How we're different
An overview on how we're different to other DAOs
Bonds are attractive to investors due to the discount they bring in comparison to the market rate of an asset. For example, a new investor seeking to enter the OtherDAO protocol through $OTHR exposure will be faced with two options:
- Purchase $OTHR on the market through a DEX (immediately accessible)
- Purchase $OTHR through bonding at a discount to the current market rate ([INSERT LOCKUP])
In both scenarios, an investor seeking to actively participate in the protocol (i.e. through staking $OTHR for passive, sustainable, and uncorrelated $USDC yield) will be better off purchasing $OTHR through bonding.
The OtherDAO is different in the fact that $OTHR is not minted for any purpose other than bonding (i.e. $OTHR is not minted to encourage protocol participation). Effectively, this means that with every bond purchased, the bottom-line of the protocol is increased. With new bonding, the increase in $USDC yield is at least proportional to the increase in supply. In instances where a bond has matured, and the underlying $OTHR is unstaked, protocol participants would experience a net increase in $USDC yield.
Additionally, 25% of the gross $USDC generated by the protocol is designated to repurchase agreements, whereby, the OtherDAO protocol agrees to repurchase $OTHR in order to maintain a positive bonding rate on all currently issued bonds. Effectively, this significantly reduces the risk of bonding for the OtherDAO protocol by ensuring (where possible) that the underlying bond retains a positive bonding rate for the duration of its vesting period.
The bonding rate refers to the difference between the market price of the underlying asset ($OTHR) and the price the asset is sold for through a bond. A positive bonding rate is such that the bonding price is greater than the market price.
Game theory is the analysis of the strategical interactions which occur between rational investors, and can be used to determine the decision a rational investor will make when choosing to enter the OtherDAO protocol. A simple payoff matrix shows the following and concludes that a rational investor will always choose to purchase a bond, assuming the inherent vesting risk is minimized:
OtherDAO | Sells bond | Doesn't sell bond | |
|---|---|---|---|
Investor | | | |
Purchases bond | | (Bond, Sell) | (Bond, No sell) |
Purchases on market | | (Market, Sell) | (Market, No sell) |
Last modified 11mo ago