Protocol Owned Liquidity (PoL) - Grape Community Treasury

DAO
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Protocol Owned Liquidity - Grape
(This discussion is going to turn into a vote)

Introduction
The Grape Network is aiming to build a treasury that will back the community with a basket of assets starting with GRAPE-USDC LP.

At a later stage, we will introduce a limited supply of bonds tradable for other assets such as USDC, SOL, and Staked SOL.

How to participate
There are two main ways of interacting with GRAPE in the DeFi 2.0 arena:

Staking and Bonding
Stakers stake their GRAPE tokens in return for more GRAPE tokens through Dynamic Rebasing.
Bonders provide LP tokens in exchange for discounted GRAPE after a fixed vesting period! (30 Day Maturity).

The Grape Network releases GRAPE from the treasury, with a portion of it going to stakers.

The main benefit for bonders comes from the price consistency. Bonders commit LP tokens upfront for a fixed return at a set point in time, paid in GRAPE. Bonders benefit from a rising or static GRAPE price.

With Dynamic Rebasing, stakers can see their balance of GRAPE resolve in real-time.

Bonders will have to wait for the date of maturity to claim their GRAPE tokens

What is Bonding?
Bonding is the process of trading an LP share to the protocol for GRAPE. The protocol specifies the tentative ROI of bonding, the amount of GRAPE participants will receive and a vesting period for the trade. In an optimal scenario, participants trade their asset or LP share for more GRAPE tokens.

You can own multiple bonds but maturity will if you withdraw your bGRAPE to GRAPE (withdraw from the redemption vault)

bGRAPE is minted and transferred to the redemption vault making the bond non-tradable.

Bond Pricing:
bGRAPE (Bonded Grape) will start with 0 discount, the discount will start growing if the bond is not sold. The price of the bond will drop until someone buys it. Buying the bond would delay the falling of its price.

The rate of change of the discount has not been determined yet. (we can choose between a linear or an exponential decay function)

GRAPE-USDC LP Bonding
GRAPE-USDC LP Bonding allows you to contribute liquidity to the GRAPE-USDC pool on Raydium in return for LP shares, which can then be used to mint GRAPE bonds at a discount.

Bond Ceilings
The Grape Network will have bond ceilings for all bond pairs. These are created to limit the amount of inflation GRAPE can experience in a given time frame. The Bond ceilings will help achieve sustainable inflation.
The GRAPE Bond Ceiling will be determined by the amount of GRAPE in the community treasury as available.

Where does the Grape come from?
Each Epoch we will deposit tokens to the Grape Treasury to be used for bonding and staking rewards.

Fee structure:
There are three steps in the process:

  1. Grape Protocol mints bGrape from Grape.
  2. Grape auctions off bGrape for LP token.
  3. User unlocks Grape from bGrape.

Option one: Grape takes on the fee
When bGRAPE is minted a 3% fee will be charged. The Grape treasury will need to hold 3% more Grape than the amount it can sell as bonds. (fees at step 1)

Option two: The user takes on the fee
The user pays 3% more for the bond (fees at step 2).

Classic OlyPRO model: The fee is charged at step 2 and the user gets a worse price for the bond. Given the fact that we will not have anywhere close to the APY other Olympus forks have, we should not lower the APY more. (debatable)

To be decided if this vote passes:
A. Fee structure
B. Redemption of the bond: Should the bond be partially redeemable (dynamic release of the coins per block) or all the coins should unlock at the date of maturity?
C. Rate of change of the discount of the bond (linear vs exponential decay function)
D. Starting Bond Maturities? (30 Day, 365 Day)

Please propose changes/improvements, voice your concerns and in case you disagree please comment with your train of thought!

Thank you,
<3

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This is exciting! Grape will own its own liquidity. Option two sounds better to me as it will not disincentivize folks from purchasing bonds. I like the idea of the longer period of vesting for bonds as well as borrowing the concept of dynamic rebasing from InvictusDAO. I think it would be very convenient to investors if we dynamically allocate claimable Grape released from the bond vesting into the staking mechanism. That would allow for more gains for investors and further incentivize purchasing bonds. I’m not knowledgeable enough to opine on the rest. #ohmygrape

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Although it all comes down to the variables you mentioned, that we need to decide upon, I really appreciate this idea! Having our own Grape-owned LP is awesome and it’s an important message we send. While the idea of Grape as a community token is a goal worth pursuing, signaling our members (and potential members) that we absolutely know how to handle the monetary aspect of Grape in terms of token price and long-term viability will give them peace of mind, which is especially needed until we decide on a pricing model for grape services.

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Very excited for this. Great work on the discussions and planning!

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This is a very intriguing proposal!

Is Grape building this internally? If not are we paying one of the ohm-like’s on solana via an Olympus pro style program?

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Yes, we have contacted all the teams building the Ohm Pro services and we have selected an already solana established group (can’t leak the name atm). They will help us set it up for the grape treasury.

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Sounds incredibly interesting and Olympus style bonding can be a great way to make liquidity protocol owned with all the benefits that this comes with.

One question is, do we need this? Especially given the fact that we are moving ahead with an MM on a CEX? I would get why would, if we had decided not to push for listings etc.

I am mentioning this because the obvious short coming from my research is that we add an extra inflation layer on our token which would be perpetually rebasing. And we already have a significant selling pressure coming from skill role/membership emissions.

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If we don’t own our own liquidity, on-chain GRAPE liquidity will completely disappear once LM ends.

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We will have nowhere near the ohm forks APY. Our bonds are going to be limited to the amount of grape that is sitting in our treasury.

We will only be selling bonds for LP (at the start) which will allow us to maintain enough liquidity in the DEX world.

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Really great job on the write up and capturing the complexities, and helping to distill it!

Feedback:

A. Fee structure: Uncertain. Grape incurring the cost implies greater risk/burden to Grape, where as if User incurs the cost at Step 2, it should be recouped at the maturity or return on the locked LP.

B. Redemption of the bond: Should the bond be partially redeemable (dynamic release of the coins per block) or all the coins should unlock at the date of maturity?
If possible, I think bonds should only be allowed to release the tokens at the date of maturity. Otherwise, the dynamic release of coins per block/epoch disincentivizes LP staking that currently provides liquidity with steadily released emissions rewards, but is not locked.

C. Rate of change of the discount of the bond (linear vs exponential decay function) Although bond pricing & PV typically use Exponential Functions afaik. The rate of change of the discount, should probably be correlated linearly to variables that define the “risk”, i.e. total amount of Bonds or LP locked.
Wrote these out for myself more than anything… :wink:

  • Linear Function: f(x)=mx+b
  • Exponential Function: f(x)=(a^x)+b

D. Starting Bond Maturities? (30 Day, 365 Day) If the goal is to attract liquidity over a longer period, I think extending the base option from 30 Day to 90 Day, since Holding, Staking & LP’s already provide a Monthly return. These bonds could extend beyond the available options.

From how I understand Grape can be allocated, received, or leveraged today or in the future.
1.) Membership/Holding
2.) Merit/Role Emissions
3.) Events/Prize Emissions
4.) Participation Rewards Emissions [Future - TBD]
5.) Staking (Single-Side) [Future]
6.) LP GRAPE-USDC Pools (Provides Liquidity)
7.) Bond (Provides Liquidity)

The aspects of this approach that intrigue me most and I’m trying to better understand:
1.) Duration: I like the Short & Long 365 Day term options.
2.) Benefit: Not entirely clear on how the LP translates to liquidity for Grape. Grape gains direct access the LP locked in other places, right?
3.) Dynamics of what the bGrape token means (Same as “$GRAPE”)

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Thanks for the feedback!

If possible, I think bonds should only be allowed to release the tokens at the date of maturity. Otherwise, the dynamic release of coins per block/epoch disincentivizes LP staking that currently provides liquidity with steadily released emissions rewards, but is not locked.

If we do the redemption of the bond only at the end, the product becomes much more risky which will translate in much higher discount and will receive less interaction. I would vote for the dynamic partial release.

Grape incurring the cost implies greater risk/burden to Grape, whereas if User incurs the cost at Step 2, it should be recouped at the maturity or return on the locked LP.

The other option is to reduce the discount of the bond by paying a portion to the partner’s wallet. I am really not sure about it but I would suggest for grape to bare the cost and change that if it becomes popular

If the goal is to attract liquidity over a longer period, I think extending the base option from 30 Day to 90 Day, since Holding, Staking & LP’s already provide a Monthly return. These bonds could extend beyond the available options.

We need something with moderate risk and epoch long maturity.

Here is where i lost you! LP is the token you get after depositing in a Liquidity Pool! Think about it as your “receipt” for providing liquidity in the GRAPE - USDC pool in raydium. Instead of staking your LP in the fusion pool to make more $GRAPE. You exchange it with a bond that will give you the value of your LP (which you are trading) in $GRAPE tokens with a discount!

So that LP goes to the Grape Treasury but the liquidity is still deposited in the raydium pool.
We achieved:

  1. Our treasury now holds the LP token which means if another project comes along and gives more APY in the raydium fusion pool that liquidity will not migrate! No more mercenary liquidity
  2. Since the treasury own the LP, we accumulate trading fees from the pair we supply liquidity for! Our mission is to own 100% of the GRAPE pair LPs meaning we want to be earning fees from every $GRAPE traded in DEXs!

Not sure i understand that either
bGRAPE is an SPL token.
bGRAPE is minted when someone exchanges GRAPE LP. That bGRAPE goes to a redemption vault (does not go to the users wallet so they cannot trade bGRAPE)
That bGRAPE matures and gradually releases coins. The user needs to go to the redemption vault to claim their matured tokens.

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Thank you again!

A: My point about Fees is that I think Grape should incur the risk later in the future, not upfront. I defer to you, just offering my 2 Grapes here :wink:

B: If the rewards are dynamically dispersed, I’d say go with Exponential to incentivize longer holding period

#2 - Benefit - Makes more sense - Thanks.

#3 “That bGRAPE matures and gradually releases coins. The user needs to go to the redemption vault to claim their matured tokens” in GRAPE? - Got it

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The vote for the proposal is here: Protocol Owned Liquidity Vote

Thank you all <3

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Questions:

  1. How much Grape is going to be bonded?
  2. How much bGrape does Grape need to sell?
  3. How does this work? Who mints the bonds?
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In answer to point C, At the very least Id imagine members who might hold a chunk of grape above the minimum membership level might be keen to bond excess as currently there’s no incentive to hold more then minimum membership requirements.
Exiquio noted could be a way of getting investors in and has the benefit of removing concerns over voting rights from selling primary grape tokens.

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