[DAO Discussion] Quarterly Redemption Option for Holders

The purpose of this topic is to discuss implementing a quarterly redemption for WL holders. This would have many advantages for holders of WL as outlined below:

  1. Allows holders to directly benefit from buybacks on a short-term basis. - Buybacks are great, but if holders cannot exit near backing price they are stuck in an investment that may be underperforming other assets. So with every buyback below market price, backing goes up; however, users are unable to take advantage of this in the current “bearish” market. It seems as weeks go by, backing goes up from buybacks, but then goes down because of other investments/situations or negative macroeconomic conditions. Thus, the impact of the buybacks is never realized in terms of profits by the holders.

  2. Provides Price Support Closer to Backing - Having quarterly redemptions encourages the price to maintain levels near the backing price which would serve to increase the price of wMemo by at least 30% in the near term. It would also help to maintain a price closer to backing, and any profits (or losses) would be more directly impactful on the market price. In other words, the backing would be more closely aligned with the market price.

  3. Aligns Interest of Holders More Directly with Dani/SkyH - The current system does not hold the TM/Dani as accountable because there is less concern for a diminishing treasury as people exit. If instead people were allowed to exit at backing on a quarterly basis, the system’s treasury would fluctuate more directly based on performance. This encourages the TM/Dani to provide good returns and keep holders satisfied so that they keep their money in WL. It also would discourage behavior that misutilizes the treasury funds or is not in the interest of holders as they would be more likely to leave (and take their funds with them). As mentioned above, giving holders the option of quarterly redemptions gives holders the ability to exit at backing. This can help align the interests of the holders with Dani and others and help to eliminate conflicts of interest. After all, if someone made an unpopular decision many people would take their money with them, we saw this after the recent rate quit. Investors are not chained to WL and can leave at anytime if they are unsatisfied.

Do you support quarterly redemptions?

  • Yes
  • No

0 voters

8 Likes

Yes we need this or what is the point of backing if you can never realize a gain.

8 Likes

What are your plans on the wMEMO that are received from redemption? Comparing to $SIFU, their tokens are kept and possibly resold again in future, whereas during RQ, those tokens are burnt.

3 Likes

Just knowing that you CAN redeem will give more confidence to buy and hold. It’s not like everyone is going to redeem and drain the treasury, some will sell, but if the price drops below backing, people will buy it up knowing then can make a profit on it.

6 Likes

i’m conflicted on this, i agree that investors shouldn’t be chained to WL, but the perception of doing another RQ isn’t good.

We’ve been telling people that ragequit is a one time thing and it’s crucial we do it to align the community. Many may be miffed but knows it’s necessary for long term hodlers.

this action kinda implies that wonderland doesn’t care about long hodlers and focus more on the short term arbitrage, especially after we told them RQ will never happen again.

But then again, long term hodlers still don’t have a way to access the treasury as of this moment, so maybe it’s good to let them go? idk.

it maybe an emotional thinking, but i know i’m not the only one who thinks like this.

4 Likes

It could benefit the longterm holder if the Redemption have a fees, lets say 5-10% or whatever it is, that would keep the price near the backing imo.

3 Likes

I would vote yes for this it makes complete sense as a fund to allow this

6 Likes

I agree with quarterly redemption but we should implement a withdrawal/ management fee of 5-10 percent to stabilize as some have suggested here

1 Like

I don’t think Rage Quit is a good title for this. Before people were raging and wanted to quit, not a bad title then.

Now I think it should be considered as a regular recurring investors redemption period. This would be for people that are long term holders, but they just want a way to take profits or some cash as they continue to invest in wonderland.

If the backing price is never brought all the back up through buybacks, and the market is undervaluing wmemo, there isn’t a way to get some money out without taking a loss.

One way around short term arbitrage, you could make redemption available to those only after they waited 1 quarter. If you buy right before redemption, when the price is below backing, you have to wait a full quarter before you are allowed to redeem. Any long term holders will qualify, and short term buys will not.

I also do not agree with the 5%-10% redemption fee. I think this should be a no fee redemption.

Backing price is a measly $34K right now, taking another 10% of that as a fee would be less than selling at market for a loss.

5 Likes

I like the idea of a quarterly redemption. I think a penalty is not needed (assuming BSGG will not be redeemable).

3 Likes

What do you mean BSGG not redeemable?

1 Like

The illiquid part of BSGG I’m guessing.

1 Like

I voted yes but I don’t entirely agree with this.
Predictable times for buy backs could result in weird price behaviors no?

For the traded price should be closer to backing price or actually ABOVE, we need:

  • more transparency on roles at Wonderland and a clear roadmap
  • the Treasury needs to focus on what Dani calls ‘boomer yields’ and not take punts on cryptos
  • a unified image. For example Alice or someone else could go on YouTube videos explain the Wonderland roadmap, post on Twitter and actively represent the protocol alongside Dani
2 Likes

Yes please.

We should prioritize this implementation and let the TM/Dani/whomever decides the future of WL determine what happens to the wMemo acquired following the redemption.

Agree with @ghostzero that there’s no need for any fees for this type of redemption. The loss on BSGG is enough of a penalty to anyone who decides to take advantage of this option.

3 Likes

Just so where on the same page, we are discussing redemptions (not buy backs as you referred to them). I only mentioned buy backs in the proposal in the context of how redemptions and buy backs can work in tandem to allow people to exit closer to the backing price. The other points you make are valid and multiple proposals may need to be implemented to fix many of the issues WL faces.

4 Likes
  1. I agree with the idea that the redemption helps to create risk-free arbitrage opportunity which helps to main the WMEMO price close to its backing price. However, Wonderland is a closed end fund, like any CEF trading in the equity market, it can be traded at premium or discount depends on how well the fund is performing.

I have already received 3.5% farming from BSGG in 1 month. This is roughly 40% a year investing in wonderland. If redemption brings the WMEMO price back to its backing, it lowers the BSGG farming APY I get from my WMEMO share. In addition, we have revenue sharing and cross of ages coming up which will create an even higher APY for the existing WMEMO holders.

  1. Even if we do have redemption, there is usually a redemption fee. This is used to discourage short term trading. If the holding period is less than 30, 90, 180, 360, etc days, we need to charge an appropriate redemption fee which will increase the transaction costs because the redemption feature will require the fund to maintain a higher cash positions in order to meet the expected redemptions. And redemption puts more burden on the fund.

  2. The lack of confidence is not only the macroeconomics, but also the uncertainties caused by previous liquidation event and an unclear future roadmap, so I still think revenue sharing is still the priority. Currently, SkyH already does buybacks but occasionally to avoid front run. The redemption process needs to be thoroughly discussed and a certain requirement is needed to prevent short term trading.

4 Likes

The two main points of contention seem to be whether to require a redemption fee (and what % although 5-10% seems popular) and what we would do with the acquired wMemo from the ragequit. I assumed we would just burn it/take it out of circulation, but open to discussion on this. Since both 5% and 10% have been proposed as a fee perhaps splitting it down the middle at 7.5% would be acceptable, or perhaps no fee at all given they would not be eligible to redeem the BSGG or VC investments (similar to the RQ). If we were to include VC investments in the redemption calculation, they would likely need to be given valuations based on the initial seed investment amount to be fair for holders. Feel free to post with thoughts. Keep in mind if a redemption fee was imposed it would still be beneficial to long-term holders as they would get a nice bump in backing every quarter.

Redemption Frequency:
After further thought, I think perhaps a biannual or triannual redemption may be a better option for holders due to the complexity of the treasury and the work required to prepare the treasury for redemption. This would also enable us to have a broader investment approach given we would have a longer time horizon for ROI. With a quarterly redemption, it may exclude investments that require locked staking or are difficult to value given the short time horizon for producing liquidity required during redemptions.

2 Likes

I don’t think it’s fair to have a penalty if bsgg isn’t redeemable. That is already a penalty so would be a double penalty for no good reason.

Have a penalty if bsgg is redeemable or no penalty if bsgg is not redeemable.

Quarterly redemptions are a good balance timing wise imo. It aligns with the Treasury Manager review periods also, gives a chance to rethink the TM position at the same time as redeeming. No brainer to align these two things

5 Likes

I agree with these points

2 Likes

Highly agree with this.

In practice Wonderland is becoming an actively managed Yearn DAO - potentially with some directional plays too.

This has enormous potential - akin to the first real decentralized hedge fund. It is a useful project that maximizes stable yield with little work needed on the part of the participant. Constantly finding new farms with high yields takes a ton of work, so for a fund to do that for you - people would be willing to pay for it.

This would be an honest project that delivers true value - no Ponzinomics - heavily driven by community input.

But fundamentally such a project - a fund that is meant to generate profit - requires a way to enter and exit the fund at fair prices. Quarterly redemptions would ensure that - and also ensure that otherwise the fund is trading at near fair value (otherwise it would be arbed in line by redeemers).

I also think as a result the redemption fee makes no sense. No more than 1% should be implemented if any. Otherwise why would anyone invest in the fund - even at 20% annualized returns from stable yields, you would need 3 months to even break even.

5 Likes