Gather ‘round the stream, Otters!
The Otter Treasury has undergone some extensive upgrades over the past month. We continue to optimize the treasury for maximum revenue (which leads to maximum buybacks, staking APY, and overall protocol health), while also positioning the CLAM token for long-term utility. We in OtterDAO believe that this is a recipe for success, regardless of market conditions. As there have been too many changes to explain in detail here, I will provide a list of recent CLAM Improvement Proposals (CIPs) and then explain their significance for the Otter Kingdom.
Review of Treasury Updates
- CIP021 (vote passed 5/5/22) — We took advantage of the market dip by converting $386K of MAI/USDC that was earning about 7% APY in Qi to our Qi/WMATIC farm. This farm is currently earning about 65% APY in Qi, while also giving us additional voting power in the QiDAO protocol (since half of the farm is made up of Qi). That $386K is now earning more Qi for the protocol than the entire $1.386M MAI/USDC farm was before it, and we still have $1M of stablecoin liquidity earning rewards in our treasury.
- CIP022 (vote passed 5/20/22) — We moved $50k of our QuickSwap CLAM/MAI liquidity pool (LP) into Dystopia, a newly released DEX on Polygon. The creators of Dystopia have singled out OtterClam as one of about 30 influential Polygon-native protocols, and to support their own decentralization have airdropped each protocol an initial governance token allocation. As a result, we have significant initial voting power in the Dystopia ecosystem (far more than a $1.3M market cap project normally would). Moving some of our liquidity onto the DEX allows us to vote for the CLAM/MAI pair and receive DYST rewards as a result. The other $500K of CLAM/MAI liquidity remains on QuickSwap for now.
- CIP023 (vote passed 5/25/22) — We converted our CLAM/MAI liquidity on Dystopia to CLAM/USD+. USD+ is a new, very low-risk, yield-bearing stablecoin from the creators over at Overnight.fi. It earns anywhere between 5–12% APY for USD+ holders in the form of daily rebases. I suggest you read more about Overnight.fi and USD+ on Medium to get the whole picture. This allows us to not only earn DYST rewards through voting for the LP pair on Dystopia, but also to grow our LP passively thanks to the USD+ rebases. This will passively deepen our liquidity (reducing price impacts on trades), grow our treasury, and add passive CLAM accumulation in addition to buybacks. In the future, we may migrate our entire QuickSwap LP ($500K+) to CLAM/USD+ on Dystopia to more fully take advantage of this unique mechanism.
- CIP024 (vote passed 5/28/22) — We migrated the remaining $1M MAI/USDC liquidity from QiDAO to Dystopia. We’ve also left this vote “open-ended,” so to speak; giving us the option to swap our MAI/USDC for another stablecoin LP on Dystopia if we so choose. This allows us to earn additional DYST rewards at an APY much higher than what we were earning on QiDAO. Besides the increased revenue, this helps us to gain additional governance power in the Dystopia ecosystem. This unique opportunity to acquire extra governance power is important for our next passed vote….
- CIP025 (vote passed 5/29/22) — OtterClam begins gauge voting on Dystopia LP pairs and becomes an active participant in the Dystopia Wars. If you have no idea what that means, fear not! I will describe this in greater detail below.
First, the TL:DR of all of these CIPs:
- About 10% of our core CLAM LP is now growing passively, in addition to trading fees. This also adds a small passive buy pressure on the CLAM token because of the nature of liquidity pool smart contracts.
- We are now earning more Qi than we were a month ago, with additional Qi governance power, while tying up much less overall liquidity in the process.
- With this newly-freed liquidity, we are now earning DYST rewards at a high rate which increases every day (as most of the DYST will be reinvested to earn even more DYST, through locking on Dystopia and through conversion to a MATIC/DYST LP). This is an income stream that OtterClam did not have before and gives us outsized governance power on Dystopia, relative to the size of our protocol. We were able to accomplish this without hindering OtterClam’s original goal of acquiring Qi through the Otter Treasury, and in fact, have increased our Qi acquisition as described above.
- As a result of our significant Dystopia governance power, we are opening up gauge voting on Dystopia pairs to PEARL and Pearl Chest holders (PEARL is just wrapped CLAM. An explanation of the relationship of CLAM to PEARL, and Pearl Chests can be found here). This adds further utility to the CLAM token.
Gauge Voting 101
You must be asking by now, “what on earth is gauge voting and why should I care?” To answer this, let’s talk about how DYST token emissions are distributed.
Ninety percent of DYST token emissions are distributed as liquidity mining rewards to the DEX’s LP pairs. Which pairs get the most DYST emissions depends on how many votes each pair gets in the weekly gauge votes. Just as OtterClam CIPs are voted on by PEARL and especially Pearl Chest holders, Dystopia pairs are voted on by those who lock their DYST into veDYST (more specifically, into a veNFT that contains veDYST, but that technical point is not important for this article). Those who have the most veDYST voting power, can vote for the majority of DYST emissions to be allocated to their favored pair (likely, the pair where they have deposited a lot of liquidity already). So more DYST allows you to vote on the pair of your choice, which in turn allows you to earn more DYST, etc. It’s a positive feedback loop that incentivizes accumulating DYST as much as possible. A very similar mechanism is in place in QiDAO with their MAI vaults, incentivizing the accumulation of Qi (which is why the Otter Treasury is also doing just that!).
This is where the concept of the “Dystopia Wars’’ comes in — it’s a sort of arms race, and DYST tokens are the arms. Having DYST and locking it gives you the means to vote on a pair to get even more DYST. Those who choose to participate in the “war” will need to acquire DYST (or at least the governance power of locked DYST) at all costs, to keep up with competitors who are doing the same thing.
CLAM as a Weapon in the Dystopia Wars
That’s where OtterClam comes in. We were airdropped a veNFT that had a significant allocation of veDYST contained in it (about 1.2% of total, initial DYST supply). We initially voted for our CLAM/MAI LP and have added liquidity to receive the DYST rewards for that pair. These rewards will add to the protocol’s voting power for the next gauge vote on Dystopia and allow us to keep pace in the “war” with protocols much larger than ourselves.
This allows us to leverage our Dystopia governance power for the benefit of our CLAM token. By opening up our own, in-house Dystopia gauge voting, we allow PEARL holders access to OtterClam’s Dystopia governance power in the ecosystem, by letting the community vote with their PEARLs on their favored Dystopia pairs every week, before the Dystopia gauge vote takes place. The protocol then utilizes its considerable governance power to vote for Dystopia pairs in the ratios that the PEARL holders voted for them beforehand.
Why is this beneficial to PEARL, and by extension CLAM? As the Dystopia wars heat up, the major players will be looking to appropriate governance power wherever possible to maintain emission dominance for the pair(s) of their choice. In addition to acquiring DYST on their own, they can also “buy” governance power indirectly through OtterClam and other protocols that offer in-house gauge voting. They would accomplish this by gaining a significant foothold in the OtterClam governance model, which means buying lots of CLAMs to wrap into Pearls, or purchasing OtterClam’s gauge votes through bribing (which is a legitimate, albeit an unfortunately labeled, mechanism in governance wars). Holders of 180-day Pearl Chests get the largest voting power per PEARL in the ecosystem, so these same major players would be incentivized to lock up their PEARLs to maintain gauge voting rights for the long term.
And, just like that, the Dystopia Wars become the PEARL Wars. You can imagine the effect that this would have on CLAM demand and price.
This is the endgame for the Otter Treasury — to drive demand for CLAM through the dominance of specific governance tokens, incentivizing those who seek that governance power to acquire it through the purchase of CLAM tokens. We have just taken a massive step forward in realizing that goal, without taking on any major risk and significantly boosting our treasury revenue in the process. Not a bad month’s work, if I do say so myself (and I do).
The brain trust over at OtterDAO is always finding innovative ways to expand the Otter Kingdom in the cryptosphere, and specifically the DeFi space. If you’d like to be a part of what we’re doing here, please visit our Discord. We’re always happy to extend our raft to accommodate another Otter.
See you downstream!