2024 Q1 TWG INV Allowance Refresh
Author: @edo and @cryptoharry
Summary
The Treasury Working Group (TWG) at Inverse Finance seeks to refresh its INV allowance for Q1 2024 to continue effective management of liquidity incentivization and to facilitate strategic operations, including OTC swaps, with all proceeds aimed at reducing DOLA bad debt and enhancing the overall financial health of the DAO.
Background
The TWG has been instrumental in maintaining robust liquidity for DOLA, INV, and DBR, crucial for the stability and growth of Inverse Finance. Our strategies have successfully managed liquidity across multiple chains and protocols, contributing to the continued adoption and success of FiRM, our fixed-rate lending protocol. Liquidity incentivization has been challenging in recent times due to growing competition (particularly with yield-bearing stablecoins prompting the creation of sDOLA) and an evolving interest-rate and market environment requiring CDPs and other protocols alike to offer higher yields for their stablecoin products.
Challenges such as DOLA bad debt continue to necessitate careful and strategic liquidity management. Since Proposal #156, the latest INV allowance refresh proposal, DOLA Bad Debt has been reduced by 200,000 DOLA and currently stands at 7.6MM DOLA. As a reminder, the existence of DOLA bad debt increases the challenge of liquidity operations for the DAO, increasing the DAO’s cost per DOLA in circulation and simultaneously reducing the revenue generated per DOLA. This is why reducing DOLA bad debt remains a top priority for the TWG.
Liquidity Management
As of Q1 2024, DOLA continues to exhibit a close (soft) peg and deep liquidity, thanks to our active liquidity management strategies. However, to sustain and enhance this, ongoing incentivization to liquidity providers is required. The INV token plays a pivotal role in these operations, not only for DOLA but also for other strategic assets within our ecosystem including DBR.
OTC Swaps and Bad Debt Reduction
In addition to managing liquidity incentivization, the TWG plans to engage in OTC swaps to further support the reduction of DOLA bad debt. OTC swaps are one of the tools currently available to the DAO targeting bad debt reduction, along with revenue surplus and the recently deployed virtual xy=k DBR auction. They offer an efficient and strategic mechanism to secure the long-term stability and growth of DOLA. All OTC Swaps are disclosed publicly in our Discord’s announcement channel. High-value OTC swaps requiring additional allowances will require a separate proposal, as done for Proposal #134.
Proceeds generated from these OTC swaps will be directed towards paying down the outstanding DOLA bad debt, reinforcing the health of both DOLA and the DAO. Eliminating bad debt allows for a more aggressive approach to the expansion of borrowing on FiRM.
Proposal for INV Allowance Refresh
Given the ongoing needs and the strategies outlined above, the TWG proposes the following for Q1 2024:
- Refresh the INV allowance for the TWG to ensure uninterrupted liquidity management and incentivization.
- Set the INV allowance for the TWG at 30,000, a figure determined based on our projected requirements for the quarter.
- This allowance will enable the TWG to effectively manage liquidity pools, engage in OTC swaps, and continue our efforts in reducing DOLA bad debt.
Conclusion
The proposed INV allowance is crucial for the TWG to continue its work in maintaining the financial health and stability of Inverse Finance. This allowance will empower us to manage liquidity effectively, engage in beneficial OTC swaps, and continue our focused efforts on reducing DOLA bad debt, ultimately contributing to the growth and success of Inverse Finance.
On Chain Actions
- Set TWG INV allowance to 30,000.