Proposal to Authorize OTC DBR Sales To Repay DOLA Bad Debt


Sell DBR tokens to OTC buyers at discount with 100% of proceeds dedicated to reducing outstanding DOLA bad debt.

General Background

Current DOLA bad debt is approximately $9.42MM and since June 2022 we have repaid $1,372,115 including funds received from OTC sales with DWF Labs and other entities. DOLA bad debt has a direct impact on our ability to scale DOLA lending on FiRM and removing DOLA bad debt is a top priority for the DAO.

We are in discussions with users of FiRM and potentially others who may have interest in helping the DAO reduce its DOLA bad debt through OTC sales of DBR’s. While discussions are preliminary, the purpose of this proposal is to authorize the TWG to mint new DBR’s in order to transact without delay when opportunities arise.


We propose enabling the TWG to sell DBR’s to whitelisted buyers at a 15% discount, with the selling price calculated by using the 30-day DBR TWAP price available on Coingecko and subtracting 15% from the TWAP price. We propose setting a minimum selling price of $0.05 regardless of TWAP price.

A minimum purchase of $100,000 per transaction is required to qualify for the discounted DBR sale and to make the opportunity maximally attractive, there is no vesting period for purchased DBR’s. The DAO will entrust signers on the TWG multisig to research interested counterparties to confirm their plans are aligned with the long term vision of FiRM.

The proposal therefore requests an initial authorization of 26,000,000 additional DBR’s for the TWG for this purpose, with an approximate value today of $2MM, with additional authorizations expected as this initial authorization is exhausted.

Additionally, OTC DBR sales conducted within this agreement will be included in future transparency page(s) on

Benefits for Inverse

  • Opportunity for material reductions in DOLA bad debt, resulting in greater FiRM lending capacity, greater rewards to INV stakers via DBR streaming, and improved DOLA peg defense
  • Reduced upwards pressure on DBR price from whales acquiring DBR’s on DEX’s where liquidity may be thin
  • Reduced DBR price volatility

On-Chain Actions


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Hello, sorry, I don’t understand. Where does the additional 86M DBR come from?

This would be additional DBR minted. The number is approximately $5MM divided by yesterday’s 30-day TWAP price less the discount.

You were listing the benefits in your proposal, but the risks. Would you please consider elaborating on that, too?

It seems that your plan is to have the OTC deals as mutual agreements. That means that $dbr stays transferable after minting. Therefore my questions is if you’ve considered adding part of the newly issued DBR to a uni v3 pool as one sided liquidity? That would work like a sell wall which would help pushing down the price of dbr once inv stakers start dumping. (Prob only after inv is accepted as collateral though) Just an idea.


I am in favor of this proposal. The current outstanding DOLA bad debt poses a significant challenge to scaling DOLA lending on FiRM, and it is crucial to address this issue now that we have built positive momentum. Successful OTC deals can make significant progress in improving the financial position of the DAO, while also bringing other benefits to Inverse as mentioned in the writeup.

As for the minimum purchase amount, $100,000 per transaction ensures that the discounted DBR sale is impactful in reducing the bad debt, while also weeding out any buyer that isn’t aligned with the long-term vision of FiRM.

Agree, DRB price is not fixed, if the price is too low, it would affect FiRM revenue

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The risk in any unvested OTC sale is having the DBR’s sold immediately, driving the market price down. Two measures in the proposal address this directly: first is the whitelisting of addresses, approved by RWG, as the goal is to whitelist known or likely large borrowers on FiRM who show an interest in long-term borrowing. The second is a $0.05 floor price. Not mentioned in the proposal are the market dynamics in the event of a selloff - if DBR prices fall below prevailing short-term fixed or even variable rates, arbs or borrowers looking for below-market lending rates are expected to normalize DBR prices.

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Thank you! While I understand the benefits of this proposal it leaves me a bad taste in my mouth. However, the end justifies the means (bad debt must go away fast). So while I’m supporting the proposal, here are some more thoughts:

What about utilising current market conditions in determining the exact parameters of an OTC deal? Here are two ideas:

  1. This idea fails since I misread the original posts: It’s about $100k worth of DBR, not 100k DBR. I’m sorry. currently 4.92 ETH gives you 100k DBR on the open market. At 15% discount it would cost 4.182 ETH to buy that much. Dumping the 100k dbr instantly after purchasing for a discount, it would give the bad actor 4.3657 eth (.1837 ETH instant profit). If we reduce the discount to 10%, users would pay 4,428 ETH for the 100k dbr and the market wouldn’t support him in selling for profit (-0,0623 ETH). So I find 10% still very generous and provides the price more safety.

  2. There is a more difficult approach as well. That would be an escrow that holds the dbr for the borrower and so he can’t control it. (Only for OTC)

Overall I’m in alignment with the proposal. But a few points of question and perhaps contention.

Given we’re talking deals for people that want to borrow $1.4MM ~ $2MM (based on $100K / price - discount) we’re talking around $80MM in DOLA demand from a minimum of 43 deals.

From my understanding measures need to be taken to scale FiRM borrowing much past where it is now given liquidity considerations. With all of this in mind I believe I have two points:

  1. The limit is too high, less than One Million DBR has become liquid since inception, around half of that has been burned. I propose an amount one half to one quarter the size with simple metrics for the remaining portions to be release (avg sale price, % of volume done by treasury, reduction in bad debt)

  2. Mostly a follow up on point 1, but 43 OTC deals is a lot, would really like to see some system for reporting these, even if it’s just a view in transparency where tx’s of DBR out from the given wallet are monitored to easily capture usage of these tokens. It’s foreseeable that in the future that may not even be that many OTC deals, but the only way it will become a small task is with automation/distribution of the pipeline and monitoring.

Address these two points, the second being the most important to me given my trust of core contributors, and I think it will not only serve to help reduce bad debt, but also how the DAO scales moving forward

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Hi Mason -

The goal with the proposal is to whitelist wallets we believe will borrow at scale and hold DBR’s, not to dump on an AMM. 100% of proceeds are allocated to DOLA bad debt repayment, which currently stands at $9.42MM so a smaller amount leaves us even further from the target. Also, as you know, the more DOLA bad debt we retire, the faster we can scale DOLA lending on FiRM.

The amount can be addressed with fewer than 43 wallets, particularly if you think about the 7-digit deposits on FiRM already. Re reporting: is your point to capture when the OTC DBR sales happen? If so this could be added to Inverse Alerts …

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Hey Mason,

Thank you for your valuable feedback as always and raising some important points.

  1. We acknowledge the need for prudent management of the DBR supply, and I believe your suggestion is worth considering. Simple metrics such as average sale price, the percentage of volume done by the treasury, and reduction in bad debt can serve as effective indicators for determining the release of the remaining portions.

  2. I agree with your suggestion of implementing a system for reporting and monitoring OTC deals. I have no doubt Alien already has some ideas of how to bake this into the existing DBR Dashboard on the transparency portal.

It is important to clarify that the allowance mentioned in the proposal is forward-looking and does not imply that we already have buyers lined up. We understand that scaling DOLA liquidity would be essential to accommodate any sizable DBR OTC sale. However, the relationship between reducing bad debt, scaling up DOLA liquidity, and the ability to sell DBR tokens OTC is interconnected. By reducing bad debt, we can make scaling up DOLA lending more cost-effective. In turn, having the ability to sell DBR tokens OTC would support the reduction of bad debt, even though present-day liquidity levels might not be deep enough to accommodate large-scale sales.

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Update 2: reduced DBR authorization to 26MM

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