[ABIP-07] - [RFC] Allow ABI buy backs via Revenue Assets

Summary

This is an extension to the RFC for whitelist of assets. [ABIP-06] - [RFC] Whitelist assets for treasury

Allow treasury team to buy back ABI using revenues acquired from revenue assets.

Abstract

This proposal seeks to be able to sell revenue acquired from revenue assets and use that to buy back ABI into the treasury. This ABI will be kept in the team DAO treasury and be used in future for community and contributor initiatives.

To start, 25% of all revenue will be used to buy back ABI. This will occur every week and can range from $100 - $5000

Motivation
After discussion with many stakeholders, the team is proposing we use 25% of the revenue we acquire to buy back ABI.

Current revenue sources:

  1. We are providing LP for gOHM-ETH pair both on Arbitrum and Polygon. We are also lending OHM on both chains. We earn anything betwen 20-80% APR on these LP positions.

  2. OHM and BTRYFLY yields. This is variable but APY around 500% - 1000%.

  3. We have a position in CRV and CVX which yields 40% APR

  4. We have MTA staked (APY between 10-15%)

Current estimated Revenue:

The team is working on a better dashboard to track these, however we roughly make 7000 - 10,000 in revenue per month (even in this market) via stable & other asset yields.

Passing this proposal will allow treasury team to acquire ABI from the market at various times at least once a week using these revenue sources. As an aftereffect of this, our total treasury value will decrease in its rebasing & yield revenues by 25%.

Keep in mind, the Abachi backing is used for liquidity. This backing grows via productive assets (e.g. OHM, Yields) and real-world yields. The real world yields are lower as we start our pilots. Real world yields provide 100% buy back and burn as per initial white paper.

  • Yes - Lets vote
  • No - (Please provide comments)

0 voters

I disagreed with this owing to the fact that this buyback is stated to happen every week.

Unlike stablecoin yields whereby the yields are pure profit, the revenue providing assets, especially that of bterfly and Ohm, are only profits when the mcap rises similar to Abi. What I’m understanding from this proposal is that the rebase rewards will be sold off to provide the revenue for the buyback, and selling rebase rewards when the underlying token is down or going down essentially loses money.

Buybacks aren’t an issue, but rebase assets needs to be handled carefully.

Edit: Must add the obligatory correct me if I’m wrong for the selling of rebase rewards leading to loss part :stuck_out_tongue:

2 Likes

I disagree if this is a mandatory buyback every week.

I think if the overall value of the Treasury ( reserve + revenue ) goes down a week, selling the part of revenue generated to buy back ABI will drain the Treasury further and will affect the backing value of token. This will have a bigger impact since we are planning to add volatile assets BTC and ETH to Treasury.

Wouldn’t it be a better approach if the buyback happens only when the overall value of the Treasury goes up? Will be able to sustain the same APY or lesser reduction based on the rise of the Treasury value.

Please correct me if i’m wrong.

1 Like
  1. This is an excellent point. Maybe the proposal will need some boundries where this buy back is feasible.

e.g. if trading 50% below backing, the buy backs start happening.

  1. With the proposal, we are not using the main assets in treasury to buy back, only revenue assets (OHM, BTRFLY etc.) and for those even we use the revenue portion (so original position is left as is). Revenue provides backing increase to the treasury, however the proposal is to use the 25% of that rev to buy back. So in theory the overall treasury value should never go down because of this.

I am somewhat conflicted on this. On one hand, I agree with @igor that the yields from those assets allow us to offset their negative price action. But at the same time, having some buy-back will allow us to raise the market price and open up bonds at a healthy price point.

In principle, I don’t think we need to do any buy-backs at this point. Our key focus should be to increase the treasury value so we can activate that liquidity via trad-fi lending products. We can certainly use the revenue from trad-fi lending to do buy-backs or burns, but this is probs not the best time to do buy-backs when we only have ~600 wallets holding our tokens.

Building on the above comment, I think there are a few things that we need to clarify before we can finalize this:

  • How do we classify OHM? Is it a productive asset or a reserve asset? We’ve already excluded it from the max 2.5% limit in ABIP-06 proposal, and given that our own rebase emissions are somewhat linked with the OHM emissions, it may force our hand to play with the ABI emissions rate, which I do not think is a smart play at this point.
  • Since ABI is a utility token, we need to stop using the term “backing value” and find a better suited term for the treasury value/circ supply number. “Backing value” is misleading as it insinuates that there is some kind of a soft price floor, which there isn’t AFAIK.
  • What exactly IS the target backing value which we intend to defend, how did we reach that number, and how important is it for the operation of Abachi to defend it by deploying treasury revenues?

I agree with @electo 's suggestion to define & automate the buy-back thresholds, as well as

  1. Define a below-backing-value percentage at which point we start to deploy the revenues from productive assets.
  2. Define a premium-above-backing-value at which point we start to increase the emissions so as to maintain a balance. This can also have a positive flywheel impact till that extra premium (e.g., 3x above backing) is neutralized via emissions, rather than only issuing bonds where people start selling into LP and destroy the market price.

Based on community comments. Not pushing this out to vote yet and keep open for comments.