[OGP-DRAFT] OATH Tokenomics Upgrade - Part 2

[yuvi]

Title: OATH Tokenomics Upgrade - Part 2

Proposal Chain: All current and future chains hosting OATH liquidity

Proposal Type: OATH Improvement Proposal (OIP)

Proposal Author: Yuvi

Date: 08 December 2023

Executive Summary

This proposal aims to reinforce the original OGP-12 OATH tokenomics proposal to provide clarity for stakeholders regarding a zero up-front capital opportunity for redeeming oOATH, as well as an assessment of Reaper fees contributing to bOATH yield.

Proposal Motivation

OGP-12 was recently approved for GPRC review noting two distinct points for further consideration, requiring a separate proposal:

1. A third oOATH redemption option, that would not require up-front capital from the user.

2. An assessment of the contribution of Reaper fees toward bOATH yield.

Users requested an option that would not require up-front capital. Moreover, this infrastructure could benefit yield strategies implemented by developers going forward.

Some users also requested that Reaper fees be directed towards bOATH stakers as a way of increasing yield.

Proposal Specifics

1. The original proposal offered a streaming option, whereby OATH would be streamed over X months, at no cost. The long-tail implication of this option is zero impact on emissions, with no value accrual. It simply delays emissions and introduces technical debt. I propose that the streaming solution be removed from consideration.

An alternative solution is to offer a source of ETH, from which a user may borrow in order to pay the premium to redeem OATH, which then repays the loan, plus a fee. The implementation of this would be via smart contracts with a flash-loan from a source of ETH, surfaced as a one-click operation for the user.

This infrastructure can also service yield strategy development through private implementation, with the ability to flash-loan and redeem during harvesting on behalf of users.

2. The OATH foundation currently emits approximately 250,000 OATH per week. This equates to an approximate 6 year emissions runway, and does not include the OATH that is recycled each week, effectively reducing emissions/ increasing emissions runway.

Through oOATH, it is anticipated that the foundation will emit 500,000 oOATH per week, making up to 250,000 OATH available via direct redemption. At 4c per OATH, this equates to 10k USD in ETH directed to bOATH. Over 30 days this yields approximately 43k USD in ETH (assuming all oOATH is redeemed via premium).

Over the past 30 days, Reaper farm on Optimism has generated $1.9k in fees.

It is proposed that Reaper fees should NOT be directed to bOATH at this time, for two reasons:

a) The opportunity cost of either manually executing or developing infrastructure to automatically execute the transfer of yield is too high for 1.9k per month.

b) Directing all fees generated by all protocols to bOATH leaves no room for the Foundation to make alternative investments on behalf of the community, or in line with the community’s wishes. Remember that just because all funds are not flowing directly into your bOATH position does not mean that value is not there.

Team Experience
No change.

Key Objectives & Success Metrics
No change.

Objectives
No change.

Success Metrics
No change.

Length of Engagement & Budget Breakdown
No change.

Community Support
Seeking governor feedback on aspects covered in this proposal.

Partnerships
N/A.

Risk Assessment

Potential risks:

Zero-capital redemption size: this can be managed by limiting the amount of ETH available in the flash-loan source, and by limiting the capacity of oOATH claims via the flash-loan redeemer.

Technical challenges during implementation: Again, capping the loan source pool limits exposure, and can be increased as confidence grows. Additionally, this infrastructure may not be available when oOATH is initially available because it requires development and test time. However, this is no more time than a streaming option may require.

Additional Details

Implementation details will be made at the discretion of OATH Foundation contributors. Any desired changes or additions to the model post-implementation are subject to change via future governance votes.

[Sober]

Well thought out and considered. As long as the ETH source is capped, I don’t see any exposure points that pose considerable risk.

[0x_mau]

Great idea to solve the zero capital wish.

I am confused on the reaper fees.

Last week you guys (or someone from the team, probably bebis since he runs Aurelius) stated via Aurelius profile on X that (a part of) both the Reaper fees and Aurelius Token ($xAU) exercising fees would flow towards bOATH: https://twitter.com/aureliusfi/status/1730992498397655512?s=12&t=tGYl8z7-KsgmVNRqV0gPpA

A S mentioned in the OATH governors group on Telegram that more info on this would be released soon

Here yuvi proposes the opposite.

Please explain

[A_S]

I was talking about Reaper fees we earned over the last month ($1.9k).
I agree with Yuvi, makes no sense to waste developer time automating the process for Reaper fees when they are low. Now, if they cross a threshold we set, maybe something like $50-100k a month, then I would revisit the topic.

Aurelius isnt live yet either, so, not worth discussing until the protocol fully launches and we have data to look at.

[mpo]

I mean sure, if you don’t want bOath to have the fees it’s all good, we didn’t even ask for them, we were just informed that we would be getting them. And I do see the possible benefits for the fees used for other stuff internally. I just don’t at all like the way it is being communicated to the community.

• First we hear bOath will get all the reaper fees from the tokenomics medium article
• After which we hear will have a separate proposal to discuss the fees to allow the first proposal pass quickly
• Then Aurelius twitter states bOath will be getting the reaper fees, AS says more info on that to follow
• Proposal drops, turns out no fees, AS more info turned out to be fees too low to share with bOath
• ???

@A_S

Now, if they cross a threshold we set, maybe something like $50-100k a month, then I would revisit the topic.

Also I don’t get this comment? Like we would maybe revisit the topic when Reaper fees per month reach half of what the alltime bOath revenue has been after almost a year in production???

The problem isn’t that we aren’t getting the fees, the problem is claiming a different thing each week and letting us believe whatever the current mood of the day is. I might come off as being irritated but that’s just because I am.

[yuvi]

Hi everyone,

Thanks for all your input.

It is important to remember that this is a governance forum and that proposals are, as the name suggests, simply proposals.

Team members may have offered up Reaper fees, but having looked at numbers, I simply proposed that we don’t need to worry about them right now.

By all means, if the community wants Reaper fees directed to OATH, then it will be so.

To that end, should this proposal proceed to a vote, I would suggest establishing two votes:

1. Flash-loan zero-capital oOATH redemption: Yes/No
2. Reaper fees to bOATH: Yes/No

Everyone is entitled to vote and I encourage constructive discussion here.

Again, this proposal is not saying that Reaper fees will not go to bOATH. I am simply offering perspective.

[NauLxD]

I don’t understand enough about oOath tokenomics to voice my opinion about it so I will abstain.

Regarding reaper fees: I really don’t care. In my humble opinion it is a waste of time to discuss that. We could be in a verge of a bull market and we should focus on things like UX which have been receiving some criticism from users.

[crypt0c]

Cheers governors hope everyone is well.

I really like the flash loan idea for the 3rd oOATH option. Checks the box for an option without up-front capital and is better for the protocol than just giving away free oath if you wait. I would fully support that portion of this proposal.

When it comes to the reaper fees portion of this proposal, I would pretty much echo mpo’s thoughts and frustrations on this topic. With the exception that I do still strongly feel they should be included in bOATH even if just a percentage. I’ve made the reasoning pretty clear in the first tokenomics post so no need to repeat that here. But the fees that reaper pulls in are irrelevant right now imo, $100 or $1000 or $10000 per month I think it should flow to bOATH. Percentages can be adjusted if need be. I don’t really understand the argument that it may not be worth it for the amount it’s bringing in right now. We’re talking about overhauling the tokenomics here and I think the proposal should be as all encompassing, and forward looking as possible. We’re setting a standard of expectations for the oath token moving forward, so people know what they’re buying into. I personally don’t like the “let’s see how it goes and maybe visit this later” approach here. Reaper is a product under the oath umbrella touted as the backbone of the system, it pulls a revenue, that should be included with bOATH. I think if the ecosystem is successful it’s pretty reasonable to expect reaper and it’s fees to grow. If time and resources are too tight to implement this right away, I don’t see an issue with pushing it down the list and waiting until the time is more appropriate to get to work on it. But I don’t see the amount reaper currently brings in as an issue relevant to discluding it from the current tokenomics proposals. I also haven’t really heard a good argument to keep it for the protocol tbh. I’ve heard that it hardly brings in any fees and is therefore irrelevant and a waste of time to talk about or implement this right now, followed by we should keep this revenue for the foundation to make other investments on behalf of the community. But I find those two statements somewhat contradictory tbh, idk. My support is behind reaper fees being included in bOATH.

Therefore, I agree that if this proposal proceeds to a vote it should be broken down into two separate votes, as yuvi suggests.

[mpo]

A calmer view on the subject:

I am in favour of the third redemption option without any upfront capital, echoing my support for it in the initial proposal. This option proves beneficial for users wanting to exit oOath without undermining the option token model.

Regarding the inclusion of reaper fees in bOath, I believe it would be a valuable addition. My primary argument being the marketing aspect of positioning bOath as the comprehensive “byte masons everything token,” making it more appealing to newcomers exploring the ecosystem or deciding whether to hold or bond their Oath. While the distribution doesn’t have to be entirely in favor of bOath, I suggest a minimum split of 50/50, with a preference for an 80/20 ratio between bOath and the treasury.

Acknowledging that there are pressing matters, such as the UI updates, I urge for a decision on this matter and its inclusion in the to-do list, if the community wishes so. It is essential to establish a clear direction for bOath to enhance its overall attractiveness, and I feel like reaper fees would help on that end.

[CryptoBlahBlah]

bOath fees are not reaper fees. Those two products are not linked at all. You’re talking about something like $0.10/day maximum if you include Reaper fees being sent to bOath. This is not even worth the time to type this out. There are thousands of bOath holders to consider.

I’m really not sure why this topic is even being discussed.

[mpo]

I appreciate your perspective. However, it seems there might be some confusion. In no point did I claim bOath fees were reaper fees. Also I don’t even really get what you meant by that.

My suggestion was about enhancing bOath’s appeal with a share from reaper fees, potentially negligible per user at the moment, but this way we would have the infrastructure ready for it when the fees start picking up. Also I feel like it’s important to focus on the total reaper fees amount rather than what a single person would earn, since people’s position sizes may drastically vary and the total amount gives a clearer picture of the total possible impact on the ecosystem.

@CryptoBlahBlah

[yuvi]

Healthy discussion here.

Evidently I am happy for this to go to GPRC review, noting my recommendation for two separate votes, should it proceed.

@yuvi

• Flash-loan zero-capital oOATH redemption: Yes/No
• Reaper fees to bOATH: Yes/No

[Cato]

Can someone explain to me just how allowing flash-loan to redeem oOATH with no up-front capital is beneficial? A user borrows ETH to redeem OATH at 50% discount. How is he going to pay his loan back when he just used it to redeem OATH at 50% discount?

As for the Reaper fees, considering they are currently small, it is not worth getting caught up about it. I would just allow those fees to flow back to the OATH foundation for future investment opportunities.

[StevenVinyl]

would this loan be from an outside source or bOath?

[yuvi]

Exercise $100 oOATH in zero-capital option
Contract borrows $50 ETH
Exercises oOATH
Converts $55 OATH to ETH to repay loan plus 10% fee
User receives $45 OATH

Converting OATH to ETH catches people out but we have to assume users may do so anyway to cover their premium.

[yuvi]

Initially, the loan will come from Aave V2 forks (Granary) since they have flash-loan infrastructure. We could develop a private source if we run into liquidity issues.

[A_S]

Im not really sure why we are considering a no-up-front-capital option.

The entire point of oOATH is to drive a benefit to bOATH holders (doesnt this option work around the desired system?).

[yuvi]

Perhaps the approach then is to direct the fee to bOATH, and even limit the size/volume that can be redeemed this way. We can also make the fee more aggressive to balance user behaviours. ie User receives $30 OATH and $15 OATH goes to bOATH. We can tailor the penalty.

[A_S]

I like the idea of penalizing the no capital up front option.

Im ready for GPRC review if we added it to the scope of the vote.

[SAMSoN]

Ready for Review from the GPRC. Thanks for organizing the proposal Yuvi.