[Proposal] Pylon <> Olympus Pro Partnership

Pylon <> Olympus Pro Partnership

Summary: We’re proposing Pylon take part in the Olympus Pro program. Through Olympus Pro, Pylon can accrue liquidity for key liquidity pairs, help diversify the treasury and create new revenue streams for the DAO.

Abstract: Olympus Pro is a bonding service that allows partner protocols to acquire liquidity on token pairs while offering users discounted tokens in return. At the time of writing, Olympus Pro has helped over 24 protocols amass over 16M worth of liquidity.

Olympus Pro helps issues with current liquidity mining:

  • Sell pressure caused by inflationary liquidity mining incentives

  • Rented or time-locked staking only delays liquidity attrition

  • Once the rewards of the liquidity mining dry up, liquidity providers transfer their funds elsewhere

  • Impermanent loss

    • IL hinders users from providing liquidity
  • Price volatility

    • Uncontrolled liquidity creation and selling creates volatility which makes the price discovery difficult

What are the protocol benefits of this new bonding mechanism?

For protocols there are a number of benefits. One of the primary benefits is creating a new revenue stream for the DAO. By owning their liquidity, the DAO will start to capture trading fees. At the time of this writing the 24 hour volume on the MINE-UST pair was $4 million dollars, the DAO realizes none of those fees.

Additionally, since there is no longer a need for extreme inflationary token incentives MINE will have a protected liquidity floor. This helps to protect from illiquid markets and creates a better trading experience for token-holders due to minimal slippage. Finally, the Olympus Pro program helps Pylon gain exposure to the Olympus community!

Motivation: What are the benefits for the community?

Gives the community the opportunity to buy discounted (~5-10%) tokens in exchange for providing the protocol a liquidity position. This provides a truly positive sum interaction between the protocol and community. In typical liquidity mining scenarios, the protocol pays out their token for individuals/entities to temporarily provide liquidity. With Olympus Pro the Pylon still pays out it’s token but receives an LP/asset in return. A win-win for both parties!

Additionally, community members that provide liquidity will not have to suffer impermanent loss. Impermanent loss describes the temporary loss of funds occasionally experienced by liquidity providers because of volatility in a trading pair. With Olympus Pro they simply provide an LP position to the protocol and receive MINE in return! The MINE is linearly vested over a typical time period of 7 days.

Current status of the Olympus Pro Program and it’s partners:

We have over 24 deployed partner projects on Olympus Pro with over 100 pending applications

  • Some notable bond contracts which have amassed large amounts of total bond volume (TBV) are:
    • Alchemix - $4.37M
    • Frax - $1.97M
    • Pendle - $1.52M
    • Shapeshift FOX - $933K
    • Stake DAO - $877K

Olympus Pro: https://pro.olympusdao.finance/

A Beginner’s Guide to Navigating Olympus Pro: A Beginner’s Guide to Navigating Olympus Pro | by OlympusDAO | Nov, 2021 | Medium

Specification:

For: Create partnership with Olympus Pro

Against: Do not create partnership with Olympus Pro

10 Likes

To clarify, the requested proposal is to use $MINE taken from the community fund to fund the bond program with Olympus.

If I have understood properly the liquidity would come from Mine acquisition. Is it correct?

Can you elaborate the following part

Gives the community the opportunity to buy discounted (~5-10%) tokens in exchange for providing the protocol a liquidity position. This provides a truly positive sum interaction between the protocol and community. In typical liquidity mining scenarios, the protocol pays out their token for individuals/entities to temporarily provide liquidity. With Olympus Pro the Pylon still pays out it’s token but receives an LP/asset in return. A win-win for both parties!

What do you mean with LP/asset in return?

So, if Pylon does this, does Mine all of a sudden get a huge APY for staking it, similar to all the Olympus forks?

Or is this proposal simply for the bonding mechanism, ie. discounted Mine in exchange for LP for the treasury? And the Pylon staking rewards would still come from buy backs?

1 Like

There should also be a “zap” feature like Wonderland has, where a user can provide UST or another acceptable token that automatically gets traded for the LP pair seamlessly, simply because it’s a very easy UI experience for a user

4 Likes

This comes from the buyback program? As mentioned in pervious proposal? So the protocol/ community will create its liquidity? And this is a continuation on how we can achieve that? If i got it right than FOR. :+1::pray:

1 Like

Crazy, less than 24 hours ago @Buchimgae posted this Implementing Ohm-like bonding system (Rented liquidity to protocol-owned liquidity) in the forum.

What great timing, currently the Pylon community is exploring (potentially implementing soon) PoL.

To preface, Pylon’s potential move to PoL has birthed a few different approaches from the community’s discussions. What I would like to know is if/how the Olympus Pro approach would be better than what our community has already thought of?

Current potential approaches.
Note: Our treasury will have approximately $140k UST weekly income and an additional 750m $Mine.

  • Using a % of the treasury’s $Mine and weekly UST to incrementally establish PoL. This can coincide with reducing gradually reducing the LP rewards.
  • Use the treasury’s UST to buy $Mine and then add that $Mine and additional treasury UST to PoL (again weekly instalments).
  • Use the treasury’s UST and Mine from the LP rewards to gradually establish PoL via weekly instalments. This would therefore reduce LP rewards whilst simultaneously providing liquidity.

Note: These would likely happen with 50% or less of the treasury’s weekly UST, so a weekly PoL increase of $140K or less.

1 Like

I’m in this proposal, been thinking POL on pylon was in need. What’s the fee by Olympus Pro will be like though, 3.3% ? would like to know specific parameters.

2 Likes

I love the idea of PoL.

However, this particular proposal is terribly incomplete, it fails to state clearly:

  • the costs of this partnership to the Pylon community,
  • the case for why this is better then our other options for establishing our own PoL (if we do it ourselves we can nearly eliminate our $mine inflation / emissions, maintain our LP liquidity, preserve flexibility to use funds for IDOs, and really drive our token price up by being smart and strategic with our T fund — as opposed to handing over our liquidity to someone else to charge us fees and eliminate our flexibility),
  • details around security (who has custody of the funds in this model?)
  • details of risks connected to OHM and it’s stability (what happens to the Pylon community funds if OHM collapses?)

As such, I’m afraid I’m a “NO” vote in the current form.

With the questions answered & proper analysis of alternatives, I might change my vote.

5 Likes

The liquidity comes from acquiring LP tokens. Through bonds, users will be able to buy Mine at a discount by paying for it with LP tokens (eg Mine:UST) . From that moment forward those LP tokens belong to the Protocol. So instead of spending Mine to rent liquidity from mercenary capital, the protocol will outright buy it and forever be the owner of it.

1 Like

Your second option is the right one :v:

Could you link the proposal you are referring to plz?

But yes, this is definitely a mechanism for the protocol to own its liquidity. A step forward to a long-term sustainable liquidity strategy

So basically the proposal is to give some liquidity to pylon and LP ownership is just a suggestion (already under discussion in the forum). I don’t think it is the unique valuable improvement in capital allocation but I think it is a good point.
The cons i see is that this comes selling mine at discount when I think mine trades already at discount and in addition is in discussion the setup of a treasury which could be filled very quickly.
I would consider the olympus pro offer only after a more concrete discussion: something that can concretize in few months if there are clear advantages.
I am glad that olympus showed interest in pylon: a very good signal for the community.

1 Like

We’re currently working on this feature!

@visionary.ust

Yes, just 3.3% fee of MINE. This service is more in favor of Pylon than Olympus :slight_smile:

For example, Frax protocol has so far acquired $2,587,624 of FRAX-wETH liquidity, Olympus has gained $139k of FXS.

1 Like

No, this is incorrect. Pylon is collecting LP position so that they own it themselves rather than paying individuals to provide that liquidity. For example: MINE-UST LP APR 90.89% $75M total provided, what this shows is the amount of LP provided by the community or worse those just looking to farm the LP, in return Pylon provides 90.89% APR… meaning they’re paying the community to provide liquidity. Statistically, what we’ve seen is once these rewards dry up the liquidity moves to the next farm leaving protocols illiquid and causing major sell pressure.

TLDR: Pylon is already allocating capital to liquidity mining incentives. In this scenario they pay the same amount of capital, except here they own that liquidity forever. This leads to a long-term economic health for their place in the Terra ecosystem and brings in new revenue. For example: MINE saw a 24 hour volume of $1,069,263, Pylon saw none of those trading fees. Olympus Pro solves not only this but it also is a mutually beneficial relationship between the users and the protocol. The users can still provide liquidity and get rewarded for it while Pylon gets to own their liquidity, cementing their place in the Terra ecosystem and can now focus on more interesting endeavors with their liquidity.

1 Like
  1. The cost of the partnership is just a 3.3% fee to Olympus of MINE which we diamond hand forever and never sell. This would not be mutually beneficial if we sold MINE and we don’t like causing sell pressure on our partners.

  2. The proposal is just that, this is a way for them to establish POL, we do a lot of the heavy lifting in terms of engineering and policy management. Pylon in return just pays us a very small fee of 3.3% and owns their liquidity forever. Olympus Pro is not meant to be a forever thing, also Pylon can choose to also do reserve bonds where they can diversify their treasury with different assets. Olympus will not own the liquidity

  3. All contracts will be audited and the architecture of the contracts are designed in such a way that it does not pose a security risk to the primary Pylon treasury or Olympus’.

  4. This is not connected to OHM in anyway whatsoever. We do not own the liquidity, MINE will not be attached to OHM in anyway whatsoever. For example a bond could look like you provide MINE-UST to Pylon and in return you receive 6% ROI MINE linearly vested over 7 days.

Hope this clears up some of your concerns!

1 Like

Perhaps some of the liquidity should be redistributed as Mine to Mine stakers? This way the APY for staking increases further and will provide a greater incentive to stake. Doesn’t need to be crazy high like Olympus forks, but maybe it could be 200% or something.

I think also a 7 day (or something like that) unlocking period for Mine would also be good, along with a high APY.

Of course I see the point of taking your offer but i don’t see an urgency to close a deal.

The community should not forget that:

  • the inflow of liquidity in pylon is very high and growing (1mn per month is not a far target).
  • the inflation was intended to bootstrap the LPs and create a community (i think the goal was reached). it will be lowered

let the community digest the numbers you provided play scenarios and see under which conditions the offer make sense.

After the treasury is set up I think pylon will be perfectly positioned to decide.

correct! the fee is standard for all partners on all chains. 3.3%

1 Like

The only sense of urgency is just because we’re launching on Terra soon and we would love to partner with Pylon!

Every point you make reinforces the benefits of Protocol-Owned Liquidity.

  • That inflow could go to Pylon rather than just be rented. Remember that liquidity is ephemeral, it can and will go away when the rewards dry up. We’ve seen it time and time again with projects far bigger than Pylon such as SUSHI, YFI, etc. Additionally, establishing it now just further reinforces the revenue benefit.
  • Again, reinforcing to the above point. When the rewards are decreased so will the liquidity. Pylon will continue to inflate their token to create incentives for their community.

Again, there isn’t really an offer… it’s a partnership where we offer Bonds-as-a-Service and we just get a 3.3% fee. The benefit is really for the community. For us we’re just happy to partner with key Terra protocols for future opportunities and to grow both communities!

It is very interesting how you said there isn’t a treasury. Where are the tokens coming from?

4 Likes