Title: UIP-03 Bonding Program Proposal
Scope: Protocol Improvements
Authors: Jas Singh, Sujith Sizon, Vithuran K.
This proposal outlines an approach for improving our current liquidity mining efforts and establishing a yield generating treasury in non-native assets, with a concerted effort to control our own liquidity via Bonding programs.
Token bonds are a concept where users can exchange certain crypto assets for native tokens at a discount. In exchange, users are emitted the discounted asset over a span of a few days.
Similarly, $UNO bonds will grow the Uno Re protocol’s POL and treasury by offering users a way to purchase $UNO at a discount. Only $USDC deposits will be supported initially, and initially only whitelisted participants would be allowed to take part in the bonding program.
This proposal also covers fund utilization areas, key program parameters, counterparty selection criteria, and community oversight. The proposal aims to engage the community, allocate funds strategically, set program parameters, select partners carefully, and elect a community overseer to drive the protocol’s long-term vision.
Currently Uno Re protocol is faced with the following challenges:
- Spending a substantial amount of UNO in order to maintain our SSIP and SSRP liquidity mining program. And recent efforts to slash rewards has been heavily criticized by the community members - which causes a requirement to provided boosted rewards on existing mining programs which does not depend on utilization of the Insurance pool capacity.
- Low liquidity on current DEX trading pair causing high slippage during buyback and burn events even with MEV routed trades. Arbitrage traders pickup profits by offramping to CEX pairs.
- Initial Capital commitment and KYB requirements with our RWA partners [REDACTED] and [REDACTED]
- Overexposure on native token $UNO which is mostly sitting idle - without generating any yield.
At the same time, the DAO is operating in an environment where various newer DeFi protocols have enabled protocol treasuries to hold their own liquidity. This new paradigm allows projects to enjoy the best of both worlds, ensuring that there’s sufficient liquidity while avoiding typical downsides that arise from liquidity mining–for instance, “mercenary” liquidity providers who quickly head for the exits and sell a token soon after they earn those rewards.
The two steps contained in this proposal would effectively allow the DAO to engage in both behaviors: continuing its liquidity mining rewards while also using its ample UNO reserves to begin purchasing its own liquidity via a bonding program.
In addition to deepening token liquidity, most protocols are over-exposed to their native governance token, with most treasuries having <10% diversification into protocol-owned liquidity or stablecoins. Issuing bonds secures funds for development and investment in strategic initiatives to increase protocol viability and longevity .
This proposal aims to launch a bonding program with the following motivations:
Bootstrapping Protocol Owned Liquidity:
Provide funding to bootstrap the Protocol Owned Insurance capital in non-native assets - paving the way for enhanced forms of underwriting capital for our insurance partners
LP Bonding - enhancing liquidity on our token trading pair in the form of either concentrated Uniswap v3 pools or Bancor 80/20 LP pools for $UNO/WETH
Sustainable Yield Generation: Allocate funds to establish a yield-generating treasury, ensuring a continuous income stream for protocol maintenance, upgrades, and community initiatives. Major potential candidates include frxETH which has implications ranging from crvUSD and llamas.
Seed Capital commitment required to meet Real-World Asset Integration: Seed funding for a KYB’ed RWA pool for UNO to bridge traditional and decentralized finance, enhancing protocol utility and attracting a broader user base.
The program needs to have governing rules to ensure a fair token distribution process by setting parameters and limits to prevent excessive dilution and maintain community ownership and liquidity.
- Max Discount on Payout Token $UNO: The maximum discount on tokens purchased through the bonding program will be set at 15%, ensuring a fair market value and preventing excessive dilution.
- Max Total Limit of Tokens / Capacity: The bonding program will have a maximum limit of 10,000,000 $UNO tokens available for purchase. This limit will help manage the token distribution and maintain a healthy balance between community ownership and liquidity.
- Quote Token or Payment Token: The bonding payments should be made in either USDC or USDT
- Daily Limits: At any particular day, there shall only be a maximum of 7500 USD worth of $UNO tokens available for purchase via bonding program.
- Flexibility to pause the bonding program under adverse market price conditions (will be determined by the UNO DAO community.)
As per the current tokenomics there are still around 25,000,000 excess / idle $UNO tokens which are releasable but not being used. The DAO should allocate up to 10,000,000 $UNO out of this towards program for the course of next 4-5 months.
Currently across the protocol is around 420k UNO per month, while expansion would require increasing it. Launching bonds would instead allow gradually reducing the emission even while we expand to multiple chains. In addition, it will increase our on-chain revenue by earning fees as the owning our own liquidity.
Quality partners who meet strict selection criteria bring valuable resources and connections, attracting more participants and driving growth and adoption. The bonding program is whitelist-only, requiring partners to meet specific criteria:
- Long-Term Vision: Partners must demonstrate understanding and commitment to the protocol’s long-term vision and goals to be whitelisted for the program
- Good OpSec Practices: Partners should implement strong operational security measures, including multi-signature wallets, to protect assets and stakeholders’ interests.
- (Optional) Token Lock Commitment: Partners must voluntarily lock 10% of their acquired tokens for a duration of least 4 years, showcasing long-term dedication to protocol stability.
- Minimal impact on UNO price
- Permanent liquidity source via RWA pool with at least 4%+ APY in Stables
- Increased treasury value from liquidity that also earns trading fees
- Exposure to paired asset in liquidity pool (ETH)
To ensure transparency and community governance, a single or multiple members from the Olympus Council will be selected to oversee the bonding program and its operations. Community members can propose and comment on potential overseers, following the established governance framework for a fair and inclusive election process.