[ABIP-17] Flex or Sell that gOHM pt2

This proposal is an extension / update to ABIP-15: https://forum.abachi.io/t/abip-15-rfc-flex-or-sell-that-ohm/66/7

Summary Get community buy in on the fine-print terms of Flex Loans from Olympus DAO which we were not aware of at the time of ABIP-15 vote, and are not what we had hoped. The loan effectively gives Olympus DAO control of the collateral and the LP 100%, and opens up Abachi to risk from Olympus DAO.

This proposal puts forth two options; take the loan and take on the risk, or sell the gOHM into ETH and launch LP against ETH.

Motivation

As per ABIP-15 governance vote (and the associated community AMA) it turns out that our understanding of the Flex Loan was incomplete.

After further discussion with the Olympus team and studying the incur-debt option on Flex Loan smart contract, the team feels there is a significant risk in this intiative which should be voted via the community if we are to proceed.

Our understanding was that we could put up our gOHM as collateral and put in 100% of the borrowed OHM into an LP which would be owned by Abachi DAO. This however is not the case.

The Olympus team will keep the gOHM and the LP position in a smart contract until the debt is paid back in full. In order to get our tokens (ABI + gOHM) back, we would therefore need to liquidate the LP to get our collateral + ABI tokens back.

There has been extensive discussions internally around this, and the team feels that while the net cost is still zero, it puts us in an unnecessarily exposed position which is not the most ideal way to execute this.

Risks:

We need to be mindful that Abachi is not an official partner of Olympus DAO nor have we been incubated by them (as other protocols have). We bought the gOHM at market and if we are to take this loan we would not be able to show this position as backing as the protocol does not own it.

We also do not have sufficient governance (effectively none after Flex Loans) in case Olympus decides to renege or change the rules of the Flex Loan. We already saw the revised APY that materialized after the Flex Loans applications had been processed. We feel there is an uneeded amount of trust required for protocols to do this.

Proposal:

Internally the team is now against the option of taking out a Flex Loan and recommend selling the gOHM position into ETH (which we are up on).

If we sell the gOHM into ETH at these prices, we net ~80 ETH. This offers two key advantages:

Short term: The LP on Ethereum will launch at roughly $6.6 per ABI. We expect the arb would bring this price down on ETH Mainnet LP and up on Polygon LP. Long term: Since ETH prices are currently depressed, as ETH $$ value goes back up, ABI will experience positive impermanent loss, thereby ALSO going up in $$ value in the ETH Mainnet LP. Together these two should create a positive flywheel effect on the price of ABI.

However, if we decide to go ahead with the flex loan, even though we will still aim to launch the LP at $6.6, the backing value will be reduced by roughly 10%. We cannot count this as backing as it requires trust and we do not own the LP or the collateral at this point.

Olympus has told us that Flex Loans v2 will enable a different approach, however we don’t have a fixed timeline for that. Once the v2 is launched, we might revisit this in a separate proposal.