AIP - 107: ANGLE token buyback

Angle Improvement Proposals
1

Hello,

This is a proposal to:

  • redistribute to veANGLE holders the proceeds from the sale of the Protocol’s veAERO and veVELO positions
  • remove the lock on the veANGLE token so all people with veANGLE can unlock their veANGLE back into ANGLE
  • remove the tokens on the old FeeDistributor contract
  • enable the conversion of Prots into ANGLE tokens
  • remove the Protocol’s liquidity positions on Arrakis
  • launch a buyback program funded with the treasury of the Protocol with the Protocol seeding a single sided UniV3 position on a USDA-ANGLE pool

Context

veAERO and veVELO token sales

Recently, following a governance vote in November, the Angle DAO has engaged into the sale of its veVELO and veAERO positions as well as of its SAFE airdrop.

The Protocol obtained:

  • 10,300 USDA from the sale of 10k SAFE tokens
  • 146,016 USDA from the sale of the Protocol veVELO position
  • 713,466 USDA from the sale of the Protocol veAERO position

This is the result of investments conducted by the Protocol back in 2022 using the treasury it had accumulated back then.

Like it’s been the case on past airdrops or exceptional profits done by the Protocol, out of the course of normal operations, we’re proposing here to distribute the proceeds from this sale into veANGLE and sdANGLE based on their weighted average balance between the time of the LayerZero airdrop (where it was proposed that veANGLE and sdANGLE would be eligible to the gist of the distribution back on the 20th of June 2024) to the 31st of January 2025.

This is the method that had been voted by the DAO for the distribution of PYTH tokens to veANGLE holders.

Conversion of Prots into ANGLE

In November, the Protocol launched the Prots program to reward the base contributors of the Protocol. We propose to unlock a budget of 1.5M ANGLE for this program to be converted between Prots holders based on the number of Prots accumulated.

veANGLE unlock

After the Euler hack, the Protocol stopped rewarding automatically veANGLE holders based on the proceeds of the Protocol. Since then, veANGLE holders got eligible to multiple different airdrops (PYTH, ZRO, SAFE).

While the payoff of these different distributions got quite important for veANGLE, many users started complaining with reason about being locked into ANGLE with rules that differed from when they locked into the Protocol.
What we’re proposing here is to remove the lock on veANGLE, meaning leave anyone with veANGLE with the possibility to withdraw the same amount of ANGLE they had locked.

The veANGLE contract supports this feature and it’s just a function to activate.
If voted positively, the Angle app will feature a way for people to withdraw ANGLE from their veANGLE.

Doing this would make the veANGLE contract irrelevant and manipulable which means that prior to doing so, all onchain governance contracts using veANGLE as a source of truth should be deprecated.
We thus propose to deprecate the onchain governance (remove the roles to the onchain governance contract across all chains) till a new onchain system leveraging the base functionalities of the ANGLE token is deployed.

This also implies changing the Protocol’s Snapshot space so ANGLE holders can vote on this space, and making ANGLE token holders the effective decision makers in the Protocol. The protocol governance multisig will remain the admin of the protocol on all chains where it is deployed.

For reference, here is the pull request creating the onchain governance vote to halt the veANGLE system: chores: kill veANGLE script by sogipec · Pull Request #44 · AngleProtocol/angle-governance · GitHub

Remove funds from FeeDistributor contract

Back in January 2022, the Protocol had implemented a revenue sharing mechanism that was done through a contract called the FeeDistributor contract. This contract stopped distributing rewards in March 2023.

We’re proposing here to recover the unclaimed funds of this contract and convert these back into USDA to be deposited in the protocol treasury.

Remove the Protocol liquidity positions on Arrakis

In August 2023, the Protocol engaged in liquidity position using Arrakis Palm product (cf this proposal: https://snapshot.box/#/s:anglegovernance.eth/proposal/0xc2c585d57217fad2a3ff0806bb30d34ab6b27afafabcff4722cff5c585343033)
This position was later adjusted to be redeployed on Polygon.
We’re proposing here to remove the liquidity associated with these positions, bridge the associated ANGLE tokens back to mainnet and sell the wETH used as a counterparty tokens back into USDA.

Launch a buyback program

With the veANGLE unlock, the sell pressure on the ANGLE may increase.
If in the meantime, the liquidity positions are removed, there would be no liquidity for people looking to sell.
The Angle Protocol has been heavily profitable since its launch, and accumulated a treasury of approximately $8.5M. We’re suggesting here to launch a buyback program using the treasury of the Protocol, by seeding a single sided USDA-ANGLE liquidity pool.

The current ANGLE circulating supply is currently around 490M tokens. With a treasury of $8.5M (as estimated per the analytics), it makes a price per token of $0.01734 per ANGLE token.

To execute this buyback proposal, we first propose to reconcile the treasury numbers of the Protocol once the different steps (veANGLE profit distribution + removing Arrakis liquidity) of this plan have been achieved, to then compute more precisely the implied price for the token.

Implementation wise, we’re suggesting that the Protocol buys back any ANGLE token trading below the defined price, seeds a Uni single sided liquidity position in a USDA-ANGLE pool with a price equal to the fair ANGLE price (based on actual treasury number and circulating supply).
The position could be seeded with 5M of USDA to start with (so that the Protocol doesn’t need to allocate all of its treasury in the Uni pool - likely not all ANGLE token holders would seek to swap their assets). If the 5M USDA doesn’t suffice and the position gets fully swapped, the Protocol could top-up the liquidity position after having removed the ANGLE token in its positions and moved it to the Governor multisig.

Unfortunately there is no burn functionality on the ANGLE token, rather these would have to an idle Protocol address for these to be kept on the side.

Let us know what you think about this one!

1 Like
2

Hey,
Thanks for the proposal!
I think at this point it makes sense to move forward.

I would just like to see the Euler hack topic closed for good before moving forward with veAngle deprecation. I think as part of it, the 70% remaining undistributed profit of the euler hack should be distributed to veAngle holders as an exceptionnal payment, as hinted in this proposal: https://snapshot.box/#/s:anglegovernance.eth/proposal/0x7c1aad3b8293a5cb15af1d8f80ccead11c84f6e61fe6b1dc7e719f1f22e831bc

This would make it up (at least partially) for the end of yield and voting power utility that suffered those who locked Angle for 4 years, several years or months ago.

3

I think this is a good plan, as it rewards the long term stakeholders in the protocol, and also gives people an option to leave at RFV. You have my support on this. Of course I also hope that there is still a future for ANGLE beyond RFV, and would welcome any update on strategy going forward in another thread.

1 Like
4

Great ! Ok for me ! let’s do it

5

Thanks for looking into the proposal!

To address your points:

  • Regarding the Euler hack: While there was a mention of it in a proposal, no vote was ever passed to redistribute the proceeds to veANGLE holders. My perspective is that veANGLE holders were fairly compensated for their positions within the protocol, even during periods when they didn’t earn yield. They benefited from protocol-received airdrops—such as the PYTH and SAFE airdrops last year, valued at $450K and $170K at the time they took place, respectively—and were also eligible for the LayerZero airdrop. Additionally, this proposal aims to distribute nearly $870K in extra rewards to veANGLE holders. It’s also worth noting that veANGLE retained its voting power, preserving a form of value even after the Euler hack.
  • On strategy: I’ll be sharing my thoughts on the forum or Discord soon, but in short, our approach is twofold:
    • We’re on the verge of finalizing significant B2B integrations that will expand the distribution of our yield products by 10x.
    • We’re conducting research on on-chain FX. Given the complexity of this market, a robust go-to-market (GTM) strategy will take time to develop.
6

Just to throw this out there wrt forex, I would include a gold tracking product. I know that just in the groups I’m in that there would be millions of $ in demand for this product. Fiat, I’m less confident in. but maybe if all of the currencies were the yield bearing versions of those, that might be interesting. I think integrations to the banking systems would be needed in order for the fiat trading to be useful (in that you could easily offboard from crypto in one step, like what Coinbase does with USDC to USD instant conversion).

7

Hi there, interesting proposal.

A few questions:

  1. The buyback price will be dynamic, correct? It will depend of the ratio between tesury value and token calculation? Theoretically a higher treasury corresponds to a higher buyback target price?
  2. The $ANGLE token has no burn mechanism. The plan is to create a burn mechanism in the future? If not, will $ANGLE token be added to the protocol treasury?!

Regarding product development, good news regarding B2B integrations for Angle Yield products. However are there plans to lauch additional yield products? The Carrot Protocol on Solana is a good exemple of a interesting yield product.

Additionally would like to ear your comments regarding eventual fixed rate CDP USDA loans opportunities namely with tokens like LBTC and stETH on BASE L2.

Best regards,
Pedro Lopes

8

Thanks for your point here!
My main concern regarding a gold tracking product is around the possibility to offer one in a fully synthetic way and in a way that remains scalable. I do also agree on the need for such a product, but if there’s one thing that the last years prove is that building a stablecoin without holding a centralized stablecoin behind (or a tangible asset in reserves) is really complex if not impossible to do at scale with a stable peg.
We could think of a mechanism where the asset tracks the price of gold backed by gold futures in a way. We’ll think of a mechanism around this!

9

The buyback price will be static once the final computations have been run. We could however vote later on to update this buyback price based on the evolution of the token treasury value. And yes, it’ll depend on the ratio between treasury value and token calculation.
The ANGLE token has no burn mechanism per se, and as the contract is immutable, no burn can be implemented in the short term. We could however choose to send ANGLE tokens to a dead address if needed.

No plans so far to launch new yield products though, there is currently an accumulation of such products in DeFi and beyond stUSD we’re having a hard time finding a product with which we could be differentiated like that.
As for new fixed rate loans, idea is now to concentrate all borrowing activities around USDA on platforms like Morpho. While we do see the value in fixed rate loans, it’s also not been a significant demand unlocker for the protocol, especially when we launched our borrowing module back in 2022.

10

Re: Euler hack : I agree veANGLE holders already got compensated. I think the current proposal makes sense.

Re: Strategy : congrats on the B2B integrations! Exciting stuff! Hopefully this will open some other B2B opportunities :slight_smile:

Re: seeding a 5M 1% concentrated pool : maybe i’m misunderstanding this but wouldn’t it be making the price more “stable” around the redeem price? Wouldn’t it make more sense to have a reclaim function on some contracts, that one can call, rather than seeding a pool? My reasoning is : if I sell $1M worth of Angle on that pool, sure it won’t move much, but then if someone comes in and wants to buy $1M worth of Angle, it will not impact the price either. Maybe I’m mistaken in my understanding of such pools though.

11

Good point on this!

The tradeoff with seeding the pool is that it’ll be automatically integrated by all aggregators, meaning anyone will be able to access it seamlessly.
The effect of having a reclaim function can be mimicked I guess if the ANGLE tokens swapped by people are regularly recovered to be put elsewhere, meaning people selling do not create liquidity for people looking to buy.

12

This, or we can work with a reclaim function and let me arbitrage it :rofl:

More seriously, I just wanted to point this out. I’m not planning on selling and I just want to know we are not hindering the upside on the Angle token :slight_smile:

I think people selling at their tokens will be more or less informed and will probably call the redeem function directly. Or, we could work with some solvers on cowswap / odos to let them know all about it too (similar to the Transmuter?).

13

Great proposal!
Best value investment in crypto atm.
Discord server is not very active. Are there any interest in starting a telegram channel for more active discourse on Angle token and protocol?

Best regards Kim

14

By experience, I know that this is something which very often ends up being super time consuming

15

Well, congrats on the upcoming B2B integrations. Full support on the buyback proposal. Sad that there is no yield product expansion. I think there is more that can be done on yield offering that makes sense to this protocol. Curious about the FX developments.

1 Like
16

I will add my concern that the sold angle needs to be removed from circulation, or it isn’t actually a buyback, and it will cap the upside movement of the token. we want a pool on the downside, but not such thick liquidity on the upside. It honestly would be better to use a simple redemption contract that can be changed as the value of the reserves change, and avoid using uniswap at all, unless we want to seed some liquidity just to make trading easier for market participants. Or a combination of seeding liquidity, and having the treasury do actual buyback operations when the token trades below RFV for a certain period of time, and actually burn the tokens (send to zero address).

17

I agree with this, and I think we can define a threshold of ANGLE tokens in position above which the position should be rebalanced into only USDA. Could be something like 5m ANGLE: if the position has more than 5m ANGLE, then it should be pulled and rebalanced to a single sided USDA position.

This way we limit the downside, but remove the cap on the upside + reduce the effective ANGLE supply.

19

Following the vote of the proposal on Snapshot and an onchain governance vote to move onchain contracts ownership, the protocol has

  • performed an airdrop (available on Merkl) to veANGLE holders for an amount of 874.2k USDA
  • consolidated the balance sheet of the protocol (by removing the Arrakis liquidity positions of the protocol).

As it stands, the total treasury behind the two stablecoins sit at a value of:

  • $4.546m for USDA
  • 3.061m€ for EURA
    These treasury values vary in real time as the protocol is making profit and distributing its revenue.
    As the EUR/USD rate evolves continuously, and in order to avoid leaving the protocol under-collateralized due to due an over-estimation of the EUR/USD price and hence of the global treasury value of the protocol, we’re using for the EUR/USD value a conservative value of 1 (lower than the lowest observed since the start of the year), which would make for a total treasury value for the protocol of $7,607,000.

The ANGLE circulating supply can be simply found here by doing the difference between the total supply and the balance in the Angle Distributor, Governor Multisig and Labs Multisig contract.
As such the total ANGLE supply is 486,510,000 ANGLE tokens.

With the computed treasury value of $7,607,000, this makes a price per ANGLE token of $0.01563 per token.

Next steps are to:

  • buy any ANGLE token above this price on DEXes
  • seed an ANGLE-USDA liquidity pool on Uniswap with a limit order at this price of $0.01563.
  • As mentioned in the proposal that was voted, the pool will not be seeded with the full treasury of the protocol but rather with a smaller amount to be topped up regularly. Pool will also be regularly rebalanced to remove the ANGLE tokens sold from the circulation (by sending them to the governance multisig)
20

Update:

  • the single-sided USDA liquidity position was created on UniswapV4 with 4m USDA
  • in order to get a tick spacing which was small and granular we had to go with a 0.3% pool.
  • the position was transferred to the guardian multisig of the protocol which will have the ability to regularly rebalance its holdings
21

Did the merkl airdrop of USDA to veANGLE holders include those holding sdANGLE? or will sdANGLE holders need to work with StakeDAO to secure their share of the distribution?