This proposal is to present defined Range Token parameters for the purpose of gathering community and investor feedback, and ultimately finalizing the Range Token spec so that it can be turned into an actionable vote.
- Proposed settlement on FOX range token with the following specs:
6 month expiry
- Range of $0.4 - $1.0
- Locking 2.5M FOX to raise $825,000 in stables
- OTC sale
The motivation for treasury diversification with Range Tokens was covered by Josh and others in this thread.
This post is a continuation of the “Mint and Sell Range Tokens for Treasury Diversification” post written by . The motivation of the original post was:
This discussion is just to start the conversation, and start to hammer out some details of what our Range Token may look like. With more details, we can better understand if this is a good idea for the ShapeShift DAO.
The original goal of: “understanding if this is a good idea for the ShapeShift DAO” appears to have been accomplished. With demonstrated community support on the polls posted by here - it appears that the ShapeShift DAO believes that treasury diversification fits in the DAO’s goals.
The motivation behind this specific post is to discuss and finalize the exact details of the FOX Range Token, so that this proposal can be turned into an actionable vote. A straw man Range Token is presented in “Specifications”, with the goal of having the ShapeShift DAO being able to provide feedback and gather feedback from strategic investors.
As a refresher, basic Range Token functionality is covered in this medium article.
A spreadsheet with full range token pricing is here. The proposed Range Token has the following specs:
- Lower price bound of $0.40 FOX/USD. Each Range Token is worth 2.5 $FOX at this price.
- Upper price bound of $1.00 FOX/USD. Each Range Token is worth 1 $FOX at this price.
- This is an adjustment from the original poll results. This adjustment is being proposed for a few reasons:
FOX/USD price has moved some since then.
- A shorter contract life is also being proposed, which allows for a tighter range.
- The current available funds in the ShapeShift treasury necessitates having more capital efficiency (tighter range).
The FOX/USD price today is ~$0.70. This range represents a ~43% move from current prices to each of the bounds.
This means that at expiry, if the FOX/USD price is at or above $1/FOX and the Range Token debt is still outstanding, the ShapeShift Treasury will have sold the underlying FOX for $1/FOX. If the FOX/USD price is at or below $0.40/FOX, ShapeShift will have sold the underlying FOX for $0.40.
This allows ShapeShift to sell FOX for a higher price at a later date, and also provides the ShapeShift treasury with downside protection in case of a larger than 43% negative move.
This range also seems like it would be attractive to RT investors, as they will still be able to earn yield on their Range Tokens and have a reachable upper bound that would potentially allow them to gain exposure to FOX upside.
- It’s also proposed that the Range Token be sold OTC. This does not entirely agree with all of the conversations surrounding the initial range token discussion, but the motivation for this over creating a public sale is.
It will be easier to reach consensus on Range Token parameters by limiting the market participants.
- Sale participants would be lined up beforehand, which would leave zero doubt about the success of the sale.
- Would act as a pilot project to gauge investor sentiment, which could potentially make for a larger more successful public Range Token offering later.
- This is proven and easier from an implementation perspective.
- It should be noted that any FOX holder could still take it upon themselves to create the same FOX range tokens and a market for these.
- 6 months from the date of vote completion.
- Initially a 1 year expiry garnered the most support in polls, so this an alteration to this is an alteration to that. This is motivated by a few things:
Will allow for more capital efficiency when creating range tokens. We can reduce the amount of FOX required to reach the desired amount of stables in diversification, by reducing this period and “sale discount”, since the yield is annualized.
- Shorter expiry + tighter range play well together.
- With current availability of FOX treasury funds, this could serve as a pilot offering with potentially a larger one happening later once more FOX is available.
Size and Range Token Yield:
35% net yield. Selling each range token for $0.825 with a notional of $1.
, and others in the community have expressed interest in making this a good deal that would be attractive to investors. 35% net yield with additional potential upside on a project of ShapeShift’s caliber, seems like it would be very competitive.
The proposal is to lock 2.5M FOX to mint and sell 1M Range Tokens at ~$0.825, netting the ShapeShift treasury $825,000 in stables. This number is mostly for example’s sake, and definitely need feedback from the DAO about availability of FOX allocation and amount of stables needed.
Benefits for treasury diversification with Range Tokens were covered by Josh and others in this thread.
The desired benefit of this post is to lead to a finalized vote for a range token that we all believe will be beneficial for the ShapeShift DAO.
This proposal includes the proposal to sell these range tokens OTC. The advantages of this approach were discussed in “Specifications”, but there is also the drawback of not explicitly allowing for general market participation.
An eventual “For” vote (after hammering out specs) would be a vote to use FOX to mint Range Tokens and engage in some method to sell the Range Tokens for stablecoins.
An “Against” vote would vote to not take any action in this regard. To leave everything as is.