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

Question: Why should the community provide a risk free return to a fund manager and friends?

This is what this proposal is doing in effect. Insuring anchor is $ for $, it’s not scaleable. So as others have pointed out it’s providing protection for a fraction of USTs use.

May be the team can articulate how you scale risk insurance to > 1:1 given the risk that is being protected? Is the policy structure a first loss for example of up to X%. In which case $1b risk capital could scale.

What does the community gain from $1bn of insured monies coming in over and above natural growth on and cross-chain.

There seems to be some level of implicit reasoning that providing a “base” layer of risk averse (original proposal labelled this “risk aware”) capital with protection will lead to greater UST take up of risk taking capital. This is a fallacy as risk markets don’t work like this and “protecting the first movers” and big boys is non-sensical. Once offered it generates a moral hazard for following capital and further pressure to ovoids more.

IMO Protections for point of sale and flow business makes a lot more sense as it should be temporal protection. And therefore is massively scaleable with the available risk capital.

Accordingly the scale of wallet sought from the community is inappropriate and should be reduced - in my view - a fund manager like Arrington should wait for the ecosystem to develop its own underwriting capacity and doesn’t deserve to be bootstrapped.

This concept of providing “competitive” but better insurance is also fraught. $13b of capital has decided UST has acceptable risk parameters. If capital doesn’t like the current risk then the pricing should capture such that their net returns are close to fiat - because that is what they are seeking. The underwriting spread and “profit” should be returned to the community and this has not been explained in the proposal. Arrington and friends shouldn’t be offered a risk arb to generate excess returns to their investors over fiat / stable coin farming alternatives.

Proposal needs to articulate what risk buckets UST will be allocated to, how value is returned to community for u/w risk in an anchor deposit and should exclude institutional money market offerings as they are non-scaleable, low velocity UST exposures.

Reduce the ask and better articulate the proposition for growing UST by more than the risk capital allocated.

Disclosure: I’m a “small” Luna staker and holder - like most.

6 Likes

I don’t know why but I have even less desire to vote yes

1 Like

Excellent proposal! One of the most precious!
100% YES!

6 Likes

It’s strange that someone who works at a large hedge fund is asking for the community to risk 1/3 of its assets on Risk harbor, as a part of your job is managing risk. I can say most funds will not risk 1/3 of their funds on a project with 10M TVL.

If there is so much demand, as they say, then a much smaller amount should suffice to prove their claims, and they can go from there.

$1B right out of the gate is something I am sure most funds would pass on.

3 Likes

I don’t understand how it’s strange when 100% of the community fund was earmarked for Ozone? More capacity would encourage more activity imo not the inverse, your suggestion is unintuitive lol

5 Likes

It’s really not. 1/3 is too much. 100% is certainly overkill. Has your fund ever risked 30% of their assets on an as of yet proven product?

1 Like

Institutional money feeling comfortable in Terra is very beneficial for the ecosystem. Especially as we get to more TradFi integrations for Terra stables. I dislike the bribe and would also be more comfortable with a 5 wallet multi-sig. May be bad timing for Anchor though, DeFi adoption + Institutional adoption spiking may shorten the runway too much.

Remember, the money isn’t locked, hedge funds aren’t evil.

1 Like

I am not a fudder, and am actually on the core team of one of the apps mentioned on this post. What did I change my mind on?

Too expensive - we should not do it at this valuation.

Reads like something made up that a teenager would say. The real issue that you are not seeing is that this only benefits you as a large fund, and you will take everyones yield which is not what most people want.

You can say whatever you would like about my opinion but you are not realistic and are only looking to benefit yourself when in reality the community fund should be about what the community wants.

A great exercise would be as follows:
Would you pay for this insurance yourself out of pocket? If yes then we can scale with this model of insurance. It works long term.

If no. You are just sucking value from the ecosystem and your 9 figs is really not as great as you think when all the sudden anchor reserve is impossible to keep up with and the average Defi person is left with nothing special. Its not good business for the ecosystem to let people like you run anchor if what you are saying is even true.

Terra is a movement about building a new decentralized economy, not some hedge funds allocation.

6 Likes

So if we give them 1B and they bring in 500M to the protocol, would that make it proven to you? They’ve proven there’s demand, all we are doing is enabling it.

1 Like

Can someone explain how dollar for dollar protection is scaleable? Meaning when Arrington puts up $150m you need to set aside $150m? If that isn’t the case which it shouldn’t be then $1b is clearly excessive in the first salvo.

And if you do need reserves that cover 1:1 then this is too simplistic of an approach to insurance.

The Hedge funder knows that there is no such thing as a free lunch. In other words I find it very hard to believe in their honesty.

Lastly, voting “Yes,” should be on the merits of the proposal not just to throw some tokens as compensation. It’s insulting to offer bribes for votes.

4 Likes

I’m not saying devote 100% off that bat but the fact is that 100% was created for Ozone. I do believe a third is very reasonable given the demand.

Really what excites me is if this can be integrated in products beyond Ozone such as Alice, Outlet, etc.

I stand by and think this is a no-brainer if the ecosystem wants to truly mature and maintain its momentum

9 Likes

No. If we give them $100M and they bring $500M then its worth it.

This is the best post on this thread and is point people in a more clear direction. This is in no way scaleable for the long term. You get nothing for backing the insurance.

This proposal needs some tweaks in the numbers in both tokens given as well as UST exchanged.

1 Like

:ok_hand: 100 % d’accords, on est là pour créer un nouveau paradigme et pas se faire enc… par les acteurs de la tradfi

You’re disingenuous as you attacked them as dumpers for example when you were completely wrong, then quickly changed or downplayed your original positions.

I also doubt you’re on the core team of any of these apps tbh bc any real builder would want to increase growth of their product and ecosystem. Fud, again. You sound like someone that works for Nexus than any company building on Terra.

Would I pay for insurance out of my pocket as in pay premiums? On an individual basis, I sure would do it in the use case of alternative high yield savings account on an elegant consumer app.

7 Likes

I’m also curious, maybe it is incentivizing yes voters in a way but why would Risk Harbor give tokens to someone who votes no? Doesn’t the person that votes no not want tokens anyways lol?

Nah. I am being real lol. You, I or anyone else will get dumped or would dump when a protocol manages $10m but has a $10b market cap.

If you do not think that then you should not work at that hedge fund. I do in fact work at an app that has been mentioned several times in this post.

I am bullish AF on this space but again say that this is overvalued as a deal and will only benefit a few people over the whole ecosystem. It is in my opinion that it would be more powerful to have 1,000 people joining this new economy enjoying the full yield of anchor and posting about it - running their lives through it and growing what we are doing rather than a single hedge fund like you taking what belongs to these people who are bold enough to join this new economy.

These small people are our marketing and best chance at creating a new worlds economy. You are here just to extract value from them and what others have built.

I am also a 7 figure Luna holder and strongly feel this way. We should start with Arrington and no one else since he has supported Luna for a longggggg time.

This is a great proposal and deserves discussion, I think a compromise has to be met with the terms on it though.

4 Likes

Many hedge funds setup re-insurance companies. You mean to tell me that for every policy they underwrite they hold 1:1 dollar for dollar?

This is clearly not how insurance should work. I find it hard to believe when Do and the team announced the $1b it was with the intention to function in this simplistic manner that cannot scale.

In fact, risk harbor’s token will be quite worthless if this is how things work. There is no business model and zero sophistication.

Now if $1b protects $10+ billion, maybe there is a conversation to be had. But even then there should be tranches released as you progress, and obviously a plan to not suck up community funds indefinitely.

Many aspects don’t feel right, and as much as I don’t want to sound insulting, it feels to me as though the Risk Harbor team placed little to no thought in all of this because they recall Do saying $1b for ozone. Thus there was a belief that it would be super easy to get $1b.

Terra can do better and MUST do better.

4 Likes

Yes we have a reinsurance arm and I agree with all of your points if you we were well-versed - I don’t think you’ve done the appropriate research. Read their whitepapers, proposal, and app, deeply. They already built an AMM that’s able to 4x leverage based on different parameters meaning that 1B capacity can protect up to 4B. That’s the v2 ozone they’re building now (i thin?). They are the most capital efficient approach to insurance and I’m sure this is what Do realized. I believe their mechanism is better and much more simpler than the original Ozone mechanism. They also built a risk engine that automatically assesses risk that I’m very excited to learn more about when fully released.

The only mistake I think the team did was undersell the features and mechanisms they built, because obviously few are actually putting in time to research what’s actually going on.

5 Likes

Now if $1b protects $10+ billion, maybe there is a conversation to be had.

In the original Ozone proposal, Ozone Insurance Mechanism v2.1, the idea of leverage underwriting was raised by Do. Risk Harbor V2, currently live on Ethereum does exactly this through our custom AMM. You can read about it more in the Ozone whitepaper: RiskHarbor-Whitepaper/Risk Harbor Ozone Whitepaper.pdf at main · Risk-Harbor/RiskHarbor-Whitepaper · GitHub . We are actively porting this AMM over to Ozone so that we can achieve greater capital efficiency and capacity on a underwriting vault composed of various Terra protocols.

7 Likes