This proposal aims to end our quarterly redemption system and utilize our simplified more profitable method of buybacks and controlled liquidity to ensure market price stability.
In a prior vote, we created a management team and ensured the long-term stability of the protocol’s core. The redemption procedure has become an obsolete method. In periods of uncertain management, it was established to guarantee exit liquidity. For a better outcome, we can leverage our new V3-like LPs on Kyberswap in combination with coordinated buybacks. We are always able to assure that the market price of wMEMO will trade in close proximity to its liquid backing.
The Treasury team has been able to concentrate liquidity in a manner that is favorable for the Treasury since the establishment of our LP on Kyberswap as a result of our strategic buybacks. We have the opportunity to use this system which results in more profit for long-term holders. We have been able to provide the same or better exit levels as during our quarterly redemption periods. The system is transparent and is available at all times to anyone wishing to exit. It also maintains our wMEMO supply at the current level.
The current system protects redeemers with large positions from slippage. It does not benefit the protocol nor its remaining holders. It comes at a direct cost to holders as the whitelisted funds need to be swapped and moved. Funds are not being allocated to return yield for at least as long as the redemption is active.
Wonderland adopted quarterly redemptions mostly owing to the unpredictability of past management and the frequent trading of wMEMO below its backing price. During that moment, Wonderland was unable to guarantee an exit at a reasonable price other than by issuing these redemptions. With the management transition this is no longer a problem. Treasury buybacks under backing price are lucrative, which is advantageous for all remaining holders, hence buybacks were decided to be the most effective alternative. The market price remains organically close to the backing price, allowing holders to sell anytime they choose without having to wait until the following quarter or be whitelisted. No lengthy or complicated procedures are involved. Exiting will need a straightforward DEX swap with fair value depending on the present backing price. It is a fluid system with no adverse consequences on holders, such as the freezing of funds or the temporary liquidation of holdings required for redemptions.
Redemption can be a complex process for some. It will be helpful to simplify the method used to maintain price stability. Those following the simple “stake and hold” approach will earn higher returns. It is our duty to look out for the vast majority of holders who expect us to manage this app well without their own constant micromanagement.
We are always able to assure that the market price of wMEMO will trade in close proximity to its liquid backing. Q: Wording is extremely vague. There should be a commitment to defend backing if price drops [x]% below liquid backing.
We have been able to provide the same or better exit levels as during our quarterly redemption periods. Q: Please provide datapoints showing that the exit levels have indeed been better vs quarterly redemptions. Also highlight the transactions, price, period/length at which market price > redemption price.
Q: What is the plan to get market price stabilized and close to full backing? And over what time horizon?
Agreed. A very specific course of action should accompany this to ensure accountability. But if the team can outline a specific course of action to achieve their goals then I would support.
I think some clarification is needed for this proposal:
Would this affect the upcoming Q1 redemption?
As others have mentioned, I think there needs to be a defined policy regarding buybacks if this is the way Wonderland chooses to go. Whether that’s an automated buyback system after the price deviates more than 5% from backing, or something else. Regardless, I don’t think it’s fair to WL holders to have to “trust” the management team to perform buybacks regularly with no set policy or expectation.
The biggest detriment is to large holders who hope to exit. If this is implemented, large holders will suffer extreme slippage in trying to exit.
My personal opinion, is that while I agree that buybacks below backing accumulate more value for the treasury than redemptions at backing, there is no reason they can’t co-exist. Redemptions do not erase or minimize the value of buybacks. If the team performs buybacks as mentioned, naturally there will be fewer redemptions anyways. But redemptions still serve as the only viable mechanism by which large holders can exit.
If redemptions are to be removed, I think there should still be a way for large holders to exit at fair redemption price if they choose so. For example, redemptions will be allowed at backing ad-hoc for holders with 5 wMEMO or more (5 is just a random number; this can be voted on). This is also a protection against the team not performing buybacks regularly. If management passes this and fails to regularly defend wMEMO, large wallets will serve as the buyback instead and allow small holders to exit near backing price, thus incentivizing buybacks to occur regularly. This is also akin to how ETF’s work; the average mom and pop holder cannot redeem or create their ETF’s, but Authorized Participants can create or redeem in certain unit sizes (usually 25k+ shares), which ensures the ETF’s trade in line.
My reaction to this is that it’s (intentionally?) rushed and there isn’t enough time for other holders to digest and understand the implications of this change before the vote is over.
My primary concerns are:
Q1 redemption - this should proceed as normal out of fairness to holders that would not have a chance to vote before it’s over. If buybacks commence and held at liquid backing this will give holders little reason to redeem anyways
The amount and frequency of buybacks should be within the proposal and vote. What is the range within which the price will be defended?
Will holders ever get a chance at a fair exit? If this range is set to 5%, following normal price action it means that they will always have to sell at a 5% loss + slippage + LP fees
Really excited about this. Never liked the redemption process we had considering uni v3 was available. We didnt have uni on avax then, but now we have kyberswap with elastic pools (and possibly other concentrated liquidity protocols on avax as backups), I think we are good to go.
Anyone can join in in supplying liquidity to the wmemo pools, and people can short wmemo on uwu lend now.
I think we can find a viable strategic redemption process with this direction, and move on to using our treasury to its max.
I’m ambivalent about this. However, I don’t think that there should be a certain price that’s being defended given our experience previously with that whole (9,9) leverage to your tits experience.