always presenting a bid and ask, available for trade.
AMMs require liquidity to be added to a pool and, once those tokens are made available, trades flow in and out through the tokens owned by the pool. Point being that once liquidity has been added, there is effectively always a buyer and always a seller. It’s mostly taken for granted in crypto that you can very quickly get in and out of a position if you want to. Amazing! Thanks for reading my article.
Oh, there are some gotchas people should know about? Hmm, let’s dig into them. I guess you should know that the less liquidity there is in a pool, the greater a trade will move the price. Which reminds me that without having a large amount of a token supply provided as liquidity, the pool really won’t be able to handle much selling without its price dropping significantly. And I guess that could be even worse if people removed their liquidity and sold it. Maybe that could lead to a spiral of selling and reduced liquidity that could quickly drive the price to 0.
But who would invest in a project with a low liquidity-to-market-cap ratio where liquidity could be pulled at any time? Not us, that’s for sure.
Till next week Ohmies!
