BAO Q4 Update
Days may be colder as we are heading toward winter, but the bao community is always steaming and expects to deliver some fantastic DeFi presents before the new year.
A lot has happened since the launch of Polly Finance + nDEFI nearly 3 months ago, so we have put together a comprehensive update covering everything we have been cooking up this quarter.
The BAO community has been busy building and testing our first hard synthetics on Ethereum main net and creating a structure to help the DAO decentralize and improve community participation.
We’ll also take a look back at the soft synth launch on Polly Finance and review the performance of our first nest nDEFI as well as recap some of the other recent developments in BAO DAO.
Polly Finance — Soft synthetics
It has been three months since our first soft synth, nDEFI, launched on polygon under the Polly Finance franchise and we recently launched our second nest nSTBL. These soft synthetics provide an easy way for people to get exposure to a variety of products that use a growing number of yield strategies, allowing you to sit back, relax and do nothing (or get on with your busy lives!) while your positions are managed automagically.
Soft synths also allow users in regions that focus on disposal of tokens as a taxable event, to enjoy a portfolio that earns yield and rebalances without realizing capital gains. Of course, check your local tax laws to see if that applies to you.
nDEFI’s Performance
The table below shows the market leading DeFi baskets and compares their mean daily return, standard deviations, and total returns with nDEFI since its launch. The mean daily return simply represents the average return from the past three months and the standard deviation measures the volatility of the baskets.
Since the launch of nDEFI, its performance has been strong relative to other comparable products. It has maintained lower volatility and out performed the best DEFI baskets on the market. This is exactly what we want from nDEFI — Low volatility exposure to DeFi whilst capturing as much of the upside and as little downside as possible.
These characteristics would make it ideal collateral in BAO’s upcoming synthetics and a promising start to the soft synthetics alpha testing on polygon, which can later be moved to other franchises and chains.
3 months is a small sample, so it will be interesting to continue with this analysis in future updates and see how our nests perform in various market conditions.
nSTBL
Our second nest, nSTBL, was just launched on our Polygon franchise Polly Finance. At the time of writing farming is available with some of the highest APRs offered from any stable farm on any network.
nSTBL allows the token holder to diversify their stable coin exposure by aiming to balance risk with yield, choosing decentralized options where yield is available on polygon for them.
We believe focusing on decentralization reduces regulatory risk as well as counterparty risk (trusting the organization to do what it says it will). Over time we hope to rebalance the nest using exclusively decentralized options. The underlying assets will be put to work in various protocols to earn yield, including AAVE, CREAM, and KASHI with more options to come in the future.
The current weightings for the stable assets in the nest are:
- RAI — 40%
- DAI — 30%
- USDC — 15%
- USDT — 15%
Hard Synths
It’s a very exciting time for BAO since we are getting close to releasing our first hard synths. Currently they are being tested by the Front End, Smart Contract, Maintainer, QA, Community Galaxy on Ropsten testnet and will be available for public testing shortly — stay tuned to the community on the discord server to keep up to date.
What are hard synths?
Hard synthetics are tokens that link price to data. That data could itself be a price, like $TSLA stock price, the price of 1 ounce of gold, or something more exotic like the number of goals Neymar Jr scores, crime levels or interest rates.
The value of the synthetic asset is backed by collateral and can have various mechanisms to help it keep its peg. Common examples are being able to redeem the collateral at the rate the data says is correct, or by creating discounts to buy back and “repay” your synthetic position, or premiums on selling it, incentivizing more “borrowing”.
Bao Markets
There are a number of synthetic projects already like Maker DAO, Abracadabra.money, Synthetix, and Liquity. However, the crypto industry is only just starting to realize the potential of synthetic tokens, with most of them being linked to prices of assets that already exist in traditional finance.
This is where BAO’s vision differs. We want to create an open financial data market, by building a platform that allows the creation of synthetics representing any kind of data in the world.
Bao starts its journey towards that goal with BAO Markets, its minimum viable synth product. You will be able to use different collateral types to borrow synthetic dollar pegged token, much like Maker Dao or Abracadabra.
Bao USD will use an Initial Margin Factor (IMF) to determine your max LTV. IMF takes into account your position size, reducing the borrowing % when your collateral is larger, reducing the risk to the protocol from liquidations of very large positions.
It also helps a little with avoiding liquidations in the first place as your borrowing % will increase slightly as your collateral drops in value. We believe being focused on building robust, decentralized products will help us become a foundation for the future of finance.
Below we have a sneak preview of what the Bao Markets front end will look like. It is still liable to change as it continues to be improved during testing, but we are excited to show you what we have been working on and look forward to inviting you to try it out soon.
2022 for BAO and franchises
Open up the DAO:
Baowolf, Chickn, Madotsuki, Vital as well as community members Jester, 0xc0le.ETH, Cookies, Q6, theJoShPENNER, and Varyints have worked together to formulate BIP 7, a very detailed plan for changing how we integrate our community more effectively.
The proposal lays out clear and concise frameworks for the following:
- Process to create new galaxies
- Onboarding new collaborators
- Distinction between guardians and collaborators in a galaxy
- How to become a galaxy contributor or guardian
- How to submit tasks/ideas
- How to open up the backlog
- Tasks without retribution vs bounties
- Operating budget of galaxies
- Offboarding process (inactivity, misconduct, abuse….)
- Code contribution
- Code review and acceptance
We hope that a new clearly defined organizational structure coupled with clear guidance explaining how to get involved will make it easier for community members to contribute and accelerate our journey together towards an open inclusive financial future.
With the acceptance of BIP 7, galaxies will function with senior members (guardians) and contributors. There will be a council of guardians too, that will help to coordinate the efforts of their galaxies as well as make decisions together that do not require a public vote.
Guardians
Guardians are senior members of a galaxy whose job it is to ensure that the galaxy performs the duties needed to achieve its goals. They are usually paid a salary by the DAO to reward them for their time because their contributions are seen as integral to the success of the galaxy.
Anyone can become a guardian, but achieving the role is not easy. Once achieved you will have the responsibility to protect your galaxy. Guardians get their role by consistently adding value to the DAO over an extended period of time, showing initiative, good judgement and mentoring other members of the community.
Council of Guardians
The Council of Guardians is made up of the multisig holders and, if there is not already representation, at least one member of each permanent galaxy. They are the most senior members of the DAO and are responsible for making sure all galaxies coordinate their efforts.
Decisions that are not put to a public DAO vote, such as treasury breakdowns or anything that needs sign-off from each of the Galaxies for approval, shall use the Council of Guardians as a proxy.
If a guardian from the council leaves their role then the galaxy they are from can elect a new one to take their place.
Contributors
Contributors are members of a galaxy who have established a role for themselves by contributing to the success of a galaxy regularly and proving to the guardians of a galaxy that they are able to add value on a consistent basis. They will be given guidance from guardians where needed.
Before becoming a guardian in a galaxy you usually must first be a contributor for the galaxy. Contributors are not given a regular salary by the DAO but may be given a grant from the galaxy’s monthly budget.
We hope to follow up this article with another if BIP 7 passes, explaining in more detail how you can take part.
Roadmap for the next year and tokenomics
Baoman’s proposal, [BIP-6] Annual Agenda, Changes and Hard Synth Alpha on our governance forum was approved by the community in a snapshot vote. It covers a number of areas including:
- Approving the maintainer galaxy, where Baoman seeks to continue with the same maintainer galaxy & pledges to take $0 salary until hard synths have reached a mint volume of >$25m!
- Authorizing main net multisig and future governor system
- Unify treasury operations, where all treasury assets on other chains will be moved to mainnet and managed by a team lead by Baowolf.
- Adjustments to unlocking — Locked BAO will be be unlocked a minimum of 6 months after hard synths launch
- Ending current Main net farming pools, except for BAO pools.
- Begin a hard synth test on mainnet.
You will be hearing a lot more about the implementation of these changes in future updates.
Taking time to restructure governance
The community approval of BIP-6 will bring a change to governance by use of veBAO (voting escrow BAO). It is a way to calculate a governance score, or voting power, for a member of the BAO community.
How veBAO is calculated and implemented is going to be determined by the community so we encourage you to post your ideas on the governance forum. We want everyone to have a say in the future of this project.
BAO’s 1st Anniversary
We are thrilled to announce Tropix will be playing a set for us on our discord server to help us celebrate our 1st anniversary. We have some other fun planned too, so come and join in the celebrations on our discord server on December 10th
