Dear fellow Bounders,
In this chapter, we will be looking at treasuries, how they work in the OHM-fork space and what we intend to do to differentiate ourselves from the other protocols in the space.
Let’s dive into it.
Treasury [ trezh-uh-ree ]A place where the funds of the government, of a corporation, or the like are deposited, kept, and disbursed.
Just like any other government or corporation, a Decentralized Autonomous Organization(DAO) has its own treasury to store funds. In the cryptocurrency context, a DAO usually stores its treasury funds inside a wallet. This is called the protocol wallet. Some DAOs also choose to impose a multi-signature requirement on the wallet, so that no one single individual has absolute control over the funds.
These funds may be in the form of various assets such as stablecoins, native tokens, or even things like NFTs.
Depending on the protocol’s aims, they may use the treasury funds to perform various actions to benefit the protocol, such as investing in various crypto assets to gain returns. They may also use these funds to develop new features and develop the protocol further.
Apart from using the treasury funds to perform beneficial actions for the protocol, most OHM-forks also allocate a % of their treasury to store assets that are used to back their native token. This portion of the treasury is called the Backing Treasury. For example, Olympus’s Backing Treasury holds DAI tokens which are used to back their native token, OHM.
Another recurring theme is that most OHM-forks also further set aside 10% of their Backing treasury for their incubation funds.
In Olympus’s original code, the Backing treasury is unable to withdraw funds as the code requires the treasury to always have 1 DAI = 1 OHM. Initially, we wanted to do the same, but after discussions with the community, we all came to an agreement that if you do not utilize the entirety of the Backing Treasury, you would be losing out.
Imagine this. If I was able to earn 16% a year and left $1 million in the bank, I would be able to earn a nice $160k interest each year!
As a result, we decided to have a community vote to remove this limitation that was imposed in the original OHM code. The vote was a resounding yes.
Now that we are able to utilize the entire Backing treasury to generate returns, we then decided to establish 3 separate treasuries including the Backing treasury that would allow us to grow our treasury funds which will subsequently increase the backing per BND.
The 3 treasuries are as follows:
As the name suggests, the Backing treasury stores assets that are used to back the native token. In our case that would be BUSD. This is the foundation of the protocol, and as such the team had decided that we should only use the Backing treasury funds for low-risk investments such as stablecoin yield farming.
The major benefit of doing so allows us to grow the Backing treasury apart from accumulating bond revenue, and this will eventually result in a higher floor price of BND.
There are two other ways in which the Backing treasury can grow whilst also ensuring the safety of the backing per BND.
To describe this most simply is that it is the storage of taxed BND.
That’s it? Yes, it is just a treasury to store our taxed BND.
We will go more into detail on how we are planning to use the taxed BND in the next chapter.
Now we have come to the main differentiator of us and other protocols out there.
The third treasury is called the Investment Treasury. As I have mentioned previously, most OHM-forks have a portion of their treasury being allocated to store assets that are used to back their native token. While this seems perfectly fine on paper, you run the risk of using Backing treasury funds for investments. Thus, the team has decided that it would be in the protocol’s best interest to create an entirely separate treasury for the sole purpose of investment called the Investment Treasury.
This treasury will be for the sole purpose of investing, incubating, promoting, developing, and venturing into projects across the crypto space.
Having an Investment treasury will allow us to diversify our investments all across the crypto space, and this will help grow the treasury exponentially whilst being able to withstand bear markets. As such, the backing per BND will not be affected since we are not utilizing the Backing treasury funds.
There are two other ways to grow the Investment treasury namely:
90% of the Investment treasury will be dedicated to medium to high-risk investments.
The remaining 10% will be used to improve the protocol as well as to develop products to expand our ecosystem to bring more utility to BND.
By not touching the Backing treasury, the protocol is able to make investments during any kind of market without risking the backing per BND. If the Backing treasury were ever to be in any sort of danger, having the Investment treasury as separate would be crucial as we can then inject funds into the Backing treasury from the Investment Treasury.
These are some areas of the crypto space that we would like to invest into:
All the investments made by the protocol will be shown to the community. We are currently working on a dashboard to showcase the investments made, holdings, profits, and losses.
Firstly, we plan to use a portion of the profits to inject funds back into the Backing treasury to raise the floor price per BND. Think of it as adding money to your savings jar when you win the lottery.
Secondly, we plan to distribute a portion of these profits to our long-term holders. These holders will be able to receive airdrops in stablecoins in which their share will continue to increase the longer and more they stake BND.
Thank you so much for reading.
In the next chapter we will be looking into:
The Way of the Boundless — Solving Trade Tax
ShadowProof Reading — ACW
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