OpenDAO: Year ONE Recap
A round-up at the dawn of $OPEN token’s 1-year birthday
After a year of development and building at OpenDAO, we’re taking a look back at our successes, “opportunities for learning,” and what comes next.
CONTENTS
⚈ 1-YEAR RECAP
⚈ THE WRONG
⚈ THE RIGHT
⚈ THE FUTURE
→ Marketing
→ USDO Swap
→ Trade APR Fixes: PCS & OT
→ DEFI 2.0: From Renting the Liquidity to Owning the Liquidity
→ Permissionless Stable Coin Minter
→ Fee Routing
→ Emissions
→ DAO Handover & Team
1-YEAR RECAP
The OPEN DAO project launched with the mission of connecting real world assets to DeFi.
We launched as a fork of Compound in which we used tokenized real world assets as collateral. The problem with that model was the funds required in the real world transactions were needed promptly and it could not wait for funds to accumulate slowly over time.
A switch was made to a DAI style stable coin model in which a mixture of onchain and tokenized real world assets would be used as collateral.
The key now would be ensuring peg and liquidity for the stable coin. This, till date, remains our north star metric.
We partnered with UMA early-on and built our expiring dollars on top of their protocol. UMA promised to launch a perpetual, although that promise never materialized. In the meantime, we kept lining up partnerships. Eventually a decision was made to go it alone and launch our own stable coin.
USDO was launched on BSC where we did a syrup pool offering via Pancakeswap. A number of partners like Fetch, Metallex, 1 inch, RAVEN, Algorand, Elrond were secured and the token price reached a high of $3.35 — over 2000% above our presale price.
There were challenges to overcome with USDO early on.
Not enough people were staking their assets and minting it. After minting there were no use cases for the stable coin so they immediately sold it for another stable. This effectively meant a loss of peg.
A few different inter-team experiments were carried out to sort this out, including the Bonds and Lottery. Eventually, we created our own AMM with low slippage and that fixed the peg problem.
We launched our farms and auto-compounding solution to incentivize people to stake their assets and mint, in coordination with OCP.
We also created native use cases for USDO via partnerships with Metallex and MCDEX to launch USDO backed synths that includes Tesla, BTC, and ETH so far. USDO is also geared to be used on Delta city, an NFT metaverse game.
USDO liquidity is steadily going up, and work is now being done to make a permissionless factory that allows the minting of USDO against any asset.
A bonding solution is being worked on that will replace the autocompounding and farms. And finally a USDO-centric swap platform is about to be launched.
However, our price at the moment is actually lower than the initial listing price…
…So arguably the question becomes,
WHAT WENT WRONG?
THE WRONG
Price does not always tell the full story, markets are not always rational. However, just attributing it to the market price not reflecting our progress would be not acknowledging problems.
Despite launching products with industry beating features such as 20% + natively on stable coins and BTC, TVL has not caught fire. Our visibility remains dismally low. Simply put, not enough people are aware of our existence.
This is largely due to us not having an inhouse marketing dedicated resource, we focused on the build it and they would come model. This is now in the process of being rectified and we also have engaged Crowdcreate, a leading crypto marketing agency to push out our products.
Secondly, our approach has been diffused at times, we have tried to do too many things at once. While most of the things done have been necessary as part of the trial and error approach, the sheer number of fronts diluted our efforts.
We also missed out on not doing a centralized exchange listing when we had high volumes, liquidity and significant uptick in price action. Eventually the rented liquidity disappeared after the syrup pools came to an end and we have been trying to dig ourselves out of a hole since.
What we have learned is there is a clear cut playbook for projects:
Raise private money (we did that)
Launch with high liquidity (we did a bit lower than what was needed, trying to conserve funds)
Get some sort of incentive farm going (we did that)
Roll out the flagship product (admittedly we took time on this and had a period of discovery)
List on a CEX
All of this ideally should be done in the first 3 to 6 months. If you miss doing this, then you lose momentum and eyeballs which you have early on.
Furthermore, there is some use case related room for improvement; the native use cases for USDO from Metallex suffers from poor UX, while MCDEX we made the mistake of launching BTC and ETH for which already deep markets exist. This is now being rectified though and some interesting synths such as leveraged Shiba are on the way.
More importantly, we always tried to limit the influx of USDO lest a run on peg begins. This stymies our growth. This is now however set to change as we now have models that will allow increasing USDO liquidity as more projects come onboard.
THE RIGHT
Our partnership strategy has worked well. We have a number of top 100–200 project partners. We are probably the lowest ranked project with so many high quality projects as partners.
Clearly the partners see something that the wider market does not.
When you are doing marketing (and we actually have been doing very little so far), you are sending your voice into the vastness and hoping that someone calls back. It is often a bit of a blind bet, you do not always know who is listening to you on the other side. Sure you get some attributes and targeting, but the process by its very nature is spray and pray.
Business Development on the other hand is a very intimate and one-on-one process. You get to explain your value proposition to a specific client.
Arguably, we have excelled so far in our development efforts.
The fact that we have increasing adoption from projects means that the product itself is sound.
This is reflected in the slow and steady uptick in USDO liquidity and transaction volumes. We are now getting close to 1.8M in liquidity for the USDO pair.
USDO has a superior peg to VAI and rUSD.
We have a small but persistent community of people who believe in us and our vision. And more importantly we have cash on hand as well as a number of VCs who remain interested in writing us a cheque as soon as we are willing to take it.
THE FUTURE
Marketing
The most important piece we are doing is to fix marketing. The Crowdcreate marketing agency mentioned earlier, plus inhouse resourcing, should help in that matter.
USDO Swap
We are also incubating a Uniswap fork with USDO as its primary pair. Technically, this can be done on PCS or any other AMM as well, but doing this allows us to capture more of the value chain.
One can argue that you lose the eyeballs PCS has to offer doing this, but that is not a correct reasoning process.
PCS does not send you any eyeballs unless you have a farm with them, if anything you are sending your users to them. Our eyeballs are primarily coming from partner promotions. A USDO swap works even with one LP pair.
Users would stake partner tokens, mint USDO, use the LP pair and buy more of the partner token again. This is the loop we actually want people to take as that benefits our partners and by having users not offload USDO for another stable, our peg remains strong.
Each new partner increases the value to the network, and we can (and will) charge each subsequent partner more in terms of fees as they derive increasingly more value as USDO liquidity and number of pairs continue to grow.
We are taking an approach which most recent stable coins have not taken.
Generally they focus on incentivizing the stable LPs. We believe that such a model is unsustainable once incentives are over. You want your stable coin to be used as a primary currency across as many different places as possible, and not just as an intermediate to another stable coin.
Also as the USDO swap grows, the fee volumes that go to the platform also increase.
Trade APR Fixes: PCS & OT
Currently PCS is not showing the trade APR for USDO pairs.
We will be creating our own graph db to track those pairs already on PCS and feed the APY to our autocompounding solution.
Doing this will communicate accurately the returns the LPs are making as the trade fees account for a significant portion.
Same thing for the stable swap OmniTrade, it currently is not tracking the trade fees. Showing the fees LPs make via this portion will demonstrate the higher return and should in turn attract more liquidity for USDO pairs.
DEFI 2.0: From Renting the Liquidity to Owning the Liquidity
While there are several structural flaws with Olympus DAO, they have correctly identified that liquidity mining is not a sustainable model. Capital moves away as soon as incentives are finished. This mercenary capital does not add any long term value. And giving away incentives to attract it also leads to inflationary pressure on your token.
Currently we ask partners to setup USDO-Token LP on our farms solution and we then autocompound it. We typically ask for $50,000 worth of incentives. While we are able to get partners over the line using this model, this does lead to sell pressure on partner tokens.
We are currently working on developing an Olympus pro style bonding solution. Instead of giving away free tokens as incentives, partners would sell tokens at a discounted price against their USDO-LP. This leads to superior outcomes for everyone involved.
When you do auto compounding $50,000 worth of inflation occurs due to the incentives. LP locked in would typically be worth $100–200K as that would be around 50% APY for LPs. LPs would typically look for a decent APY as they have to factor in a potential impermanent loss.
This means each partner could lead to a 50–100K worth of USDO going to LP and a total rise in USDO liquidity of 100–200K. Also this comes at the partners cost as they would have a bit of a down pressure on their tokens due to autocompounding.
While this is not bad a SUPERIOR MODEL exists.
At the same cost of $50,000 partners can achieve a much higher amount of liquidity. If a 5% discount is applied then, that means $1 Million worth of tokens would be sold in return of $950K worth of liquidity. This leads to a much greater demand for USDO and is a win-win solution for partners and us.
We are working on building a permissionless solution for this and would be rolling out at the earliest and then double down on the partnerships outreach. Once this is implemented on BSC we will look to roll this out all EVMs as fast as possible.
Permissionless Stable Coin Minter
Work is underway on building a permissionless lending market factory. Currently each partner is onboarded manually and we deploy the contracts for them. This typically takes a couple of days worth of turnaround time. While not a deal breaker at this point in time, as the partners ramp up having things as a self-serve model would allow us to achieve much higher growth rate. Now that the liquidity and demand for USDO is growing the manual process serves as a bottleneck to USDO growth.
The permissionless factory is also in line with the overall governance minimized and protocol oriented design we are moving towards.
When the inevitable regulatory pushback comes, being a permissionless protocol will hold us in good stead.
The factory deploys no admin contracts which means there is no risk of rug pulls and should give the community greater confidence.
Fee Routing
While generally everyone understands that growth in TVL and USDO liquidity will lead to greater appreciation of OPEN, currently there is no clearly defined pathway atm for it. Things are adhoc and manual in terms of revenue pass throughs.
Currently there are several revenue streams
1. Mint fee
This is a 0.5–1% fee on the amount of USDO minted at the time when such a minting/borrowing is done. This is automatically sent to a predetermined address, as part of the factory code update.
2. Reserve factor
This is 10–20% of the difference between the lending and borrowing rate. This is automatically sent to a predetermined address, as part of the factory code update.
3. Interest rate
Since USDO is only created on as-needed basis, the DAO will vote on its creation and the interest goes to the DAO.
All of the above fees are ascribed to OPEN. They will be given to the OPEN — <BNB/ETH> LP providers which should boost OPEN liquidity.
USDOSwap fees (0.05%) and Bonding Whitelabel fees (3.3%) belong to OCP, alongside any products run by OCP.
The DAO will govern and earn from USDO directly, while OCP will continue to build an ecosystem that is centered around USDO.
All of the fee distribution will be encoded in contracts so that it becomes apparent to the community how growth in USDO adoption boosts OPEN value.
Emissions
OPEN will acquire USDO BUSD liquidity by using a bonding solution. This will be the default mechanism for liquidity incentives and no more free OPEN will be available.OPEN will always come at a cost. We will make a hard tack away from the farm and auto compounding based liquidity mining programs. The bonding mechanism will be the default way in which bulk of the remaining OPEN which are set aside as incentives will come in to circulation.
A few VCs have been in touch with us regarding a Series B raise, and a CEX listing is being worked on. For both of those we want to get traction and price action going first so that we can negotiate from a position of strength. The treasury allocation tokens will be used up for this.
DAO Handover & Team
While this is important the key is to get a repeatable model working first. I believe with the USDO — LP BD strategy as well as the various permissionless factories that are being worked on we are on the cusp of it.
Once things are working systematically, admin of USDO minting will be handed over. Most of the other things are purely permissionless already so there wont be much in terms of admin handover.
Once USDO liquidity is growing in a predictable and scalable manner and admin is handed over, the core founding team intends to focus on USDO adoption in real world use cases. We envision a venture studio of sorts where we can incubate projects that are directly contributing to USDO adoption with real world applications. But more on that when we are close to it.
In closing, the key message we want to convey is that despite missteps along the way (which are being fixed), the big thing which is USDO liquidity and adoption is moving in the right direction.
Things are in control. We got this.
If you’re clappy and you know it, clap those hands (on the left, a few times.) Show the DAO some love.
