MGP-15┃Update Treasury Strategy

Governance Proposal (PGP) Approved PGPs
1

Summary:
This proposal aims to update the Parallel treasury strategy.

Rationale:
In line with the MIP-17, which is proposing to redistribute 80% of the revenues generated by the protocol to the treasury, we propose to update the treasury strategy. Parallel’s biggest need right now is liquidity for MIMO, PAR, paUSD but also KIBTs tokens, allowing them to be bought and sold with a slippage as low as possible while supporting the growth of these tokens.

With this in mind, we propose to focus the treasury strategy on 2 key axes:

  • acquisition of liquidity owned by the protocol:
    Protocol Owned Liquidity (POL) means that the protocol (Parallel) holds its own liquidity so that it no longer has to spend MIMO tokens as incentive to obtain liquidity, thus reducing the selling pressure of MIMO tokens.

  • acquisition of governance tokens to influence their token inflation towards our liquidity/token pools:
    introduced by Curve with veCRV, tokens with a veMODEL enable their holders to redirect part of the issued inflation to liquidity pools/tokens whitelisted by the DAO of the protocol.

Flywheel:

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The flywheel will allow us to accumulate liquidity owned by the protocol, while increasing, at no cost, our voting power in vlAURA, enabling us to redirect an ever-increasing quantity of inflation to our pools, increasing the attractiveness of our pools, and therefore the supply of PAR, paUSD and KIBTs.

We propose 2 options for setting up this flywheel:

  • Option 1: (more data here)

    • Ethereum:
      Every 4 months, claim ETH rewards from sePSP2 staking
      Every 4 months, swap ETH for AURA tokens
      Every 4 months, claim auraBAL from vlAURA locking
      Every 4 months, swap claimed auraBAL for AURA
      Every 4 months, claim APW from sdAPW staking → Deposit and stake them for sdAPW
      Every month, bridge accumulated PAR to Polygon
      Every month, bridge accumulated paUSD to Polygon
      Every 4 months, lock AURA tokens and relock current vlAURA

    • Polygon:
      Every month, swap accumulated paUSD and PAR to get a 50/50 split in $ equivalent
      Every month, Deposit and stake PAR in the p-cs-kp-eur on Aura
      Every month, deposit and stake paUSD (20%) with MIMO (80%) in the MIMO/p-cs-kp-usd on Aura
      Every 4 months, claim BAL and AURA tokens from the p-cs-kp-eur
      Every 4 months, claim BAL and AURA tokens from the MIMO/p-cs-kp-usd
      Every 4 months, swap claimed BAL for WETH
      Every 4 months, bridge WETH to Ethereum
      Every 4 months, bridge claimed AURA to Ethereum

This is the most aggressive of the 2 options. By splitting 50% of revenues into the p-cs-kp-eur pool and 50% of revenues into the MIMO/p-cs-kp-usd pool, it would theoretically (not taking into account fluctuations in token prices and protocol revenues) accumulate around $18,500 in POL in the p-cs-kp-eur pool, $18,500 in the cs-kp-usd pool and around $92,700 in POL in the MIMO/cs-kp-usd pool. However, it would require an investment of around 4.5 million MIMO tokens per year in the MIMO/cs-kp-usd pool.

Note: For management cost reasons, we propose to implement the strategy only on Polygon, bridging PAR and paUSD from Ethereum revenues to Polygon.

  • Option 2: (more data here)

    • Ethereum:
      Every 4 months, claim ETH rewards from sePSP2 staking
      Every 4 months, swap ETH for AURA tokens
      Every 4 months, claim auraBAL from vlAURA locking
      Every 4 months, swap claimed auraBAL for AURA
      Every 4 months, claim APW from sdAPW staking → Deposit and stake them for sdAPW
      Every month, bridge accumulated PAR to Polygon
      Every month, bridge accumulated paUSD to Polygon
      Every 4 months, lock AURA tokens and relock current vlAURA

    • Polygon:
      Every month, swap accumulated paUSD and PAR to get a 50/50 split in $ equivalent
      Every month, Deposit and stake PAR in the p-cs-kp-eur on Aura
      Every month, single deposit and stake paUSD in the MIMO/p-cs-kp-usd on Aura
      Every 4 months, claim BAL and AURA tokens from the p-cs-kp-eur
      Every 4 months, claim BAL and AURA tokens from the MIMO/p-cs-kp-usd
      Every 4 months, swap claimed BAL for WETH
      Every 4 months, bridge WETH to Ethereum
      Every 4 months, bridge claimed AURA to Ethereum

This option is the least reasonable of the 2 options. By splitting 50% of revenues into the p-cs-kp-eur pool and 50% of revenues into the MIMO/p-cs-kp-usd pool, it would theoretically (not taking into account fluctuations in token prices and protocol revenues) accumulate around $18,500 in POL in the p-cs-kp-eur pool, $3,700 in the cs-kp-usd pool and around $18,500 in POL in the MIMO/cs-kp-usd pool. However, compared with option 1, it would not require any additional investment in MIMO tokens, as the 50% of revenues destined for the p-cs-kp-usd pool would be deposited directly into the pool without being matched with MIMO tokens. Increasing the quantity of stablecoin without proportionally increasing the quantity of MIMO tokens can be assimilated to a “buyback” in the sense that it will mathematically increase the token price. However, buyback has repeatedly been shown not to work, and it is not the DAO’s objective to support the token price. Furthermore, this option would reduce the amount of POL acquired by the protocol in both the p-cs-kp-usd pool and the MIMO/p-cs-kp-usd pool.

Note: For management cost reasons, we propose to implement the strategy only on Polygon, bridging PAR and paUSD from Ethereum revenues to Polygon.

Regarding the other tokens currently held in treasury, we propose to migrate our liquidity provided in the PAR/jEUR on Balancer Polygon to the p-cs-kp-eur on Aura Polygon. In addition, we propose to claim and compound rewards from others tokens/LPs for vlAURA, thereby increasing our voting power:

Polygon:

  • Claim BAL from PAR/jEUR LP
  • Bridge back to Ethereum all BAL tokens in treasury
  • Move PAR/jEUR liquidity → p-cs-kp-eur (wFRK/PAR/jEUR)
  • Stake p-cs-kp-eur LP on Aura

Ethereum:

  • Claim ETH rewards from sePSP2 staking → Swap claimed ETH for AURA tokens
  • Swap remaining WETH in treasury for AURA tokens
  • Swap BAL tokens for AURA tokens
  • Lock AURA for vlAURA
  • Claim APW from sdAPW staking → Deposit and stake them for sdAPW
  • Claim unvested SAFE tokens

Note: This proposal could only be accepted if MIP-17 is also accepted. If this proposal is accepted and the MIP-17 is rejected, this proposal will also be automatically rejected.

Means:

  • Human Resources: Multisigners will need to sign and execute transactions to update the treasury strategy and manage it in accordance with the voted strategy.
  • Treasury Resources: Described in the proposal.

Technical implementation:
Described in the proposal, will depend on the option chosen by the DAO.

Voting options:

  • For Treasury Strategy Update - Option 1
  • For Treasury Strategy Update - Option 2
  • Against Treasury Strategy Update
  • Abstain

Authors: @starny & @JeanBrasse from Mimo Labs

Community poll:

  • For Treasury Strategy Update - Option 1
  • For Treasury Strategy Update - Option 2
  • Against Treasury Strategy Update
  • Abstain
0 voters
1 Like
2

Awesome proposal.
I fully agree to accumulate aura & lock for vlaura to further accelerate the Flywheel.
As the caluclation are based on the protocol revenue from one year backwards, it could assumed that this is a quite conservative calculation (even though we reduced only recently vault creation fee & borrowing fee each by 10 times).
To my understanding these pools will have an attractive yield which will attract yied hunter. In order to parcitipate in pools they will most likely mint PAR & PAUSD against their assests instead of supporting with USDC or EUROC.

Anyway I am in favour of Option 1 as it accquires the most POL.
But may I kindly ask where the 4,5 mio MIMO come from?

Thank you

4 Likes
3

Hey,
thanks for the constructive feedback! Much appreciated!

I based the projections on average revenues starting when borrowing fees and initiation were reduced. This is to avoid incorrect projections. With the addition of yield-bearing tokens as collateral (wUSK, wFRK, wstETH, rETH, etc…) we can expect an increase in revenues over the next 6 months, boosted by the flywheel.
Indeed, the pools will have an attractive yield which will encourage the mint of PAR and paUSD instead of holding USDC or EUROC.
As for the 4.5M MIMO tokens, they will come from the protocol treasury (which currently holds 20.9M, more info here and here).

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4

2 days left before the end of the vote: Snapshot

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