[RFC] - Quarterly Redemption Option for Holders
I support the following:
- Yes to Redemption Option 1
- Yes to Redemption Option 2
- Yes to Redemption with Modification
- No, I Do Not Support Redemption
0 voters
[RFC] - Quarterly Redemption Option for Holders
Scope
This proposal outlines the purpose and implementation of a quarterly redemption option for holders.
[DAO Discussion] - Quarterly Redemption Option for Holders [DAO Discussion] Quarterly Redemption Option for Holders
Objective
To provide a quarterly redemption option to enable holders to exit at either full backing or liquid backing (choice to be determined).
Provide a High Level Overview
A quarterly redemption allows holders to exit once every three months at the backing price–the treasury dollar amount associated “or backed” with each wMemo in circulation. They are essentially each wMemo token’s share of the assets in the treasury. This differs from the market price, which is the price wMEMO is trading at in the open market. When the market price of wMemo is below backing price, it is trading at a discount relative to its underlying or backed value. A quarterly redemption period allows users to exit at the backing price even when wMEMO is below the backing price.
The process may require a snapshot (if illiquid assets are used in the redemption process), followed by preparation of the assets for distribution to wMemo holders. This will be determined at a later point in the RFC process as we gain further input from holders.
Provide Low Level Details (to be completed)
For the purposes of refining this RFC, a few matters will need to be addressed:
1. Redemption Process
1. Snapshot (only needed if we use illiquid assets for redemption):
The day of the snapshot, a backing price will be calculated and presented to holders. Given the volatility of the underlying assets, the backing price may fluctuate from the time the snapshot is held to the time the redemption is distributed. A Holders Snapshot will be taken with a vote duration of 5 days each quarter (every 3 months). Voters who wish to redeem their wMemo for that quarter can vote Yes or No. The purpose of the vote will be to prepare the treasury if we decide to include illiquid assets in the redemption (see Option 1 below).
(Further details will be added on this process).
2. Two Redemption Options (One will be chosen for the WIP):
Option 1:* Redemption would be at liquid backing value + 25% of the remaining BSGG (excluding the airdrop bonus). I have discussed having a full backing redemption (with 100% of BSGG; however, there are concerns that we would be in effect “rugging ourselves” by dropping the market price of BSGG by dumping such a large amount on the open market at once. We were also concerned about the impact on the price of the remaining holders’ value of BSGG that was not redeemed. Furthermore, given that 500m tokens were allocated as an airdrop bonus and it is currently being distributed through the farm, excluding that amount would reduce the impact on remaining holders by ensuring the farmable amount remains. We could alternatively pay out the BSGG in the form of a stablecoin, but this does not seem fair to long-term holders.
Option 2:* Redemption would be at the liquid backing value (no BSGG). At the time of this writing, the liquid backing currently stands around $35,000 per wMemo, versus $48,000 for the full backing price.
*In both scenarios, no fees would be taken out of the backing since we are not doing a full backing price, but one closer to a liquid backing.
3. How will the redemption be paid out (in MIM, proportional assets of the treasury, etc.)? I’m advocating for a redemption that is paid out in MIM/USDC (and a portion of BSGG with Option 1) or an alternative stablecoin so that small frogs are not disadvantaged with gas fees and headaches associated with smaller proportional asset allocations. Paying out in stablecoins would also reduce price volatility risk during the redemption process.
Discussion of redeemed wMemo tokens:
Once the wMemo is redeemed I would propose that it be burned similarly to the previous RQ, effectively serving as a buyback. The non-liquid portion of the assets that are not redeemed would increase the backing value for the remaining holders of wMemo after the redemption period.
Business and/or technical requirements of the implementation of the proposal:
Present the requirements to implement the proposal.
There are two main ways we can execute a redemption:
Option A - Deploy a single tick V3 pool on ETH, load with stables and let people bridge wMEMO over and redeem. There will be costs/fees associated with bridging over to ETH.The V2 pool that’s currently on AVAX would stay. Arbitrage between the two pools would keep the prices close to backing - allowing frogs to sell into V2 to redeem. The benefit of this is that no contract will need to be deployed/developed/recycled. And it is something the TM can carry out on his own. Also any redeemed wMEMO would be able to be brought at backing in the V3 pool during this time allowing larger buys to potentially occur. This process may be quicker/easier to deploy given the TM has full control, and does not require devs to deploy a script (reducing the potential for SC risk and delays in the redemption process).
Option B - Reuse the RQ contract and make some slight modifications so that the redeem price can change for use each quarter - deployment and development of this is something that the TM would not be able to carry out and would need help to execute. A potential concern with this route is exposure to smart contract risk.
- Thanks to SkyH, Tikkamasalas, Nal X, Kyle, and everyone in the discord/forum for input and help writing the RFC.
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