TAP-11 Ribbon Finance Whitelist

Summary: Seek authority from the community to whitelist Ribbon Finance for depositing of reserve assets.

Background: Recently the DAO has been accumulating additional ETH reserves assets such via OIP-15: Add ETH to the Treasury or wBTC via OIP-35: Add WBTC to the Treasury. The DAO is now seeking the ability to utilize Ribbon’s vaults for reserve assets to further increase the backing of OHM.

Motivation: Whitelisting Ribbon Finance will allow Olympus to earn yield on reserve assets to help bolster the backing of OHM and grow the treasury. The DAO will adhere to the treasury framework of no more than 5% of excess reserve assets to riskier strategies in options vaults. However, this is just a limit and the DAO will assess the optimal distribution on a per asset per protocol.

Description from https://docs.ribbon.finance/: Ribbon Finance is a new protocol that helps users access crypto structured products for DeFi. It combines options, futures, and fixed income to improve a portfolio's risk-return profile.

Theta Vaults: Theta Vault, which is a yield-focused strategy on ETH and WBTC. The vault earns yield on its deposits by running a weekly automated options selling strategy. The vault reinvests the yield earned back into the strategy, effectively compounding the yields for depositors over time.

The Theta Vaults run two options strategies to generate yields:

Covered call - Vault writes out of the money covered calls.

Put selling - Vault writes out of the money puts.

Risks: There is inherent smart contract and platform risk involved with managed vaults. Ribbon utilizes Opyn as a settlement layer so there is composability risk with use of multiple protocols. The strategies vary in risk and they also incur the potential risk of loss from being in the money at expiry.

Protocol Analysis: Using a risk analysis framework developed by the DAO, the Policy and Partnerships teams have attempted to score various protocols based on some subjective and non-subjective data. Ribbon scored a 7.2 out of 10 which is medium to high risk. This is due to inherent risks associated with option vaults and inherent protocol risks not only of Ribbon but also where the assets are deployed to.

The following risk analysis shows the outcome of the Treasury Team's holistic assessment of the proposed platform and intended strategies. Lastly, one final reminder that this score is an average that was derived from an generalized assessment of the platform which includes TVL, audits, protocol age/risk, targeted investment and strategy type.

Ribbon Finance

Request for comment: https://forum.olympusdao.finance/d/1157-request-for-comment-ribbon-finance-whitelist