Strudel Improvement Proposal: The Orkan

Strudel Governance Proposal

Title: Strudel Orkan (OHM/Curve-style Overhaul)
Authors: mattim0use & ataxia & don
Date Created: 11/08/2021
Date Posted: 11/08/2021

Summary

To overhaul Strudel’s farm ecosystem, and utilize curve.fi incentives to peg vBTC and build a mega-liquid pool for TRDL/vBTC/gTRDL.

Background

The Strudel protocol has been at the bleeding edge of innovation since its inception a little over a year ago. In that period, we have seen the space grow tremendously and new dynamics emerge showcasing what decentralized communities can achieve when organizing as a unified entity.

Our main source for liquidity over the past year consisted of paying yield incentives to farmers which have aided us tremendously in getting to where we are today. However, it is time to switch to a new model of issuance that will align the incentives in order to fulfill the goal of the Strudel protocol which is to bridge and create markets for the only trustless BTC on Ethereum.

We propose restructuring $TRDL as a reserve currency of the bridged Bitcoin ecosystem, backed by a growing and self-increasing treasury. In order to do so a switch to bond based issuance is required in order to direct our monetary policy in order to achieve our goals as a protocol.

As we’ve seen on most of the OHM forks, the native coin usually trades at a huge premium on the Risk Free Value, so the inflation meant by TRDL emission via bond should even be a net positive for the price.

Differently than OHM, there will not be any staking or rebase mechanics. Rather, there will be a Curve-like locking. Users may lock TRDL to receive a variable amount of gTRDL. gTRDL, representing the locked TRDL, bears yield in form of vBTC.

That yield is organic and sustainable and does not further inflate the TRDL supply. So, regarding TRDL, we’d have a big inflation coming from bonds (which may even be price positive) and a huge deflationary mechanic being the time locking, thus drawing a great ascending price spiral.

MISSION & VALUES ALIGNMENT

We aim to utilize CRV, which is the largest DEX by volume and it specializes in low slippage trades for stable pairing (eg wBTC-renBTC). They pay CRV denominated incentives determined by decentralized voting gauges.

Our protocol goal will be to build a treasury of vBTC and other wrapped BTC assets which we will deploy to create a liquid ecosystem for $TRDL. Furthermore, we will implement a permanent BTC acquisition strategy which will finance BTC denominated yields for gTRDL holders.

The end game To create an omega-liquid network of pools. This will allow the Strudel Prtotocol to create trading markets to grow alongside with the interchain ecosystem. Making indexes and pairing it with our collateral system. Lending platforms for vBTC, ideal being Aave. We believe that we can get 1000 BTC over the bridge, which happens automatically with arbitrage whenever peg is over BTC market rate.

SCOPE OF WORK

STEPS for Implementation:

  1. Increase $TRDL issued to the multisig to 100% of the daily strudels. This effectively stops the current LP program

  2. The multisig will auction $TRDL for strategic assets.

  3. The Gnosis Auction would trade $TRDL for CVX which we will votelock in order to have access for a CRV gauge for Orkan Pool (vBTC-3BTC CRVLP).

  4. The Gnosis Auction then sells $TRDLs for Orkan LP

  5. $TRDL protocol provides liquidity for CRV incentive used to increase treasury holdings of vBTC

  6. Demand for TRDL, vBTC and ownership of the Liquidity pegs vBTC and increases the value of $TRDL alongside our treasury growth.

  7. Strudel Protocol governance will determine policy at this point for dividend payouts, further $TRDL issuance and protocol upgrades

SPECIFICATION

1. Discontinue $TRDL liquidity incentives by increasing Treasury allocation to 100%

1.2. Implement fixed-term incentives for Structured products to bootstrap liquidity only
- The multisig can create fixed-term farming setups using covenants.eth.link
- We propose creating a front end for these setups on the Strudel.Finance
webpage

2. Implement Bonding Mechanism

Alpha treasury bootstrapping , ~1-2 weeks
Bond of vlCVX to get max locked TRDL at a big discount

Post-alpha bonding

  • Bond Orkan LP tokens (vBTC-3BTC) → get TRDL at discount
  • Bond vBTC → get TRDL at discount
  • Bond $TRDL-ETH SLP → get TRDL at discount
  • Bond CVX → get TRDL at discount

Whenever TRDL trades below risk-free value, the protocol market sells the xBTC (of the curve meta pool type) to market buy TRDL

Lock TRDL for a certain amount of time (the more time you lock, the higher the TRDL:gTRDL ratio) to receive vBTC yield (which is sustainable, non-inflationary in any way, since the farmed Crv gets sold to buy vBTC to distribute to veTRDL holders)

This fosters an inflationary scenario on TRDL with the bond emission, but it’s always backed by some treasury, so it should be somehow priced neutral, while, in the most likely scenario, TRDL would trade at a huge premium out of the risk-free value for the yields generated by market-making using vBTC as collateral.

The expected result on the protocol dynamics is to create a consistent demand on vBTC (single-sided bonding, bonded on auctions, bonded on UniLP, buyback out of Crv) which is great to incentivize bridging to arb and sustaining the peg.

In case vBTC trades below peg, the protocol may keep a certain percentage of other idle xBTC assets as a safenet, to sell in case vBTC trades below a certain ratio. By owning enough of the liquidity we can ensure the peg while creating profitable arbitrage that we distribute to gTRDL holders.

1.1 General Objectives

To deploy a CRV gauge for a vBTC-3BTC meta pool and obtain a CRV incentive.

Currently, there are protocols renting out votes so that anyone can “purchase” an incentive for their LP. We can take advantage of this opportunity and acquire enough voting power to be awarded an incentive for a vBTC-3BTC pool that has been created for this purpose.

At a t0, there will be a short period of treasury bootstrapping event, when Users may bond vlCVX and veCRV to receive veTRDL locked for 4 years at a discount.

Bonds have variable rates, and those rates will be chosen by the policy. There’s a wide range of assets that we could target as bonds to diversify the liquidity. In no particular order we are interested in acquiring:

  1. vlCVX
  2. veCRV
  3. vBTC
  4. TRDL-vBTC Univ2 LP
  5. vBTC-MIM Univ3 Popsicle LP
  6. vBTC Curve meta pool token
  7. BTC basic Curve token
  8. Other bridged BTC that are in the basic Curve BTC pool

1.2 Where does the vBTC yield paid to veTRDL holders come from?


With the liquidity bootstrapping event, the protocol accrued valuable vote power on Curve gauge weighting.
That voting power will be used to incentivize a vBTC-3BTC meta pool, where the protocol itself will be the no1 liquidity provider.

At the moment, 1$ of bribes get 4$ of Curve emission.
Owning vlCVX will draw a baseline of voting power and emission, while bribing may then be implemented.
A part of the farmed CRV will be locked to further increase the voting power, while the rest will be sold to buy back vBTC from the market to distribute to veTRDL holders.

That means a perpetual demand for vBTC, which would naturally push the price above peg: that’s the perfect scenario for creating organic bridging demand.

Other vBTC use cases may follow (for example, CDPs using idle treasury to lend to Users). The core of the proposal is the Ohm flywheel mechanic, enhanced by the Curve game. While Ohm relies on inflation of his supply and on Players to play the (3, 3) game, effectively cooperating, to reach its wanted effects, for us the economic incentives would be enough to make the Players play the best strategy, since it’s the one and only.

The initial vlCVX treasury would be enough to bootstrap this whole process, while later on there will be a liquidity and treasury blackhole effect.
Paying a certain amount to get a multiple of that in form of Crv emission will allow us to pay clean vBTC yield to our holders, in a non-inflationary manner, since we’re spending literally Curve’s money.

FINANCIAL IMPLICATIONS

This proposal will drive demand for Strudel (TRDL) as the reserve currency of the vBTC Network. Implementation of the proposed system will allow the protocol to own its liquidity and deploy the economic policy to ensure the peg of vBTC.

TBE: buying incentive for $TRDL token as-is, but further its utility by using its $gTRDL-lock up mechanism, by rewarding users with vBTC, the more valuable asset. Once we have a supercharged vBTC peg, now we can rely on bridge-crossing-and-selling arbitrage for vBTC to keep at a stable peg. Before this, the main issue was convincing the market of the under-peg arbitrage situation. The curve.fi protocol solves this problem for under-peg-arbitrage by making it automatic.

SUCCESS METRICS OR KPIs

  1. Pool Depth
  2. Voting Success
  3. Volume Increase
  4. Delta between current Strudel Bitcoins (vBTC) and other Bitcoin/Wrapped Bitcoin protocols
  5. On Chain Metrics (number of unique wallet holders)

NEXT STEPS

Raising the TRDLs yielded to the multisig to 100% and establishing Gnosis Auction for Curve voting power.

SQUAD BACKGROUND
Nerd Finance is a decentralized community that manages, creates, and invests in innovative established, and developing blockchain projects. Nerd helps give users and teams access to powerful trading tools, professional advice, and many investment opportunities while providing numerous sources of value for the NERD token and Nerd NFT holders.

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