Overall, I’m excited for the merge, and the document shared by GFX is full of details, it is amazing to move the conversation forward. But I would like to see some changes to it / more details on some points - these are listed below.
II. Definitions
W. I don’t think we should use a raw TWAP as the sole source of exchange rate. Dan Elitzer explains nicely what is the problem here :
I see TRIBE as a value and growth play, too, and using a TWAP is not appropriate. This metric is not comparable between TRIBE and RGT, because both protocols have very different approaches towards liquidity. As an example, if a large holder would like to enter/exit a position in both tokens, the price impacts would be very different (and I took a pair that is advantageous to RGT) :
This shows that RGT token price is more subject to hype/fud and not being valued properly. On the other side, TRIBE has a liquidity that is toovery deep, it is not even valued at the intrinsic value of its assets, let alone growth potential. As an example, we could stop incentives on the TRIBE/FEI pool, vote to remove IDO liquidity, and have the protocol buybacks pump the TRIBE token like crazy. But we’re not doing that, because we value liquidity. The two protocols have a very different approach towards liquidity, and that makes TWAPs not comparable.
If “intrinsic value” using 619M circulating TRIBE (~1.35$ per TRIBE) is how TRIBE is valued for ragequit, why not also use this metric for exchange rate ? It would change from 26.7 TRIBE/RGT to ~21.5 TRIBE/RGT. Also, discounting REPT-b holders indemnification (20M$ / 12.5M RGT = 1.6$/RGT), and a small discount for liquidity depth, I think we should propose 15 TRIBE/RGT in the OTC deal. It is already generous, considering what traditional ways of valuating RGT would give :
Assuming the current deployments and yields, we can estimate that Fei Protocol can generate around 40M$ of profits yearly, and we are not even optimizing for yield yet :
- 220M$ in stablecoins @ 7% APR
- 46M$ of ETH in Tokemak @ 8% APR
- 113M$ of ETH staked on Lido @ 5% APR
- 500M$ of ETH in Aave/Compound @ 1% APR
- 150M$ of ETH in Uniswap-v2 FEI-ETH pool @ 7% APR
- ~500k FEI of interest earned in the various Fuse pools over the last ~4 months
This is equivalent to ~0.065$ of yearly revenue per TRIBE, and at the proposed 1.08$ TRIBE price, that is a valuation at ~16x P/SALES, accounting only for the revenues and not even the assets held by the protocol. If we used the same 49x P/SALES as RGT, that would be 3.185$ per TRIBE, and then we’d need to add the 1.35$ of intrinsic value (protocol assets), for a total of 4.535$/TRIBE, or a change rate of 6.4 TRIBE/RGT.
The Fei Protocol revenue is around 6x more than Fuse, but it would be interesting to see revenues from other Rari products, to see how things add up. I think this points to another important point : we need more information / technical reports on both protocols.
That being said, I don’t think we should make an offer too far away from the spot price, as it would not be fair to RGT holder, and we still want the merge to happen. A change rate of 15 would give RGT holders 15*1.35=20.25$ of intrinsic value per RGT, and they would get access to liquidity mining, PCV to bootstrap new products, a token with larger liquidity, a wider tokenholder base, no debt, and still be exposed to Rari’s growth.
VI. Distribution of TRIBE to RGT holders
How do we handle the fact that Rari contributors have vesting RGT tokens, and would need to switch to a TRIBE vesting schedule ? I think more discussions on this topic should be included in this section, because it is an integral part of the merge proposal, and should be part of the snapshot.
VIII. Ragequit
C/D. I think users should stake (irrevocably) in the Ragequit contract, and only one ragequit transaction reading the CR oracle should take place at the end of the 3 days period. The currently proposed mechanism will create a race to exit first, and as more people ragequit, the FEI offered per TRIBE will drop (because circulating FEI will increase, so PCV equity will drop). It would be more fair to allow everyone to commit to the ragequit, and have everyone ragequit together (looking forward to the memes here), like what we have done in the Genesis event and commitment from FEI to TRIBE. The current plan creates unnecessary MEV & arbitrage opportunities that in the end may be detrimental to the protocol. It’s also not very fair to people that don’t know how to operate a bot.
X. Assumption of REPT-b Repayment Obligations
Can we get more details on this ? What is the total amount expected in FEI (I think 20M, but I’m not sure), what happened, how were the token mintable, who are the current owners, were the tokens acquirable at a discount after the hack ? If the Rari community takes a discount on RGT conversion for it, they bear the price of hack repayment, so I don’t care, but if protocol equity post-merger is used to compensate this hack, I would like to get more details.
XI. GFX Labs Payment
In section “IX. Costs of Implementation”, it is said that both protocols are responsible for due diligence, deployment, etc. But if the compensation is going to be in the order of 3.5M$, I would have higher expectations regarding what is provided by GFX Labs. For instance, I expect most code for the merge to be written by your teams, and that you take care of the additional informations required to snapshot the merge.
Regarding the amount, it is very large for a ~month of work. If the goal is to foster a long term relationship between the Tribe and GFX Labs, I think that PDF you created was a good interview challenge & you’re hired, but now you guys should get the full amount on a back-weighted long duration timelock (e.g. quadratic 4 years), with clawback possible by DAO vote, like contributors and core team members get. You have proven that you can be valuable DAO contributors, so it will be a pleasure to get you on board, but if we want to keep you motivated & active over the long run, the timelock is kind of mandatory, I don’t see why we would make an exception, even the Fei Labs core team vests their tokens over a long duration : “These tokens are subject to 5-year back-weighted vesting. Team members receive in each of the 5 years 10%, 15%, 20%, 25%, and 30%, respectively.”, and the Rari core team will also get on a long vesting schedule when they join.
I think this is especially important because you are active in multiple governances (e.g. Getty gets a ~150k$/year streaming COMP grant), so if we want your team to stay involved in the governance, you need to have a good reason for it, and if you stop being active, the DAO should be able to claim the TRIBE back.
XIII. Prohibitions
I would like to add the condition that all Rari smart contracts be verified on Etherscan before the merge happens, it was one of our conditions for the merge, leaving smart contracts unverified is a big deal, so this should be part of the snapshot.
XIV. Financial or Technical Statements
Rari Capital and Tribe represent that, to the best of their knowledge, any financial or technical statements, representations, documentation, or information are correct and that all reasonable, good-faith efforts have been made to ensure their accuracy. Any financial or technical statements, representations, documentation, or information officially disclosed by either Rari Capital or Tribe are declared as an appendix to this proposal.
Will GFX prepare these financial and technical statements, I don’t see anything in the appendix ? I don’t feel comfortable voting for a merge without more public details about :
- the current holdings / profitability of Rari (Bruno’s comment is worrying, -20M$ equity with 7M$ yearly revenue in external assets is not a very good deal for 363M$, even if we get an amazing team of contributors at the same time and a cool road ahead with synergestic products)
- the current amount of contributors and whether they are full-time, if they plan to stay after the merger, etc
- An analysis of current token holders/vesting schedules would be very welcome too