Status: Draft Proposal Author(s): Jimpson, n00bleLAND & CryptoChicca
Discussions-to: Bear Fund - Proposal
Created: 6 December 2021
Requires (optional): BIP
Implementation (optional): Proposal to be discussed for a week, then proceed to BIP vote if supported.
This proposal is to implement a system which enables the BBH DAO to gain upside from a Bear buyback and also provide an avenue for those Bear holders seeking to sell their Bear for immediate liquidity.
BBH DAO currently does not own any bears, so it does not have exposure to the DAO’s upside. As a long term project, BBH DAO should invest in its own success.
Further, there has been listing below the mint price, and undercutting, causing a drop in the floor. Many bears have requested the BBH DAO buy floor bears to fix the floor.
This proposal is not suggesting a buyback program to fix the floor, but instead a sustainable long term program, to both reinvest in the Bears, and provide an avenue to enable those wanting quick liquidity to get a guaranteed minimum value. This shall be known as the Bear Fund, as coined by @Jimpson.
The Bear Fund will be made up of two “parts.” One part will be where floor bears are accumulated, and the other will be a liquidity pool that will hold Ethereum used to purchase bears from those looking to sell. The buyback price of the bears will be calculated based on the equity value of one bear (defined as Total Value of the Honeypot/9,999).
- Providing liquidity to Bear holders that require it quickly.
- Providing an avenue for the BBH DAO to accumulate good value bears to either sell at a higher price or hold for future
- There have been multiple proposals prior to this shoing considerable support. Earlier proposals reference here:
Buyback Price Calculation:
There will be a Maximum Buyback Price that will be calculated as 20% below the equity value of one Bear.
The following is an example of how the repurchase price will be calculated.
If the current valuation of the honeypot is approximately $1M and there are 9,999 Bears, that means each Bear’s equity value is $1,000,000/9,999. This comes to approximately $100 per bear or .024eth at a valuation of $4,150/eth at the time of writing. At a 20% discount of the equity value, that would mean that the Hideout would repurchase Bears for .0192eth.
By this logic, any Bear purchased under the designated value (i.e. 0.24 Eth) would be purchased at a discount, and thus profitable for the Honeypot. Although this would mean that the seller would take a slight loss, that loss would be equivalent to the convenience of having the ability to immediately liquidate their bear holdings. The strike price will be regularly adjusted to reflect the total value of the honeypot.
Listing fees will be paid by the seller. So, in the case of the Hideout purchasing a floor bear, the seller will pay the gas fee. In the case of the Hideout selling a repurchased Bear, the Hideout will pay the listing fee.
The Honeypot currently holds 92eth.We can expect that a large portion of this may be eaten up after the initial passing of this proposal. Moving forward, we will be able to have a more accurate forecast for expected redemption of this offer. This will enable a dedicated allocation of ether to be reserved for this mechanism.
*In the extremely unlikely event that all Bears want to liquidate, investment positions will have to be liquidated in order to accommodate all requests. However, with the 20% buyback price discount, 20% of the Honeypot will remain, minus listing fees.
It is proposed to establish the Bear Fund as an automated platform that can be accessed at all times. A mechanism of this kind is expected to be available to the Bears in late January 2022.
Selling DAO-Owned Bears:
The bears re-purchased by the Hideout could be resold on OpenSea at a 50% premium from the re-purchasing price or the original mint price (.05eth), whichever is larger. This would cover gas costs, offer the Honeypot an economic gain, and raise the floor price of the Bears.
Formula with example:
BBH DAO-owned Bears:
Bears purchased through this arrangement would sit in a DAO owned wallet. These bears would not be eligible for voting thus affecting the voting quorum. This will be adjusted to reflect 10% of the total number of Bears that are held by the public, not including the Bears held by the DAO. (Example: if the DAO owns 200 bears then the amount in circulation will be 9,799. That would mean for a proposal to pass it would require that 979 votes be counted, which is 10% of the outstanding bears.)
It is proposed that the Honeypot Manager will periodically monitor this process to ensure quality assurance of all processes.
- BBH DAO should invest in its own success and currently does not have exposure to that success.
- Bear holders sometimes require immediate liquidity so this program enables a quick exit for holders should they require.
- A platform is currently under development for release in late January that would enable this proposal to be implemented. Further details of that project will be advised in due course. This proposal should work through governance protocol and get feedback and refinement with the view to commencing upon the project’s launch in late January.
- A liquidity pool must be maintained in order to fill all sell orders.
- Honeypot Manager to periodically assess accuracy and integrity of mechanism.
This is a new proposal initiative, which takes into account the past success of projects like NFTX.io, and also the great feedback received via Jimpson’s governance proposal Bear Fund buy back scheme.
Copyright and related rights waived via CC0.