[ABIP-09] [RFC] Reduce APY due to OIP-85

Summary
Reduce APY to 100% due to the recent proposal where Olympus is decreasing their reward rate to 0.11 (~470% APY).

OIP-85
https://forum.olympusdao.finance/d/1114-oip-85-emissions-adjustments/19

Abstract
Reduce the reward rate gradually over a 1 week period to target 100% at 80% staked. This reduction will stay in place until new bonds are offered against a reserve asset e.g. BTC, ETH or DAI.

Motivation

Abachi relies partly on the rebase from OHM for revenues. With a reduction in place we also need to appropriately reduce emissions. We target to acquire OHM as close to the premium as possible to maximise this revenue.

Due to the recent vote on Olympus to reduce emissions and BTRFLY also reducing to 1000% and may be more soon, we have to follow suit. Emissions may be turned up again when OHM APY increases or Reserve assets bonds are opened again (once we are above backing). If we rebase faster than the assets that provide yield values, we are only driving emissions up and price down.

The initial modeling of ABI we modelled the APY on was a 1:10 ratio. So at 1000 APY we should be 100APY. This 1:10 ratio was based on the amount of OHM the treasury holds (currently 20%). As the APY and holdings go up, our APY also goes up.

This is a sister proposal to since the APY will be partly offset by the buybacks: [ABIP-07] - [RFC] Allow ABI buy backs via Revenue Assets

  • Yes
  • No

0 voters

Agree on this, given that the dependencies.

1 Like

OHM will only be reducing APY to ~500% in the event price falls below liquid backing and inverse bonds are activated.
If the intent it to follow suit then the wordings of this proposal should be amended to reflect what is stated in the OIP and not a preemptive APY reduction from our side.
With that said I’ll be voting no to this proposal.

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This is not what the proposal says though. The proposal open OIP-85 will reduce APY to 470 (or lower) / 0.11 reward rate as long as reserve bonds are turned off.

Reserve bonds have been off for a week or more now and there seems to be no plan to open them up again.

I however agree, if they move the APY back up (they have not mentioned how and when in the OIP) we should put another vote in place to push APY up again.

The title of OIP-85 is ‘Emissions Adjustment during Inverse Bonds’ and I’m sure the person who wrote it explained it in the Oly server that it’s only whilst inverse bonds are active.
Regular bonds will be switched off whilst inverse bonds are active though, that’s for sure and they were open only three days ago as mentioned by Potted Meat and with a positive percentage of course.

I don’t think we need to be so dependent on OHM emissions. OHM is less than 20% of our treasury at the moment and has been a loss-leader so far rather than revenue, so I’m not sure why we are following it so closely.

  • Feb 18: OHM in Treasury = 3290 ($215,500)
  • Mar 27: OHM in Treasury = 4452.75 ($175,394)

Furthermore, this proposal does not take into account what will happen if the OHM price recovers. Since we hold a lot of OHM, even a small price appreciation will increase the value exponentially for us. So while OHM is fine as a productive investment for us, I don’t see the value in acting in unison with them since they are not contributing to our treasury in any meaningful way, or are helping with Abachi’s raison d’être, which is to provide B2B lending products to Trad-Fi.

1 Like

We have to be clear on two things:

  1. ABI is NOT a reserve currency token therefore the backing value does not hold any real meaning for us. I don’t understand what is the impact on Abachi’s functions if we stay below backing for an extended period.
  2. There’s only 100k ABI in circulation. We need more supply in order to explore the potential of gABI and potential listing with a CEX.

We are at 105,800 ABI in circulation, inflating at 370% APY. We will still have less than 400k ABI out there by this time next year. This does not seem like a crazy emissions schedule to me that needs reduction, irrespective of what any other token is doing out there.

Our challenge is NOT emissions, it’s distribution. There’s only about 650 wallets that hold 99% supply of ABI (including gABI, ABI and sABI). In order to have a valid, active market for price discovery, we need to stimulate distribution rather than move defensively. Reducing emissions does not solve the above problem, while simultaneously leading to further reduction in ABI holders, which is not going to help anybody. We’re solving for the wrong challenge here.

1 Like

Some excellent discussions here and definitely this has pros and cons on both sides including core team.

Pushing this out to a vote and will keep core team out of the vote. The idea here is to ensure we do not get into a vicious cycle where price is only trending down with rebasers drying up all liquidity.

Hi all,

This analysis may seem overly simplistic, but in light of brightening sentiment in the market and what looks like some price stabilization for ABI, I don’t think it will end up being necessary to reduce APY. Runway is at 444 days (almost 100 days over the stated target of 1 year) and I have every confidence that a. the permissioned lending and KYC services will be doing well by Q4 2022, and b. the bull market will have resumed by then.

Just one man’s opinion, but I think the APY as it is will end up being perfectly sustainable.