In a recent statement, StakeDAO announced that they are deprecating their options products:
This closure is of relevance as one product, the ETH Put Selling Strategy, occupies a Frax gauge (sdETH-FraxPut) and has associated locked liquidity. StakeDAO users are currently being advised to withdraw from their options position. As such, this author believes the Frax community should vote to unlock the gauge.
The ETH Put Selling Strategy (the Strategy) is described on the StakeDAO website:
This strategy leverages Opynâs oTokens to sell 7-day European ETH put options every Friday to market makers via Airswap. The premium received generates passive income for its users. The position is covered with USD stable coin collateral representing 100% of the face value of the put options sold. The USD stable coin collateral is staked into Stake DAOâs Passive FRAX Strategy to generate additional yield.
From the Frax perspective, having the position collateralized with FRAX3CRV pool tokens helps with the $FRAX peg. Some community members believe this is sufficient reason alone to reject unlocking (for example, see Dennett: 3CRV-->4Pool : Unlock LPs in the sdETH-FraxPut and sdFRAX3CRV-f gauge pools - #5 by Denett), and I understand this perspective. Indeed, recent market conditions have illustrated the importance of maintaining a strong $FRAX peg. However, the fact remains that the strategy was designed, first and foremost, to sell ETH puts. Lockers had a reasonable expectation that ETH puts would continue to be sold while the gauge persists â this is no longer the case.
In terms of numbers:
Current gauge weight: 0.28% (~123 FXS per week)
Current value locked: 2.5 million USD
Finally, just a broad comment: The partnership between Frax and StakeDAO has been one of the more enjoyable to witness. It has been a pleasure to see how these two teams and communities have supported each other thus far, with supporting products on each platform and many dual community members. Perhaps optimistically, I hope that Frax members will extend this support once more to StakeDAO by unlocking the sdETH-FraxPut gauge, though I am sure the good vibes will continue regardless of the outcome.
I support the unlock here since the original gauge was specifically made for selling ETH-puts. since that strategy has now been retired I believe this is a valid reason for unlocking without penalties.
I also considered the fact that the TVL is only 2.5M so the effect it would have on FRAX peg is simply irrelevant at these numbers.
This puts the needs of the protocol behind the profits of lockers. Protocol paid users to lock. Users took on risk when they locked, one such risk is that StakeDao deprecates this strategy. All $FRAX holders and the protocol are hurt when locked liquidity is unlocked. The only people who benefit are the ones who took their 100%+ APY and now want to run instead doing what they agreed to do (lock their liquidity).
I can see your perspective, but I respectfully disagree. I believe lockers had every reasonable expectation that StakeDAO would continue maintenance of their strategies. To violate this expectation without remedy seems unjust imo. It is not as though the APYs went low and lockers simply wanted out (if that were the case, Iâd first do something about my DAI/FRAX LP hehe).
StakeDAO and Frax have a strong bond and I believe it would serve mutual interests if this situation gets resolved in a fair way (whatever that ultimately equates to). The TVL is really quite minimal and I think there is tangible benefit in keeping the communities and protocols copacetic.
That may be true but Iâm not sure why you would believe that $FRAX holders and the protocol should be responsible for bearing the costs associated with remedying the actions of StakeDao. Frax Protocol has fulfilled all obligations and should not sacrifice protocol health to remedy a situation caused by stakeDao, especially when lockers were rewarded with triple digit rewards for taking on this risk.
Your argument boils down to: âI want to be released from my obligations because things didnt go the way I expected them toâ. This risk is the reason rewards were paid.
Your final assessment misses the point. I will suspend any notion of âfairnessâ or âreasonable expectationsâ for a moment:
I agree that Frax has fulfilled all obligations thus far and I acknowledge that there are valid reasons for Frax to block the proposal. As stated in the initial post, the eth-puts were collateralized with FRAX3CRV, so unlocking would allow liquidity to flee. On the other hand, blocking the proposal strains social capital with StakeDAO (a trusted partner) and risks alienating users - both aspects with tangible value. Given the minimal TVL in the gauge and the degree of co-mixing between the communities, one has to wonder: is the juice worth the squeeze here, drake?
Ok I think there is more merit to this line of reasoning. But I think we disagree on the relative values of the juice and the squeeze as it were. Putting that aside, a big part of my pushback on this proposal is that the cost (squeeze) of the proposal is born by the entire protocol and $FRAX holders while the benefit (juice) is allocated to a select few.
While I agree that lockers bore some risk, was it clearly stated anywhere that StakeDAO shutting down this pool would not result in an unlock of the pool? You make it sound as though this was explicitly stated somewhere.