[Proposal] [Community Pool Spend] Allocate Earmarked Community Pool Funds to Ozone

Governance & Proposals
#1

Preface

I have a vested interest in raising this proposal. I am a long-term community contributor at Risk Harbor, and I am a $LUNA holder, $ANC holder and Anchor protocol user on the Terra blockchain.

Background

1). Brief History

  • On 2021/05/21, Do Kwon posted Ozone specifications and $OZ (previously $O3) token distribution plans [Linked here].

    • This was in response to demands for a Terra-native insurance protocol from the TeFi ecosystem.

  • Around Sept. 2021, following the successful migration of Columbus-4 to Columbus-5, Ozone again became one of the primary focuses of the TeFi ecosystem. [Linked here]

  • On 2021/10/21, Do Kwon once again posted that Ozone would be initially bootstrapped by community pool funds [Linked here], in accordance with Proposal 44 [Linked here] and [here].

    • There is currently more than 3.14B UST worth of assets in the community pool.

  • The Ozone protocol was handed to the Risk Harbor team to build from start to finish with no additional subsidies and to lead long-term development, and has since been rebranded to Risk Harbor Ozone.

    • On 2021/11/04, the Risk Harbor Team announced that they will take charge of the Ozone protocol[Linked here].

2). Risk Harbor Ozone so far

  • On Ozone V1, the Terra community pool will be the sole underwriter of the Ozone.

  • At this time, there is $10M underwriting capacity in Ozone and it is 100% utilized.

    • Policyholders ate up the entire capacity in less than 2 hours after the launch of Ozone.
    • This implies significant demand that is unmet by underwriting capacity.
    • Note there was 100% utilization and high demand to cover only smart contract risk on Anchor.
    • Since launch, there have been countless conversations lining up large buyers, institutions, and other community members to purchase serious volume.

  • The premium is very competitive (compared to Nexus Mutual and other protocols), such that the demand for native protection on Ozone is much higher than other options.

3). Developments

  • No community funds were used to build Risk Harbor.

    • All development from beginning to end, including audits, was conducted and financed by the Risk Harbor team.

  • Following the debut of Risk Harbor Ozone V1 on Mainnet, the listed items are already under development:

    • Integration with Arrington Anchor Yield Fund
    • Integration with Anchor for point-of-sale protection
    • Integration with Mirror
    • Integration with Orion
    • Integration with Kash
    • Integration with Alice
    • Integration with Angel
    • Dashboard, key metrics, and analytics for users to track their protection
    • Open-source libraries to make Cosmos smart contract development easier
    • Better documentation for Solidity developers to onboard onto the Terra ecosystem and create protocols to launch on top of Ozone
    • Risk modeling services to Terra protocols surrounding smart contract, governance, and structural risks
    • Run bug bounties for core Terra protocols which Ozone protects

  • Risk Harbor Ozone V2 is currently under development. Ozone V2 will include innovative features that include but are not limited to:

    • Community-enabled underwriting
    • Levered underwriting
    • Automated Market Maker (AMM)
    • Risk engine
    • UST depeg protection across different blockchains
    • Anchor protection across different blockchains
    • Creation of other novel products on the Terra blockchain that are complementary to Ozone

Goals and Impacts

Allocate earmarked 1 Billion UST from the community pool fund to provide underwriting capacity for Ozone.

Key Outcomes

  • Help meet the protection demand for, but is not limited to, the aforementioned features under development for Ozone V1 and Ozone V2.
  • The community pool funds will serve as underwriting capital to increase capacity for policyholders. This will attract more risk-aware capital to Terra and depositors to Anchor who otherwise wouldn’t have deposited without natively integrated protection. In particular, institutional investors often face strict risk tolerances which cannot be met without the ability to purchase protection.
  • Premiums after any losses will be held in the Risk Harbor Protocol Treasury. These funds will make Ozone more resilient to unexpected shocks by having additional capital to insulate policyholders in the case of a black swan event. In the long term, these funds will contribute to a more robust risk management protocol and benefit the entire Tefi ecosystem.
  • Risk Harbor will allocate 10% of Risk Harbor Tokens, once released and bridgeable, to all Luna stakers, with 100% vesting at launch.**

Implementation

Underwriting funds: A lump deposit

  • The community pool supplies 1B UST (100% of the 1B already provisioned for Ozone) of underwriting capacity
  • The funds will be deposited into the Ozone treasury via the following multi-sig address:
    • terra1qyw695vaxj7jl6s4u564c6xkfe59kercg0h88w
  • There will be 6 multi-sig signers for the Ozone treasury:
    • Chauncey from Angel
    • Jeremy from Delphi
    • Remi from LFG
    • Jonathan from Levana
    • Dh and CJ from TFL
    • Nick from Chronos

Underwriting duration: Indefinite

  • Risk Harbor Ozone community aims to be the ultimate long-term stakeholder in the Terra ecosystem, and we wish to serve the Terra community indefinitely.
  • To facilitate this, we ask the community fund to support us and underwrite Ozone indefinitely, unless a counter-proposal is passed to remove the said underwriting funds.

Next Steps

  • Community Discussion
  • Upload Governance Proposal
  • Voting Period

Considerations

1). Does Risk Harbor Ozone use its own product?

  • As one of the largest Terra and Anchor advocates in the DeFi ecosystem, Risk Harbor will invest 1M UST out of its own treasury into Anchor, and purchase Ozone protection for the deposit.

2). Will there be UST depeg protection?

  • Ozone in its current form would not protect against UST depeg risk. This may change in the future. In the meantime, we are currently working on a more scalable and sustainable mechanism with LFG to further robusticize UST.

3). How is the premium set?

  • In Ozone V1, the premium is statically set by the Risk Harbor Ozone team at a very competitive rate to bootstrap demand.
  • In Ozone V2, the pricing is controlled by an Automated Market Maker (AMM) which dynamically prices protection.

4). What would happen in a hypothetical loss event on Anchor?

  • The community pool fund is the underwriter (counterparty) of policyholders. As policyholders file a claim, their aUST will be swapped for UST or a diversified pool of assets.
  • If the distressed aUST recovers its value after a temporary loss event, it can be redeemed through Anchor to cover the payout and replenish the community fund pool. Otherwise, if aUST is permanently debased, the community fund pool will cover the loss event on behalf of policyholders.

5). What is the projected timeline for delivery for Ozone v1 and Ozone v2?

  • Ozone V1 launched already and has sold 10M of Anchor protocol protection. The other products mentioned in the “Background” section above are also in the pipeline.
  • The Ozone V2 timeline is not yet fully finalized but is already in development and tentatively targeted for Q2.

6). When will more capacity be available given that the team acknowledges that there is an unmet demand? Is this dependent solely on the passing of this proposal?

  • Many large institutional buyers and consumer applications have expressed interest in purchasing protection for Anchor deposits including the Arrington Anchor fund and other large-scale applications as noted below. The only way to meet this scale of demand for risk management is for community funds to serve as underwriting capital. If the proposal passes, community funds that have already been provisioned for Ozone will facilitate the inflow of substantial capital into the Terra ecosystem. The only way to accommodate this volume and help maintain large capital inflow into Terra is through the passage of this proposal.

7). What if the 1B capacity is not enough to match the demand for Terra products?

  • We may make an additional proposal for additional underwriting capacity.
  • We will allow community members to underwrite in the full open version of Ozone V2.

8). The value of aUST is constantly changing. Will Ozone account for this?

  • Yes. In the full launch, Ozone will be constantly updating the aUST ratio.

9). Will the funds be used to fund any company operations?

  • No. This capital is not an investment and as mentioned below, has already been provisioned to solely provide underwriting capacity for the broader Terra ecosystem.

10). Will Ozone use a 1:1 capital requirement? How does this scale?

  • No. We will soon be launching an open V2 that uses leverage (e.g. 1B underwriting can protect x more B worth of assets) via our novel AMM that dynamically prices protection and applies leverage based on various parameters such as risk, capacity, and more.

11). Will Ozone only protect Anchor?

  • No. We will protect Anchor, to begin with, but ultimately as we scale up, we will have vaults that provide protection for applications across the entire Terra ecosystem such as Astroport, Mirror, Mars, and more.

Summary
We truly believe that decentralized finance requires decentralized money. As the Terra ecosystem expands, risk management has emerged as a fundamental primitive to unlocking new waves of capital, where both retail and institutional users can participate in a secure, transparent, and capital-efficient manner. We’re also excited to onboard further developer activity: whether it’s tooling, documentation, product refinement, or creating a host of unique applications from scratch all built on top of the Ozone platform. The opportunities are endless, and we look forward to building the future of risk management with the broader Terra community and bringing decentralized money to the rest of the world.

Useful Resources

Risk Harbor Ozone V1 (Terra) whitepaper, [Link here]
Risk Harbor Core V2 (EVM) whitepaper, [Link here]
Risk Harbor Ozone Link: https://ozone.riskharbor.com/

About Risk Harbor Ozone

  • Risk Harbor is a risk management marketplace for decentralized finance (DeFi) that utilizes a completely automated, transparent, and impartial invariant detection mechanism to secure liquidity providers and stakers against smart contract risks, hacks, and attacks.
  • Risk Harbor Ozone is an algorithmic, claims-based asset protection platform covering various forms of risk in the broader Terra ecosystem. It is a Risk Harbor Core v1 implementation on the Terra blockchain.
  • To reiterate, currently, the Anchor UST (aUST) pool offers protection only on the risks associated with Anchor protocol. There is no UST peg protection yet but that is the next high-priority product that is currently under development by the Risk Harbor team, amongst other products in the pipeline.
30 Likes
#3

Hello - I will remain anon for this but I am a fairly well known person in the space.

I do not agree with this proposal and think it is a complete over spend over the communities money. Here I lay out exactly why that is and why you should vote not to this proposal in its current state.

The break down by section:

Background
1). O zone should be community funded. Do even said so. Agreed.

There is currently $3.14B in the WHOLE community fund. You are proposing to take 1/3rd of the entire pot to do what exactly? What do we get in return as a community…

2). There are several options for DeFi insurance. $10m is not even close to a sample size to say that you (Riskharbor) have that amount of demand to fill. Just as you mention you innovated in the insurance market in DeFi. Who is to say someone will just out innovate you? Phase DAO is already going to likely be a better more scaleable model of insurance (So they claim) . Betting 1/3rd of the entire communities money on Risk harbor is absurd. Especially at the price they are proposing…(More to come).

3). You are Vc funded and expected to spend money. The proposal here is just going to promote dumping tokens on retail investors. These integrations are great but expected. A much smaller amount should be used.

Goals and Impacts
Digging in to the weeds of this post - we see 10% of all Risk Harbor tokens are being given away to people who vote yes.

This feels like a clever blackmail. Its not your money - why not just vote yes? They are selling 10% of the entire marketcap of this token for $1b. Meaning that they are valuing o-zone/Risk harbor which manages $10m at $10b total marketcap.

That is crazy to value something even remotely that high and Delphi knows this. Look at what Astroport manages in TVL compared to token marketcap.

https://coinmarketcap.com/currencies/astroport/historical-data/

Astroport Token marketcap trades at almost exactly 1:1 to TVL.
Look at those in the Terra ecosystem. This valuation that they are proposing is absurd.

Risk harbor is proposing to value its token marketcap at $10b when it manages $10m. If we are valuing Risk harbor like any other product we would value the entire marketcap no where near $10b.

That is a joke. You will all get dumped on by VCs and this is a giant smart play to make a bunch of money for the insiders.

We as a community deserve way more fair terms than what is proposed here. I will be voting no for this and I think you all should too.

Do himself just said UST is printing as fast as it could. Why would we need to spend 1/3rd of our money on something we do not really need?

TL;DR
We need better terms than what is proposed. There are other options for insurance coming out and spending almost 1/3rd of the communities money behind a single protocol is too much when we have hundreds coming in the future and throughout the rest of the year.

#4

I do not agree with this proposal and think it is a complete over spend over the communities money. Here I lay out exactly why that is and why you should vote no to this proposal in its current state.

The break down by section:

Background
1). O zone should be community funded. Do even said so. Agreed.

There is currently $3.14B in the WHOLE community fund. You are proposing to take 1/3rd of the entire pot to do what exactly? What do we get in return as a community…

2). There are several options for DeFi insurance. $10m is not even close to a sample size to say that you (Riskharbor) have that amount of demand to fill. Just as you mention you innovated in the insurance market in DeFi. Who is to say someone will just out innovate you? Phase DAO is already going to likely be a better more scaleable model of insurance (So they claim) . Betting 1/3rd of the entire communities money on Risk harbor is absurd. Especially at the price they are proposing…(More to come).

3). You are Vc funded and expected to spend money. The proposal here is just going to promote dumping tokens on retail investors. These integrations are great but expected. A much smaller amount should be used.

Goals and Impacts
Digging in to the weeds of this post - we see 10% of all Risk Harbor tokens are being given away to people who vote yes.

Its not your money - why not just vote yes? They are selling 10% of the entire marketcap of this token for $1b. Meaning that they are valuing o-zone/Risk harbor which manages $10m at $10b total marketcap.

That is crazy to value something even remotely that high and Delphi knows this. Look at what Astroport manages in TVL compared to token marketcap.

https://coinmarketcap.com/currencies/astroport/historical-data/

Astroport Token marketcap trades at almost exactly 1:1 to TVL.
Look at those in the Terra ecosystem. This valuation that they are proposing is absurd.

Risk harbor is proposing to value its token marketcap at $10b when it manages $10m. If we are valuing Risk harbor like any other product we would value the entire marketcap no where near $10b.

That is a joke. You will all get dumped on by VCs and this is a giant smart play to make a bunch of money for the insiders.

We as a community deserve way more fair terms than what is proposed here. I will be voting no for this and I think you all should too.

Do himself just said UST is printing as fast as it could. Why would we need to spend 1/3rd of our money on something we do not really need?

TL;DR
We need better terms than what is proposed. There are other options for insurnace coming out and spending almost 1/3rd of the communities money behind a single protocol is too much when we have hundreds coming in the future and throughout the rest of the year.

17 Likes
#5

I’m def for this proposal, think its a worthy spend of community treasury. Insurance/confidence around core of Terra ecosystem and UST is required to grow it.

1B might be slightly on the high end, but I think there will be a ton of demand for this. Perhaps start at 500m ot 750m with future vote to increase?

#6

Deciple_of_Do shared some excellent points, and they echo my thoughts. Some alternatives could include unlocking small tranches based on of demand. But asking for $1 Billion is frankly outrageous.

Also, this entire proposal comes across as: We want $1 Billion. There aren’t any deep insights. What does the current backlog look like? What are your financial projections that necessitate $1 Billion?

And the token allocation for $1 Billion? This sounds laughable to say the least.

HARD NO in the current form and the fact that this proposal was made in this form makes me extremely skeptical of your intentions and ability to properly execute.

8 Likes
#7

1). Ozone should be community funded. Do even said so. Agreed.
There is currently $3.14B in the WHOLE community fund. You are proposing to take 1/3rd of the entire pot to do what exactly? What do we get in return as a community…

Per the community burn proposal: ([CommunityPoolSpendProposal] Burn Pre-Col5 Community Pool), Do stated “Following the initiation of the above, a separate, new proposal will go live once Ozone launches to fund it using the proceeds from the mint/burn of the 88,675,000 LUNA → UST at the discretion of future governance proposals by the community.” The 1B will be used to underwrite protection across the entire Terra ecosystem. With this amount of protection available, tremendous amounts of risk-averse capital will flow into Terra as no other L1 offers this type of protection capacity. The community benefits are obvious, massive capital inflows, more protocols launching with native protection, and more.

2). There are several options for DeFi insurance. $10m is not even close to a sample size to say that you (Riskharbor) have that amount of demand to fill. Just as you mention you innovated in the insurance market in DeFi. Who is to say someone will just out innovate you? Phase DAO 2 is already going to likely be a better more scaleable model of insurance (So they claim) . Betting 1/3rd of the entire communities money on Risk harbor is absurd. Especially at the price they are proposing…(More to come).

On demand, we have numerous institutions, neobanks, and large purchasers lined up. Just one example is that the announcement and launch of the 150M Arrington Anchor Yield Fund will be solely protected by Ozone, and is dependent on the increase of Ozone capacity. Arrington himself stated in the Risk Harbor Ozone announcement AMA that availability of protection was the main bottleneck preventing the fund from deploying capital to the Anchor ecosystem.

Also, the protocol mentioned is extremely new and unproven. Anybody is free to make grand promises but that is not a guarantee that they can execute and deliver. Risk Harbor has been around for over a year and has already delivered on multiple iterations.

As mentioned previously, the capital is already earmarked and has been waiting to be allocated. Hoping for another potential viable solution that requires waiting another year or two would give other platforms the opportunity to snipe risk-averse capital which is ready and waiting to flow into the Terra ecosystem today. Waiting doesn’t make sense.

3). You are Vc funded and expected to spend money. The proposal here is just going to promote dumping tokens on retail investors. These integrations are great but expected. A much smaller amount should be used.

This is factually incorrect. In fact, the opposite is true. Insiders are on a strict 4-year vesting and unlock schedule where insiders cannot sell a single token until 1 year post-token launch whereas for the community, 10% vests and unlocks immediately. This means literally anybody can dump aside from the insiders.

Digging into the weeds of this post - we see 10% of all Risk Harbor tokens are being given away to people who vote yes.
Its not your money - why not just vote yes? They are selling 10% of the entire marketcap of this token for $1b. Meaning that they are valuing o-zone/Risk harbor which manages $10m at $10b total marketcap.

This is the community’s money. This is not a token sale. These community funds will be used to underwrite protection, not to pay development, audits, or any other activities. The people who benefit most from this proposal are those who want protection, not the protocol.

That is crazy to value something even remotely that high and Delphi knows this. Look at what Astroport manages in TVL compared to token marketcap.

https://coinmarketcap.com/currencies/astroport/historical-data/ 3

Astroport Token marketcap trades at almost exactly 1:1 to TVL.

Drawing a comparison between another protocols TVL from a different sector and these funds is a false equivalency. The funds requested in this proposal are not in exchange for a percentage of the protocol. These funds are going to be used solely for underwriting protection on Terra protocols. Protection is a public good that benefits the whole Terra ecosystem.

Look at those in the Terra ecosystem. This valuation that they are proposing is absurd.

Risk harbor is proposing to value its token marketcap at $10b when it manages $10m. If we are valuing Risk harbor like any other product we would value the entire marketcap no where near $10b.

That is a joke. You will all get dumped on by VCs and this is a giant smart play to make a bunch of money for the insiders.

Read point 3.

We as a community deserve way more fair terms than what is proposed here. I will be voting no for this and I think you all should too.
Do himself just said UST is printing as fast as it could. Why would we need to spend 1/3rd of our money on something we do not really need?

Many large institutional buyers and consumer applications are ready to purchase protection for Anchor deposits including the Arrington Anchor fund, pending available capacity. The only way to meet this scale of demand for risk management is for community funds to serve as underwriting capital. If the proposal passes, community funds will facilitate the inflow of substantial capital into the Terra ecosystem. The only way to accommodate this volume and help maintain large capital inflow into Terra is through the passage of this proposal.

TL;DR
We need better terms than what is proposed. There are other options for insurance coming out and spending almost 1/3rd of the communities money behind a single protocol is too much when we have hundreds coming in the future and throughout the rest of the year.

Read point 2.

20 Likes
#8

I and many others here I am sure agree with you that insurance is a good thing, however I disagree that it will make a massive difference like you are stating. We are already the number one TVL chain besides ETH itself and already have Nexus mutual which has not really moved the needle for the community.

Look at the combined TVL of all of these insured products and it is a fraction of the whole piece. Why would things suddenly change on Terra + Risk harbor? It will not. You have maybe a single client in Arington with a sizeable amount of AUM ready to go.

They are not claiming to even give you all of their AUM. You should instead kickstart this fund with what they want allocated + perhaps a bit more for these other lower AUM projects. You should instead reach out to Outlet Finance who has stated they have managed more than $100m and would likely be all over an integration.

Waiting is not an option. I agree, but redoing this proposal entirely is. Not saying that team is better or worse but the capital has not been allocated and as Do stated in your quote " at the discretion of future governance proposals by the community. ". Taking 1/3rd of the communities treasury and just saying “We have $155m” is not worth it. We are paying you 33% of the treasury for you to move the marketcap of UST by not even 1%.

That ROI and E/V of that trade is really bad even with your token involved. Even worse will be giving it that unfair valuation.

I will instead compare you directly to the leading project in this space by TVL. Nexus mutual. They have over 460m in TVL Nexus Mutual and only a ~700m marketcap. NXM price today, NXM to USD live, marketcap and chart | CoinMarketCap

Even at that valuation and you fill up the ENTIRE $1b in insurance you will only create 2b in total marketcap which is a very good comp for you guys. That would mean that the Terra community would pay $1b for only MAYBE $200m in return. I do 100% agree there is a large public good aspect here that you are offering and that comes with a price but still feels very one sided for you and your team instead of the broader ecosystem.

Something within the proposal feels off. I made this account just to state how I feel because Luna in important to me. I can see based on likes more people are agreeing with me and you. Your likes are from Risk harbor team members.

7 Likes
#9

@Deciple_of_Do has very valid points. Right now Anchor has over 1B UST deposits per wk, meaning there seems to be more and more confidence on Terra ecosystem even with protocol risk.
To ask for 1/3 of community funds to be able to underwrite a small portion of new deposits coming in, seems extremely bad capital allocation.
UST and Terra/Luna is way to dependent on Anchor and the community pool should be pushing other ways to diversify and add more utility for UST.
Right now 10B UST is currently sitting on Terra protocol alone, which means only a small portion of UST is actually moving outside of the terra ecosystem.

3 Likes
#10

Should the Terra Community demand a greater % of the Risk Harbor tokens? Say 10% as previously mentioned plus 40% going back into a new Risk Harbor Community Fund?

If Risk Harbor requires $1b UST from the Community Fund to underwrite it then the community should own far more of it and reap the benefits of its “engineered” valuation.

#11

I for one would vote absolutely yes. In fact, my opinion is that 1b is nowhere near enough. People have been dying to get some insurance at a reasonable rate. Not like Unslashed Finance’s ridiculous 7-8% lately (even though it includes UST depeg protection). I hate how most insurance providers are using ETH, whose fluctuating prices could mean our investments won’t be fully covered anymore.

I’m waiting to put in significant funds…maybe 500k…but need insurance. I’m sure there are plenty of similar people who don’t want to invest such large amounts without insurance. If 1b coverage is released, I believe it would be gone very fast. Without insurance, a lot of people will only risk a significantly smaller investment.

2 Likes
#12

I and many others here I am sure agree with you that insurance is a good thing, however I disagree that it will make a massive difference like you are stating. We are already the number one TVL chain besides ETH itself and already have Nexus mutual which has not really moved the needle for the community.

Nexus offers a completely different product. Claims on Nexus are controlled by governance, specifically underwriters. Many agents looking to purchase Anchor protection, whether institutional or retail, have expressed distrust with that claims evaluation model because of the inherent conflict of interest it represents. This is why we created Risk Harbor in the first place. Claims should be evaluated by impartial smart contracts instead of cumbersome, biased intermediaries.

Can you really say 500-600 million dollars of institutional capital which is currently waiting on the sidelines for Ozone capacity to increase isn’t moving the needle? These institutional investor’s are not mercenary capital. They are in it for the long haul and the only thing stopping them from entering is their inability to satisfy their risk mandates. These new institutional Anchor depositors could take their aUST and participate in numerous other protocols, like Mirror, as acceptance grows.

Look at the combined TVL of all of these insured products and it is a fraction of the whole piece. Why would things suddenly change on Terra + Risk harbor? It will not. You have maybe a single client in Arington with a sizeable amount of AUM ready to go.

They are not claiming to even give you all of their AUM. You should instead kickstart this fund with what they want allocated + perhaps a bit more for these other lower AUM projects. You should instead reach out to Outlet Finance 1 who has stated they have managed more than $100m and would likely be all over an integration.

We are covering the Arrington fund entirely, not partially. In fact, the launch of the fund is blocked on capacity increase from Ozone. All of this information is already public, and can be referenced in past news articles and Twitter spaces. The Arrington fund is not the only partnership we have lined up. The Risk Harbor team has been in constant communication with numerous institutional investors who have expressed interest in deploying significant funds to anchor, contingent on their being enough capacity in Ozone.

Also, we only mentioned a handful of the many potential buyers of Ozone protection in the proposal. We have a much longer backlog of integrations in the pipeline from funds, credit desks, neobanks, consumer apps, and various other unique use cases. Ozone is permissionless meaning that whoever wants to buy protection, no matter the size, can do so, if the capacity is there. As mentioned in the proposal, we are working to build SDKs and APIs to allow anyone, especially fintech apps like Outlet, to automatically buy protection as users deposit into their accounts. But the prerequisite for all of this is enough capacity to support their current demand and also their future growth needs.

Waiting is not an option. I agree, but redoing this proposal entirely is. Not saying that team is better or worse but the capital has not been allocated and as Do stated in your quote " at the discretion of future governance proposals by the community. ". Taking 1/3rd of the communities treasury and just saying “We have $155m” is not worth it. We are paying you 33% of the treasury for you to move the marketcap of UST by not even 1%.

That ROI and E/V of that trade is really bad even with your token involved. Even worse will be giving it that unfair valuation.

“Drawing a comparison between another protocols TVL from a different sector and these funds is a false equivalency. The funds requested in this proposal are not in exchange for a percentage of the protocol. These funds are going to be used solely for underwriting protection on Terra protocols. Protection is a public good that benefits the whole Terra ecosystem.”

I will instead compare you directly to the leading project in this space by TVL. Nexus mutual. They have over 460m in TVL Nexus Mutual and only a ~700m marketcap. NXM price today, NXM to USD live, marketcap and chart | CoinMarketCap

Even at that valuation and you fill up the ENTIRE $1b in insurance you will only create 2b in total marketcap which is a very good comp for you guys. That would mean that the Terra community would pay $1b for only MAYBE $200m in return. I do 100% agree there is a large public good aspect here that you are offering and that comes with a price but still feels very one sided for you and your team instead of the broader ecosystem.

To reiterate my previous point, this is not a token sale. These community funds will be used to underwrite protection, not to pay development, audits, or any other activities. The people who benefit most from this proposal are those who want protection, not the protocol.

14 Likes
#13

I very much appreciate this comment and clarification, I think that by allowing capital to move into the Terra ecosystem not only do Lunatics benefit by having the UST marketcap move up and more LUNA being burned but when capital moves into an ecosystem it is more likely to stay there by moving from risk-off strategies into more risk-on strategies which will benefit other protocols as well as the entire ecosystem. It appears that smart contract and future peg insurance is vital for institutional money to flow into the ecosystem and as more institution funds flow into Terra the more credibility and value Terra will capture. These benefits are vital to the sustainability of the ecosystem.

Although, $1B+ capital held in a multisig with 3 signers does not seem ideal. Perhaps 5 signers could be onboard, might I suggest a member of GT Capital? (Note: I do not have any vested interest in GT Capital nor am I involved, I have not discussed this with them and am not even sure they would be willing to join the multisig.)

2 Likes
#14

I understand the usefulness of a robust insurance fund to insure institutional deposits, I also understand the strategy of bringing this type of actor into the DEFI through the TERRA door, even if that does not reassure me, on the other hand. 1/3 of the reserve seems abused to me at the moment. Moreover, what will these big capitals do when they have vampirized the yield reserve in a few weeks?

1 Like
#15

If you think UST and Terra/Luna is way too dependent on Anchor, you should want increased Ozone capacity. Ozone capacity is a public good that increases confidence for Anchor depositors and prevents cascading loss of confidence events and other types of black swans.

11 Likes
#16

I have 3 issues with this :

  • A 3 wallet multisig is not good enough to prevent regulatory capture. This is negligent.
  • The anchor design is currently trusted and LP is growing. Attributing 1\3rd of ressources to this is a lot. I would vote in favour of a more modest proposal
  • The 10% token bribe for yes voters seems ethically wrong to me. Plz get rid of this and let the community vote on the merits of the proposal itself. The community’s interest goes before self interest.

I am willing to reconsider #2 if I can hear why this is necessary all at once and not in tranches once we see product market fit and benefits for the community.

13 Likes
#17

I thought this was super interesting. Its like a strange blackmail…“Give us literally $1b of someone else’s money and we will give you something that cost us nothing to create.” Insane business model here, and the main value will still go towards their team regardless of what they mention. The price they are offering is too high.

I agree I would be willing to reconsider, but there have to be stipulations, goals, etc. This is too big of a bet on any single protocol. Likely indicating that this will fail long term because you need so much money and apparently have so demand.

This is going to cost Luna holders 1/3rd of the fund and they will get almost nothing in return because there will be a new/better insurance model within a year.

Propose Just covering the fund + 50m more or something along those lines to have a more serious conversation. With the same token rewards.

2 Likes
#18

Here is another thought. If this is such a good deal? Why not raise this privately? To private VCs at this same valuation.

Would you be able to? Get one to lead and come back with those same terms. That would be fair.

1 Like
#19

$10M TVL and you are asking for $1B???

No fintech ever has received that much money with only $10M in AUM.

That is insane to me. You also claim that the people who buy protection stand to gain the most and not your protocol. The team, stands to gain the most from this, with very little given back to the community.

2 Likes
#20

I don’t think that, but the big institutions are only interested in it for that reason, they’ll take what there is to take and leave us naked.

1 Like
#21

I’ve been waiting for this proposal to go live and created an anon account to not reveal my identity. I work at a large hedge fund in NA and can confirm that we are looking to invest 9 figures into the ecosystem but have been waiting on capacity on Ozone to protect and increase our current position. I also know other funds we deal with will not touch this without protection from Ozone. Contrary to others, I actually think 1B is way too little and to accommodate legitimate institutional appetite, we’d likely need 3-4B worth of capacity.

@Deciple_of_Do frankly from the outside looking in you seem like a fudder and have not done any research. Majority of your points are heavily opinionated and assumptions. You have changed your arguments 3 separate times on 3 different posts so not sure if you have ulterior motives but you do know that the capital can always be removed so it’s a great deal to receive a token airdrop with no strings attached if things go south.

As institutional capital, we typically aren’t public and prefer to stay out of the public eye meaning most of us will not come and ask around if there’s capacity. We have allocation mandates and it’s an expectation from us to have this capacity available otherwise we will not deploy any capital. We love Terra and interested in products beyond just Anchor but parametric protection is a non-negotiable for us. The team is also well-vetted and to my knowledge am not aware of another product that is native on Terra performing at a similar level.

From our side, this is an obvious yes and if you guys expect real capital to come and stay long-term, than yes is the only rational decision.

8 Likes