RGP-5: Use of ETH & RBN from Divergence Ventures

Authors

@ken

Summary

The Ribbon DAO has received 2,611,881 RBN and 719 ETH from Divergence Ventures as a result of the abuse of the RBN airdrop. This proposal lays down the possible options on how the RBN and ETH would be used.
Note: This is separate from any discussion about tipping the whistleblowers of the wrongdoing, which would be a separate proposal.

The Path Forward

After talking to several community members on Discord, we have compiled a few agreed upon ideas for how to best utilize the funds.

Option 1: Use 719 ETH + additional RBN to LP on Sushi

The first option is to provide liquidity on the Sushi RBN/ETH. The DAO will avoid staking to prevent clashing with the ongoing LM program. This establishes Ribbon’s protocol owned liquidity.

Motivation: By providing liquidity as a DAO, this ensures that the protocol will always have liquidity even after the LM program ends.

Execution: The DAO will create a Sushi LP on the RBN/ETH pool.

Option 2: Buying back RBN with 719 ETH

Motivation: When the 719 ETH worth of RBN was sold by Divergence, the ETH from the Uniswap pool was taken away. Buying back replenishes the ETH in the pool, making the LPs whole.

Execution: The DAO will initiate a Gnosis batch auction to buy back RBN with ETH. The auction will last for 8 hours.

Option 3: Do nothing / Defer for future

The DAO will not do anything with the ETH and RBN returned. Future proposals on how we can best use the funds will be created.

Vote

We will put up a Snapshot vote on Wednesday, 13th October 2021.

Edit 13 Oct: Changed post to use Sushiswap LP instead of Uniswap V3.

  • Use 719 ETH + additional RBN to LP on Uniswap V3 (details in post)
  • Buying back RBN with 719 ETH
  • Do nothing / Defer for future

0 voters

4 Likes

I think it would be a better return to use the ETH in one of the vaults or split it evenly up between the 4 the lowest is 30% apy and the highest is 50% apy, then profits from the vaults be used to add more ETH to the vaults and buy back and LP RBN.
719 eth=vaults
2,611,881 RBN=LP

You need ETH to LP, so if we were to use the RBN to LP, some of it will need to get liquidated for ETH

Buy back ribbon with eth.

Distribute rbn in future incentives.

2 Likes

ooof. i like lping but that kind of sucks especially because the existing eth was gotten by dumping on community as well. maybe some kind of OTC deal for the ribbon needed with lockups? im sure some funds are interested at a small discount.

it expressly says to use the 719 ETH and corresponding RBN, so don’t think they’d sell the excess just only use what pairs.

But that does leave the excess RBN unaccounted for. Perhaps best to just burn that.
Adding to incentives is gonna go to the best MM, removing from the circulation would result in a more global benefit in % ownership.

weve seen 700 eth buys in the past few days, it moves price but not by much, and it gets sold off. i think the narrative of protocol owned liquidity is more valuable than a transitory 2% bump on ribbon price.

3 Likes

julian is a lead dev bro

My preference is to do nothing.

The ETH is a useful tool going forward and unless we are productive with it, at this moment in time it would be quite wasteful.

Market buying RBN at this point is a very short-sighted and short-term outlook. This will cause some buy pressure now, but is ultimately not sustainable for the future. Simply put, pumping the price temporarily with a 719 ETH buy will be arbitraged to hell.

Although I am supportive of using the ETH to LP, I do not think LPing during the Liquidity Mining program makes sense. Primarily, this is just a dilution of current stakers who are ideally community members who would like to participate further.

Given these 3 options, for the community, my vote again is to do nothing.

12 Likes

I think key here is dilution is in liquidity on market, not in LP staked.
This may have the effect of slightly reducing volatility by providing smooth liquidity across all ticks which may provide very slight benefits (given relative size of market) to LPs in reducing how often they need to rebalance. Effect may be too slight to matter, but don’t think it has negative impact on stakers since not competing for LM.

I do agree, Nothing is a good option, and keeping that ETH available, perhaps earning income would be a useful alternative.

1 Like

I will personally vote for the LP options.

As of right now if the DAO provide liquidity with the 719 ETH, it will take also around 610k of RBN.

This mean that there will be 2M RBN remaining. I think we can keep this 2M RBN and evaluate later what is the best options.

Owning his liquidity is a really good way to protect the entire DAO and make sure we do not get into liquidity crush. A lot of old protocol are trying to hire market maker and pay a lot of money. Owning our liquidity will save us money on the long run.

3 Likes

I like the do nothing option (for now)

  1. Buying RBN seems short-sighted
  2. Do you really need to LP right now? Maybe LP after the LM period is over. There is already over 50M in liquidity and it’s slowly climbing
4 Likes

Buying RBN with ETH will have a limited impact, I suggest if we want protocol liquidity to go with Olympus Pro.

As for the ETH, I think we could use it to backstop losses in the ETH vault as a trial, this would incentivize more deposits, something like rdpx where a % of losses are refunded.

If we were to buy back RBN with ETH i would say, rather than an auction we should just set a bid below price with the eth in V3 liquidity.

2 Likes

++ The narrative of protocol owned liquidity is super powerful just look at Olympus. Im against the buyback because it would be small and could easily be frontrun anyway.

4 Likes

This. I support this. Till team have concrete plan and how-to run the plan. Since (atm), i dont see team have their own backup plan for the worse scenarios, like yesterday.

I’m voting for Option 1, adding the ETH + RBN to a v3 position. This liquidity, if spread over the full range, would represent between 5-10% of the TVL of the pool.

Since it wouldn’t be staked into the LM program, creating the LP position now has the least impact on existing LP’ers and LM stakers.

If we wait to do this until the LM program ends (after which I assume pool TVL will decline), the remaining LP’s will be getting diluted more than they would be now. With that in mind, I don’t see a reason to wait.

1 Like

Option 2 is definitely my prefered choice. That RBN was exchanged in the Pool to ETH. We should undo this action. The RBN could then remain in the Treasury?

2 Likes

I voted to do nothing and wait until the end of the LM program, and I encourage you to do so as well.

LPing in the same uv3 pool is unnecessary due to the significant depth that is already present. If we feel the need to have some deployed DAO liquidity, we should seed new liquidity on Arbitrum rather than make the mainnet pool deeper, especially since this will be temporary position anyway.

Additionally, regarding the issue of RBN staking emissions, I have copy and pasted my comments from #rgp-5 discord channel. Please let me know if I am misunderstanding the uv3 staking documentation.

It was my understanding that the rewards were emitted to staked LP based on their share of total pool liquidity, not total staked liquidity. This would mean the the DAO LPing would reduce stakers RBN emissions even if the DAO did not stake the LP token into the staking contract. These rewards would effectively go unclaimed and be left in the staking contract. This is my understanding as derived from the uniswap docs found here: Uniswap V3 Staker Design | Uniswap

This is due to a quirk of the uv3 staking contract that reduces gas costs. It piggy backs of the main uv3 pool’s snapshotsCumulativesInside , which is not updated by the staking contract and represents totals for the entire pool

EDIT: For a more elegant explanation, see this paradigm article by Dan Robinson. He discusses the “Unstake Liquidity” compromise at the end of the article

6 Likes

I voted to do nothing.

Regardless of whether the 0-INF position is staked, it will affect the LM payout for those who do stake. gadget seems to be the only one here who’s read the uv3 protocol specs.

+1 this makes the most sense in terms of maximizing current incentive to participate in LM. Also this would enforce a couple months of patience, we may have a much more necessary use for this value by then.