Olympus DAO

Summary: Propose that Olympus trial to deploy 333,333 (this amount has been edited up from 100,000) excess FRAX from the treasury to the FRAX pool in Convex Finance in order to accumulate trading fees, CRV tokens and CVX tokens.

Background: The purpose of this proposal is to improve treasury capital efficiency, where our stablecoin assets are earning trading fees, CVX tokens and CRV tokens. Convex is a protocol that is allows for automated management of CRV pool assets. Convex does not charge deposit or withdrawal fees - it takes 16% of the CRV rewards which are distributed to Convex stakeholders. Convex currently has $3.8 in TVL. I consider Curve deposit directly is not appropriate because in order for smart contract wallets to receive CRV rewards directly from Curve those wallets have to be whitelisted by a Curve governance vote. Such votes have not been well received by Curve governance where solutions like Convex exist. (For a background of why we would not deposit directly to Curve and pursue our own gauges please see this thread which presented an immovable roadblock to the FRAX protocol from pursuing just that strategy). This proposal has been discussed on #Goverance in the discord, in the General section of the forum and by a largely positive vote on the Proposal section of the forum. The original number of FRAX was changed to 333,333 FRAX following discussion and feedback.

Abstract: Olympus has about 3.6 million FRAX sitting idle in the treasury when it could be earning interest. Currently the Convex FRAX pool is paying 0.41% apr in trading fees, 7.82% apr in CRV tokens and 5.91% apr in CVX tokens - this is a substantial amount of value not currently being captured by Olympus (these percentages already account for Convex fees). This proposal seeks to trial a deposit of 333,333 excess treasury FRAX into the Convex FRAX pool in order to capture some of this value for Olympus. The sum of 333,333 represents about ~6% of our current FRAX holdings. I propose that the treasury retain the CRV and CVX token rewards and redeposit them into Convex for further yield. In that circumstance it is reasonable and appropriate for us to pursue a low risk trial strategy to collect interest available to us through our FRAX holdings. The amount can be raised above 333,333 by a further OIP when and if the community is comfortable in taking on more risk in the future.

Risks: The author considers the passing of the proposal adds the following risks to the amount of FRAX deposited. Curve oracle and smart contract risk, indirect exposure risk to USDC, DAI and Tether through 3pool via FRAX-3pool, Convex smart contract risk (Convex is carrying 3.8 billion dollars https://defipulse.com/convex-finance - the author considers it to essentially be a farming contract). Given FRAX itself has deposited 72 million FRAX into Convex through an AMO, we are to some extent already exposed to a failure in this risk stack of Frax, Convex and Curve (at least to the extent of FRAX’s 16.5% backing by FXS governance tokens).

Motivation: This would allow us collect CRV tokens, CVX tokens and trading fees on a portion of our FRAX holdings.

Voting period: voting period will be for 5 days from the date of scattershot voting commencement.

For: Deploy 333,333 FRAX to the Convex FRAX pool.

Against: Do not deploy FRAX to the Convex FRAX pool at this time.