MIP-010: Treasury Diversification and Liquidity Enhancement

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Treasury Diversification & Liquidity Enhancement

Summary

Shift Metronome treasury assets into optimal positioning on Protocol Owned Liquidity and strategically deploy MET to drive TVL and liquidity in a capital efficient manner.

Background and Motivations

Through functionalities like Smart Farming, Metronome presents a powerful tool for DeFi power users to deploy their assets and generate yield. This activity (and the corresponding TVL gain) is constrained by the ability for users to swap the synthetic USD and ETH assets at competitive rates on the open market.

As such, the primary constraint in Metronome's continued growth is the ability to incentivize and attract liquidity. And with limited resources, it is very important to do so in a way that maximizes capital efficiency. In other words, Metronome needs to support as many dollars of liquidity as possible with as few dollars of spend towards incentives or otherwise.

The Growth Workstream has done extensive research in determining the best possible strategy for liquidity incentives, performing a quantitative analysis across all of the following Ethereum mainnet platforms and their corresponding tokens:

• Curve

• Convex

• Frax

• StakeDAO

• Yearn

• Balancer

• Aura

• Pitch

• Uniswap

• Bunni

• Pendle

• Votium

• Velodrome

• Wombat

• Wombex

Per the research, these platforms and their tokens were analyzed for their ability to attract liquidity plus the investment outlook on acquiring these tokens, where applicable.

This research has affirmed the existing strategy on Ethereum mainnet of prioritizing Curve LP primarily through a Convex position, as well as through Protocol Owned Liquidity (POL) and consistent MET bounties for governance voters through the StakeDAO Votemarket.

Optimizing POL

Certain strategies can be employed to multiply the impact of our protocol owned liquidity. Chiefly, taking an active approach to strategic farming against POL can drive outsized revenue back to the treasury, which in turn can accelerate the ability to grow liquidity and acquire strategic resources back to the treasury.

The Treasury Committee should have agency to shift LP between markets and networks (so long as the total $$ amount of LP for each synthetic asset is unchanged). This means migrating liquidity off of i.e. Curve and onto the likes of Velodrome, Balancer, or otherwise.

Gearing up for Optimism

Lastly, Optimism has been flagged as a significant opportunity for growth in Metronome. Treasury resources should be utilized to bootstrap this deployment and capture high revenue opportunities presented through Velodrome as quickly and as efficiently as possible.

Specifications

Deploy treasury resources as follows:

• Add approximately 305 ETH and 305 msETH as Protocol Owned liquidity on Velodrome, sourcing ETH as follows:

• • 200 ETH from treasury
• • 150 ETH withdrawn from ETH mainnet POL
• • • Treasury Committee will access this ETH strategically as open market liquidity allows
• • 300 ETH withdrawn from MET-ETH POL
• • 345 ETH from above converted to wstETH and deposited as collateral through Vesper position
• • • 305 msETH minted against the position
• • This POL will be treated as "probationary", and will be assessed for potential reallocation following a 6 week duration after deployment.

• Withdraw $100k from MET-USDC POL (50/50 of each asset) and redeploy on Velodrome as MET-ETH POL

• Mint an additional 250,000 msUSD against ETH collateral on mainnet as POL for msUSD-FraxBP

• • Treasury Committee will deploy this msUSD strategically as open market liquidity allows

• Transfer an additional 100,000 MET to OpComms for the purpose of strategic liquidity incentives

• • Increase bribes to a target of 15,000-25,000 MET/week with a focus on Velodrome
• • Convert some MET to CVX to build permanent incentives on mainnet

The Treasury Committee is also granted approval to migrate liquidity across individual markets, beyond what is explicitly listed above, so long as global Metronome liquidity is not negatively impacted.