Deal to Swap Treasury INV for 750k-1m DOLA

Inverse Finance DAO
1

Summary

Proposal to swap up to 1,000,000 DOLA for INV, with the INV being minted to the DAO Treasury initially and the DOLA coming from 0x759a159D78342340EbACffB027c05910c093f430. The minimum deal size is expected to be 750,000 DOLA.

This will be complete at the market price of INV, provided it is no less than 25 DOLA per INV.

After completion, 100% of the DOLA received will be used to reduce DOLA bad debt; more information on the DAO’s bad debt can be found on the Bad Debt Dashboard.

Background

The DAOs North Star, as detailed in the Season 1 Strategy Proposal, has been to pay down bad debt accumulated since the 2022 exploits. This policy has been in place since the first exploit experienced by the DAO. One of the key strategies for achieving this is swapping Treasury INV and DBR for DOLA (or other stablecoin) with interested parties, the other source coming from DAO-generated profits.

Despite the bad debt, the careful and effective management, incentivization, and bribing strategies employed by our Treasury Working Group help maintain the DOLA peg stability. These strategies are continuously adjusted based on current risk premiums in DeFi.

0x759a159D78342340EbACffB027c05910c093f430 is a long-term holder of INV and governance participant, having held the position of #1 or #2 delegate for a considerable time.

Deal Abnormality: Synthetix Debt Position

The interested party, 0x759a159D78342340EbACffB027c05910c093f430, has a large leveraged position on Synthetix protocol, with 471,726 sUSD debt against 714,570 SNX. This position needs to be unwound in order to pull out the 1,000,000 DOLA, however in order to do this:

  • A minimum loan health of 500% is needed to start withdrawing SNX collateral
  • 67,312 SNX is locked in escrow, which is considered first when looking at withdrawable SNX, meaning a greater than 500% loan health is needed in reality

Assuming a SNX price of $2.30, $176k of sUSD debt is needed to pay off in order for the position to begin being unwound (withdraw SNX, sell for sUSD, pay down sUSD debt, repeat). As SNX price increases, less debt is needed to be paid off, and if the price is less, more debt needs to be paid off. The deal will only happen whilst SNX is priced at $2.30 or higher.

In order to get the $176k total to begin unwinding the position, 0x759a159D78342340EbACffB027c05910c093f430 wants the option to sell 11,500 INV held at 12.7 DOLA per INV to the Inverse Treasury to raise $146k. If the amount needed to unwind the position is reduced, then the DOLA per INV will reduce, while 11,500 INV stays constant. If this option is utilized, 750,000 DOLA will be used to swap for INV, if not then 1,000,000 will be used.

Deal Workflow

SNX price >= $2.3 & INV price >= 25 DOLA

  1. OPTIONAL: 0x759a159D78342340EbACffB027c05910c093f430 sell 11,500 INV to Inverse DAO Treasury, for the minimum price ($y) needed to start unwinding Synthetix position

  2. Synthetix position unwound until ($1,000k OR ($750k + $y)) equity pulled out

  3. 0x759a159D78342340EbACffB027c05910c093f430 swaps (750,000 DOLA OR 1,000,000 DOLA) for INV at current market price

    • INV market price is locked in when both the TWG and 0x759a159D78342340EbACffB027c05910c093f430 come to an agreement, using latestAnswer from the InvPriceFeed

  4. (IF step 1 is carried out): 0x759a159D78342340EbACffB027c05910c093f430 buys back 11,500 INV for $y

In order to approve this deal, the following is requested:

  • 146,000 additional DOLA allowance to the TWG
  • 40,000 INV minted to the treasury (assuming minimum price of 25 DOLA/INV)
  • Additional 40,000 INV allowance to the TWG

Allowance Calculation:

  • Current DOLA allowance: 2,401,683
  • Requested DOLA allowance: 2,547,683
  • Current INV allowance: 8,898
  • Requested INV allowance: 48,898

On-Chain Actions

  • Mint 40,000 INV to the Inverse Treasury
  • Grant 2,547,683 DOLA allowance to the TWG
  • Grant 48,898 INV allowance to the TWG
1 Like
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I’m a bit hesitant with this proposal given that the amount would put this address in control of >50% of vote weight. On the flip side, I’m also incredibly bullish that the largest holder wants to increase their position in this way. The duality of man.

In order to vote for this proposal (not saying its a necessary component just that I’d like to see some thought before this is brought to a vote) I’d like to see some thought around how we might use this to add some wind to the INV sails.

I was under the impression that the last DBR OTC sale, while good for bad debt, was viewed as a bit of a mistake given that it took the largest buyer of DBR out of the market and with it the price appreciation that would have come with their purchase.

Could a portion of the deal be an open market purchase (perhaps after the majority is completed at the desirable price) so that there would be some market buy pressure? Would be a pity to once again do an OTC sale when buy pressure is so sorely needed.

From a lil bit of digging it appears that :earth_americas::space_invader::space_invader::space_invader:.eth has their INV deposited in Frontier and has some DOLA debt against it. Do they plan to stake in FiRM? I see that they own 33K DBR currently but it’s unclear to me how they acquired it as they have no INV staked in FiRM (and 4.3K unstaked INV).

If they were to stake their entire position in FiRM they’d be earning a major share of DBR which would reduce yields for other stakers, making them one of the only market viable sellers of DBR. This is a lil worrisome to me.

Lastly, in order to feel comfortable with this I would like :earth_americas::space_invader::space_invader::space_invader:.eth to post here on the forum in response to this proposal, they technically don’t even need anyone else to make this proposal happen as is, and they are a large governance force, so I would really really like to have them come represent themself.

2 Likes
3

RWG thoughts are summarized in the attached document:

4

Have thought about this further and I’m 100% in favor of this deal.

Let’s get it done

1 Like
5

It is a great way to reduce bad debt and ensure skin in the game from an important team member. Reducing bad debt is of paramount importance and this help us to do a big step in that direction. The vote of confidence can also help with momentum for inverse.

EDIT. Community member not team member.

6

Just to clarify, the wallet is not controlled by an active contributor. They are an active community member, however, regularly voting in DAO proposals (but external to the group of core contributors).

1 Like