Should we use some of the treasury for buybacks?

Overview

We're proposing a change to how the treasury is currently being deployed.

With the shift from our rebase model to a ve-token model, we will stop inflating the supply of MAG. This allows us to potentially have a deflationary token model where the supply of MAG is constantly decreasing, by using a portion of our treasury to do buybacks.

The goal of doing so would be to bring the price of MAG up and return value to our holders as the asset becomes increasingly rare and valuable.

Current Treasury Usage

The Magnet treasury is used to build the protocol and to bring value back to MAG holders. At our core we are a build guild that have joined together to invest in, incubate, and build projects that return value to our token holders.

Currently we have a roughly $10 million treasury:

• $5m of main treasury in Vector Finance
• $3m of main treasury in StakeDAO
• $1m of innovation fund in Vector Finance
• $1m of liquidity on trader joe of MAG-MIM

We are scheduled to move an additional $1m from the main treasury to the Innovation Fund per the last proposal: https://snapshot.org/#/magnetdao.eth/proposal/0x3b4f2bdcac665976381a15be9ec62e4190451ed95ed58e94934cd9da4fa1e2f4

Options for Treasury Usage

The community has been in active discussions of these buybacks and has expressed several different options as viable. There is the choice of doing nothing here (option A) and leaving the treasury as is (farming for yield to return to veMAG holders).

We as a core team have put forward a version of buybacks (option B below) that we believe will raise the price of MAG while having minimal impact on the treasury balance.

The community has also brought up an option of more intense buybacks that would allocate more of the treasury for buyback than just our farming yield (option C below).

Finally, a portion of the community has also asked that redemptions be put forward as an option for using the treasury. The mechanics of this redemption and what portion of the treasury would be utilized have not been decided on, so more discussion and a vote would need to be made on this (option D below).

Option A: No buybacks

The first option is continuing to allow the team to allocate the treasury to safe stablecoin farming, and not changing how we use the treasury yield. For this option no buybacks would be implemented.

Due to the better yield there, we would move the half of the treasury in StakeDAO to the Anchor Protocol (a highly respected project that gives yield to the UST stablecoin), continue farming on Vector, and return the yield from these farms to our veMAG holders as an APR. (You can see the estimated yield for this strategy in Option B below.)

If this option were to win we would not make any buybacks using the treasury, and all yield from the farming would go to veMAG holders. In line with our previous proposals we would allocate $1m more of the treasury to our Innovation Fund and farm it on Anchor, deploying it as needed.

Option B: Use 50% of yield for buybacks

This option would still move $1m into the Innovation Fund and in addition would do the following:

1. Remove our funds from StakeDAO
2. Take $3 million and put it into UST Anchor staking for the main treasury
3. Take an additional $500k from Vector main treasury and put in UST Anchor, so that split is 50-50

The new treasury breakdown would be the following:

• $3.5m of main treasury staked in Vector
• $3.5m of main treasury staked in UST Anchor
• $1.0m of innovation fund staked in Vector
• $1.0m of innovation fund staked in UST Anchor

• What do we do with rewards?*

Vector staking ($3.5m):

• Continue to compound and accrue VTX & PTP. This VTX & PTP will be distributed to veMAG holders once launched.

Anchor staking ($3.5m):

• Use all yield from this to conduct periodic buybacks, done over time so that they cannot be front-run. All tokens bought back will be burned. This will generate about $60k of buying power per month.

What about Innovation Fund rewards?

• These will remain in the innovation fund and continue to be compounded until we pursue any major use of these funds.

Option C: More intense buybacks using the treasury

This option includes the items detailed in Option B above, and in addition allocates $300K from the treasury to do more intense buybacks over the next 3 months. These buybacks would be done at random to avoid front-running.

The treasury allocation for option C would look like the following:

• $3.35m of main treasury staked in Vector
• $3.35m of main treasury staked in UST Anchor
• $1.0m of innovation fund staked in Vector
• $1.0m of innovation fund staked in UST Anchor
• $300k in the multi-sig wallet for buybacks over 3 months

Option D: Redemption Proposal

If this option were to win, we would not make any changes to the treasury structure, and would put buybacks on hold until we can discuss a redemption mechanism. The details of this redemption would need to be discussed in a community thread and then voted on at a later date. The outcome of this redemption vote could vary from a partial redemption of the treasury, to the dissolution of the treasury, depending on community feedback and any proposal votes.

The Vote

For this vote we will offer all four options, and MAG holders at the time of the Snapshot will be able to vote using Ranked Choice Voting: https://docs.snapshot.org/proposals/voting-types#ranked-choice-voting-irv