Inverse Finance - Financial Status @ 31st March 2023

[r3gen]

Authors: r3gen finance (@Hammad-r3gen & @Pepperoni_Jo3)
Reviewers: @cryptoharry & @patb

Summary

This Financial Status report aims to support transparency, clarity and accountability which are central tenets of the Inverse Finance community.

The report provides stakeholders with a comprehensive view of the current state of the organisation’s financial position and enables token holders to continue to be well-informed decision makers.

The structure of the report broken is down as follows:

1. Key Metrics
2. Asset Holdings
3. Expenditure
4. Stablecoin Runway
5. $INV Inflation
6. Bad Debt
7. Industry Comparison

You can access the full dashboard here [Sharing Copy] Inverse Finance - Financial Status Report

This update also allows token holders to ask questions, offer feedback, and participate in Inverse Finance’s decision-making process.

1) Key Metrics

• Total $DOLA supply at the end of March was 63.82M a 6.69% increase from the previous month.
• The price of $INV at the end of March was $47.44 which is a 33% increase since the start of the year.

2) Asset Holdings

Despite challenging market conditions Inverse Finance has significant assets holdings spread across a variety of assets. This provides Inverse Finance short-medium term financial confidence and a healthy stablecoin runway (see section 4).

• Total holdings as of 31st March 2023 = $7.10M
• $5.14M held on Ethereum, $1.68M on OP and a small portion of $275K on Binance Smart Chain.

• Stablecoin asset holdings = $1.68M
• Volatile asset holdings = $5.42M

• Asset Liquidity Breakdown: 64% of current asset holdings are liquid assets which allows the DAO access to $4.61M that can be converted into cash. 28% of holdings are illiquid with the majority of those assets being used for liquidity provisioning for INV ($1.74M) and a partnership with velodrome which has $450K locked up for 4 years

3) Expenditure

Expenditure by WG remains relatively constrained, with 11 core contributors across seven WGs. Expenditure is largely focused towards technical and product development as Inverse Finances continues to focus on building during the bear.

• Monthly DOLA spent by working groups is the average of the last 4 months of spend and includes salary (which is exclusive of $INV vesting contracts) and other OpEX costs. We will be working on providing more granular insight into OpEX costs.
• Total monthly spend = $137.30K

4) Stablecoin Runway

Inverse finance’s current stablecoin runway is 15 months. The TWG aims to maintain a runway of 12 months or more.

The runway is calculated as follows: runway (months) = current stablecoin holding / monthly stablecoin spend. Our current holdings total $1.65M with an average monthly spend in stablecoins at $109.58K.

5) $INV Inflation

$INV is emitted and used to support a variety of activities including contributor vests, bonding and staking rewards. The TWG is closely monitoring $INV inflation to balance the value created from additional $INV with risk of price impact due to $INV sale.

In this section we breakdown operational expenditure and other INV spend analysing the rate at which INV inflation is increasing each month.

• The largest INV expenditure is for liquidity expenses totalling 10.09K from January to March
• Staking rewards can be attributed as the biggest contributor to INV inflation with 16.18K distributed since the start of the year
• February saw a slight decrease in INV inflation, however since January there has been a 53% increase

6) Bad Debt

This section highlights the current bad debt situation accrued as a result of the April 2nd 2022 price manipulation and the exploit on June 16th 2022. Bad debt (i,e, loans that are unlikely to ever be repaid) continues to be a major weight on Inverse Finance, and paying bad debt is a primary focus over the next 6 months.

As a result of these two incidents, 1,594.44 ETH, 94.95 wBTC and 38.93 YFI of user funds were taken, and ~$10M DOLA bad debt was also incurred. The recent Euler exploit has also been included in the total DOLA bad debt amount. The breakdown of total current bad debt for each asset and the total repayments as of 31st March 2023 can be found below.

7) Industry Comparison

This section presents a comparative analysis of Inverse Finance’s financial performance against other DAOs. We have selected Index Coop and MakerDAO as our benchmarks due to their similar team size and structure and their standing as leading DeFi protocols.

In terms of stablecoin expenditure, Inverse Finance’s monthly spending is the lowest among the three organisations and is 50% lower than Index Coop, which operates with a comparable organisational structure and team size. The lower stables runway for Inverse Finance (refer to graph in section 4) can be attributed to our strategy of holding a higher percentage of assets in volatile tokens. Specifically, 76% of our holdings are in volatile assets compared to 44% for MakerDAO and only 3% for Index Coop.

In terms of revenue over total expenses, Inverse Finance outperforms Index Coop. Our monthly revenue over total expenses ratio is 2x greater than Index Coop’s. It is worth flagging that revenue numbers are only estimated and over the coming months we will continue to work on more clearly defining and categorising revenue streams.

Close

Inverse Finances is in a robust position with large asset holdings and a healthy flow of revenue. Unfortunately bad debt incurred due to past exploits impedes the organisation’s growth. Continued efforts to paydown the bad debt will be critical in contributors efforts to build a sustainable and prosperous future for Inverse Finance.