Redirecting Buybacks to Protocol-Owned Liquidity

I will put this up as a governance poll within 24 hours.

This post builds on my previous Forum post: Establish a Treasury + Redirect MINE Airdrops for LUNA to MINE stakers

As well as Ed’s sharp listing of the issues with the current buyback structure: Establishing the Pylon Treasury

My proposal is as follows:

Instead of weekly MINE buybacks to be redistributed to stakers, this proposal will use half (50%) of the UST generated via yield to buy up MINE from market prices while leaving the other half (50%) in UST.

The resulting MINE and UST will be used to provide liquidity to the MINE-UST pair. MINE rewards generated from providing MINE-UST LP will be redirected to governance stakers.

Although this results in less short-term APR for MINE governance stakers, this new proposal generates buy pressure on MINE per buyback and results in providing a more sustainable runway for protocol growth in the long-run by investing in protocol-owned liquidity.

Furthermore, since the MINE-UST LP would be protocol owned and a part of Pylon’s treasury, later down the line, MINE governance stakers may decide what to do with the MINE-UST LP. Currently, since all rewards are redistributed to stakers and there is a lack of a Pylon treasury, such actions are not implementable. This means that later down the line the community can, for example, decide to unstake the LP, buyback MINE with the remainder of the UST in the LP, and then burn it as a whole.

The possibilities are open but first we have to build up a robust treasury, and protocol-owned liquidity via this method helps us take the first step towards doing so.

Let me know what yall think. Voting goes up within 24 hours.

4 Likes

To start, I would strongly recommend waiting to introduce a governance vote.

  • The community feedback is that they want significant time to discuss new ideas.
  • Currently, parallel voting does not function for many $Mine stakers, if the vote is put up soon a large number of people will not be able to vote.
  • To redirect any tokens to the treasury, we first need to establish the treasury. This proposal should come after the one written by Ed.

As for your proposal, I love the idea. It is in line with one I was drafting up (I will instead contribute to this). Your proposal provides multiple improvements for $Mine stakers, not to mention that the treasury would accumulate ASTRO with this.

There are two things I also think are worth considering.

  • Protocol owned liquidity comes with risks. One is a negative feedback loop for $Mine price. This risk can be mitigated by reducing the % of protocol owned liquidity in the treasury’s entire portfolio.
  • The desire of community members and the broader Terra ecosystem to reduce LP rewards.

To help mitigate this, I propose adjusting the move towards protocol owned liquidity.

  • Keep 50% of the UST generated via yield in the treasury, thus only utilising 50% of the UST for protocol owned liquidity.
  • Gradually reduce the $Mine used for LP rewards, redirecting this $Mine to the treasury to be used for treasury owned liquidity. Thus the treasury owned liquidity will be made up of 50% UST from generated yield and 50% $Mine from $Mine LP rewards that a redirected to the treasury.

This has several benefits.

  • Reduces the treasury’s exposure to its own token.
  • Gradually reduces $Mine emissions by redirecting LP rewards.
  • Gradually reduces LP rewards whilst simultaneously gradually providing more liquidity, therefore as people exit their LP when the LP rewards are too low for them, a similar proportion of liquidity will have been provided by the treasury.

Downside.

  • All UST generated from yield would be redirected to the treasury as UST or as protocol owned liquidity, thus $Mine staking rewards would be removed.
2 Likes

Generally, I’m supportive of not using the entire treasury for POL and continuing to use a portion of it for buybacks. I feel like that can be a separate proposal related to how we choose to use that treasury. I’m not sure 50% is the right number, but 0% is probably not the right number either.

Regarding Woody’s “downside” point, I think that can be mitigated by redirecting the $LUNA staking rewards to $MINE staking rewards.

I generally support the idea but I also think that cutting buyback to 0 from the start is not a good idea. I’d start with 50% and then gradually we can cut it down so the transition is smoother.

  • 50 % of UST goes for mine buyback and distributed among stakers (and lower by 10% each 1-2 months, moving it to trasury)
  • 25 % of UST kept in treasury
  • 25 % used for adding POL (50% of that chunk used to buy MINE and create LP tokens)

Once we build several M of liqidity we can start cutting down LP rewards.

1 Like

Very much agree with Woody

1 Like

Hello?
It has not been 24 hours yet since you post this, but somebody already made a poll on this…
The wallet was created few hours ago, and this is not a good way to manage the governance, I think.

For this vote, I will go with “No”, and suggest to split the proposal into 2 separate votes:
(1) Redirecting UST yields reserved for weekly MINE buybacks to Pylon’s community-governed treasury.
(2) Redirecting all LUNA airdrops to Pylon’s community-governed treasury.

Simply just because I agree with (1), but disagree with (2).

And again, I don’t want to be manipulated while not knowing who is the main decision maker in this governance system.
Maybe it is better to stay “No” to all governance polls until this meaningless status is cleared.

2 Likes

Proposal is up, there is no link to the discussion, and moreover, no consensus has been reached. Thats not the right way to do it.

Right now I’m also voting no without some more complex breakdown of such transition and to prevent rushing things too much in the future.

2 Likes

It is also very tricky that this post only captures the supporting ideas of original posts, not all the cons.
Thanks to the great function of Copy&paste technology, I was able to bring some cons here.

@Woody has summarized the issue on the post 1 and also provided reasonable solution as below:
With this in mind two things arise for me.
1 - I think it would be good to still reward/thank Luna stakers.
2 - The anger Luna stakers might have if we remove the MINE airdrops.

I see two solutions to this.

1 - We could ‘airdrop’ Luna stakers some of the UST earned from Pylon pools (the UST that is normally used to buy MINE and give to governance stakers) and instead give the MINE that would be airdropped to Luna stakers to MINE governance stakers. This would reduce MINE selling as our governance stakers are far more aligned with holding MINE.

2- Alternatively, we could redirect the MINE to a Pylon treasury. We could use the MINE for “treasury swaps” with projects launching on Pylon. This could work well with more projects looking to create diverse and robust treasuries. In essence, we would give x amount of MINE to new projects which launch on Pylon for them to keep in their treasury and have it locked/vesting for y period of time. In return they also give us z amount of their tokens which we have locked/vesting for y period of time. This creates a decent amount of skin in the game for both parties and also rewards MINE stakers (given we direct the project’s tokens to MINE governance stakers).

For another post, I have proposed some ideas:

  • A: I basically agree with an idea of building treasury for Pylon DAO, but it is not the most critical thing as of now. More important thing is to build a confident/clear governance system properly at the first place. As a first step, the founder/dev teams can show how much influence they have on governance poll . If they have too much power in governance, then they can lock their partial or all asset for some period, e.g. 4 years until final token distribution milestone is reached, so that $MINE staker can be confident that the governance system cannot be controlled by dev teams or founders. After building such clear and confident governance system, we can go forward to have treasury and further. I already made a post regarding this (LINK), so please take a look if interested.
    With the treasury, I would like to propose buy $ANC and $LUNA since both are necessary conditions that allows current Pylon protocol to survive/get profit. There are several advantages for having some stakes on those protocols:
  1. Pylon governance should have some power to protect its own profit from any policy changes made by the governance of those protocols.
  2. We can use those staking profit for additional airdrop or for buying more treasury based on governance agreement.
  3. It can increase the bond/link/dependency among the protocols, which will increase the level/complexity of decentralization.
  4. Slight buying pressure on $LUNA/$ANC
  5. No need to mention, but anyway it can also diversify the portfolio of Pylon treasury.
  • B: Let’s assume that we have made a poll on Terra Station if it is reasonable and okay to reduce 80% of airdropped $MINE. As a $LUNA staker, one would vote to “No (with veto)” probably to protect his/her own rights or not to lower financial expectation on $LUNA token. Some very considerable one who cares Pylon Protocol might vote “yes”, but I don’t think it would be dominant to make the poll passed. The most desirable way to do this is to buy and stake huge amount of $LUNA with Pylon DAO treasury, if passed by Pylon governance, then use that amount of influence to reduce the amount of airdropped $MINE .

@psychoet @Bob_jornet the recently listed vote is not for this proposal, it is for the one created by Ed.

That’s why posting link to relevant thread would help…

2 Likes

And now, both @butaw and @ed.pylon can show up and explain what happened here and why the vote was listed.

Yer 100%, I assume Ed just accidentally forgot to.

I don’t think they need to come here and explain anything. I think that is unnecessary

Yes, it’s too hasty, we must prevent being manipulated

2 Likes

I am supportive of this plan. We can use votes in the future to lower the buyback %, but 50% is fine for now. We should have 25% in treasury in aUST and that can then be used to purchase tokens at private sale prices etc. and diversify the treasury.

1 Like

I have seen the proposal in polls. main questions:
how a proposal for managing the treasury will be enforced? It is just a text.
Who actively manage the treasure? Is it a multisig account which we plan to move to a full DAO setup?

Community funds are never mentioned. I am not sure that redirecting luna airdrops is fair. Pylon relies on luna and luna stakers are rewarded for it. I would consider more another case: with astroport we can lower the inflation for mine-ust LP. What about redirecting a part of it to the treasury?
25% of supply is community funds. What is the usage ot them and who controls them? Again: DAO? Power user?

1 Like

Generally, I like the idea of protocol owned liquidity.

That said, there are a lot of moving parts in play we need to work through and get right as a community.

Thus, I agree that it is a bit hasty to say “proposal goes up in 24 hours” - can you give it at least 1 week for proper community digestion and discussion? :slight_smile:

Can you please provide an analysis of how your proposal would interact with @ed.pylon’s proposal to establish a Treasury? Here’s my understanding: Under Ed’s proposal, all of the $UST earned from Pylon Pool fees would go into the T, right? And, you are basically building on that, and saying, let’s take 1/2 of the $UST in the T and buy $mine and then the T can buy LP tokens composed 50/50 of $mine and $UST, and then the T can deposit all of its LP tokens into the LP farm? And return farming yields to $mine stakers? Is that correct? Am i missing anything?

An administrative question:

  • if the Treasury needs some of the $UST to participate in IDOs or hire staff or pay for a CEX listing, how are we going to resource those initiatives if all of our $UST is parked in LP tokens?
  • going proposal by proposal via governance is slow and time consuming, thus, maybe your proposal should pre-empt this issue by adding the following additional motion:

“The community moves to grant the Pylon team standing authority to sell down the Treasury’s stake in the LP farming activity on a just in time basis if and as it is required to free up funds for other Community Governance approved uses (eg. funding contractors, investing in IDOs). For the sake of clarity, this is not a blanket approval for the Pylon team to use Treasury funds in the LP Farm for any discretionary purpose, but, simply an administrative approval for the Pylon team to transfer liquidity in the LP Farm into the general purpose Treasury fund if/as it is necessary to fund Community Governance approved activities and obligations. The intended spirit of the approval is that the Team keeps liquidity in the LP Farm as long as possible to generate yield for $mine stakers, while also having authority to fund other Community Governance approved activities and obligations on a just in time basis.”

1 Like

I voted No with a big stack but still looks like it’ll pass. For me the whole thing is too vague and there are still many many questions in regard to the treasury.

  • What measures are we gonna take to effectively manage treasury? Are we gonna gover each decision with a pool? Seems highly ineffective.
  • I still think we should separate luna airdrop poll and treasury formation
  • We should make a consensus how we start building the treasury. I don’t like the idea of completely cutting out staker buybacks
  • How are we gonna distribute rewards earned by treasury to stakers? That would mean setting right incentive for holding MINE. Right now airdrops + buybacks + potential IDO allocations are pretty atractive I think.
2 Likes

pylon is not yet structured to handle a treasury with a proper governance.
I also vote no. And I will ask to see a roadmap of ot pass, a discussion and the financing for it.
The proposal is already deciding trading strategies: are we joking? Apollo is thought from the beginning for that. We have to be careful and understand the target of pylon.

1 Like

I am voting no from all wallets.
A proposal which merge creating a treasury plus describing detailed strategies within the same poll is not acceptable.
I believe that people are voting based on title. I consider it a topic to discuss before implementing and entering in detail. A chat can make also sense.

1 Like