Q3 2024 INV Mint Proposal

Forum Post: https://forum.inverse.finance/t/q3-2024-inv-mint-proposal/437

Summary

Mint 52,388 INV tokens to the Inverse Finance DAO treasury to support ongoing DAO operations: xINV staking rewards, DOLA liquidity incentivization, INV liquidity incentivization, TWAP sells, and OTC swaps.

Background

Since INV+'s inception in January 2022, INV’s tokenomics have been inflationary, with regular DAO proposals for minting. A core tenet of INV+ is safeguarding INV stakers from inflation through the dilution protection program. This program prioritizes allocating a larger share of Treasury INV to stakers over other uses like liquidity incentives, thereby protecting stakers from dilution at the expense of non-staked INV holders.

Progress has been made in further enhancing the strategic approach:

• The DAO continues its accumulation and now holds a diverse portfolio of emission-controlling tokens, including VELO, AERO, THE, RAM, sdCRV, sdBAL, AURA, and LIQ. These tokens enable us to direct rewards to DOLA pools, reducing our reliance on INV emissions.
• The continued high pace of repaying DOLA bad debt, utilizing both the virtual xy=k DBR Auction (FiRM revenue) and Treasury profits. This has led to 1.16m DOLA bad debt repayment in 2024 so far.

In the long term, these strategies aim for zero INV emissions needed to support DOLA.

As highlighted in the latest TWG allowance proposal, INV inflation levels have been reduced throughout 2024 so far. As shown in the graph below, INV inflation is currently at its lowest point since the start of 2023, with an over 50% reduction since the start of 2024.

Quarterly INV mints as a % of total supply have been gradually decreasing over time:

The presence of DOLA's bad debt necessitates INV inflation due to the substantial costs associated with incentivizing the additional TVL in liquidity pools (the bad debt DOLA was originally sold into market liquidity). These bad debt DOLAs in circulation do not generate any return for the DAO, resulting in a pure financial loss. Furthermore, the bad debt increases the risk of holding DOLA, requiring higher incentives for holders and significantly greater liquidity depth to mitigate sell pressure, as DOLA holders are more sensitive to depegging. Consequently, the DAO must allocate far greater funds for DOLA liquidity incentivization than if DOLA had no bad debt. Therefore, repaying DOLA bad debt is the DAO's top priority, as it is crucial for reducing future reliance on INV inflation.

Overview

This proposal aims to mint 52,388 INV for sustaining DAO operations over the next quarter. The proposed amount considers the current rate of INV inflation and the strategic need to bolster our Treasury reserves for both existing commitments and potential new initiatives. The allocation is as follows:

• xINV Staking Rewards: Allocate a significant portion of the minted INV to reward xINV holders, adhering to our dilution protection program. The allocation will be adjusted biweekly to reflect changes in INV expenditure.
• DOLA Liquidity Incentivization: Continue incentivizing liquidity providers in DOLA pools on decentralized exchanges, using a portion of the minted INV. This aligns with our strategy to maintain and enhance DOLA’s market presence and stability.
• INV Liquidity Incentivization: Use a portion of the minted INV to incentivize liquidity in INV pools, mirroring the approach taken with DOLA.
• OTC Swaps: Allocate INV for OTC swaps to attract and engage new INV holders, with proceeds contributing to DOLA bad debt repayment.
• Gradual TWAP Sells: Use INV for TWAP sells, in place of bonding, to raise stablecoin reserves in the Treasury that go towards covering stablecoin OpEx and DOLA bad debt repayment. This is carried out with a focus on minimizing market impact.

Proposed INV Supply Change

On-Chain Actions

• Mint 52,388 INV to the Inverse Finance DAO Treasury.
• Grant 35,000 INV allowance to the xINV contract for dilution protection xINV rewards.
• Grant 15,000 INV allowance to the Policy Committee to use for raising Treasury stablecoin reserves