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Gather around the stream, Otters! Ambassador Ogmi has returned from the Otter Kingdom with exciting news for all of Otterkind!
Summary (TL;DR)
CLAM has a new buyback mechanism when the market price of CLAM is below it’s backing price (USD value of treasury / CLAM supply). This mechanism slows or stops new CLAM emissions, and utilizes treasury rewards to create constant upward price movement until the market price of CLAM reaches its backing price again. Once market price = backing price, emissions begin again and treasury rewards are reinvested.
The Otter Treasury has also been restructured to earn additional yield (which allows for stronger buybacks and higher backing price), and to maximize rewards in Qi for governance power in the QiDAO ecosystem. The intent is for OtterClam to be a major influencer in Qi vault rewards distributions, which could encourage investors to buy PEARL to gain greater influence over QiDAO rewards through OtterDAO votes.
Introduction
There is big news coming from OtterClam and it has a major impact on our CLAM token.
First and foremost, I’d like to briefly review CLAM’s tokenomics and the ongoing developments of OtterClam for context in today’s article. With that in mind for comparison, we can then move into the major protocol updates that have just taken place via OtterDAO vote. These updates should have a positive effect on CLAM, and by extension, OtterClam as a whole.
In my last article, I emphasized how CLAM is a good buy in an uncertain market. Well, this is even more true now. Two CIPs (CLAM Improvement Proposals) have been voted on and passed in the last month that, along with other developments, massively improve the tokenomics of CLAM.
You see, previously CLAM attracted attention through its high APY stemming from elevated emissions (hyperinflation), giving you many more CLAMs than you started with. A buyback mechanism served as a backstop in the event of CLAM dropping to $1 (technically, 1 MAI). At that point, the protocol would use treasury funds to buy back CLAM and burn it, raising the price above the $1 threshold.
These attributes were coupled with a certain amount of price stability from our new, time-locked PEARL chests (if this is new to you, you can catch up ). PEARL chest functionality is unaffected by the updates covered in this article.
There are also a lot of promising developments coming down the pipeline, such as our Otto Genesis NFT Collection which is slated for March (more info on that ), which includes CLAM burning as a function of the minting process. There is also the ongoing construction of the Otter Kingdom in our Sandbox . These developments are still underway and contribute both directly and indirectly to the organic demand for the CLAM token.
Protocol Upgrades
Now that we have gone over the original protocol mechanics, let's talk about the recent upgrades. There are two that are already in place and one more to be deployed in the near future.
Redesigned Buyback Mechanism
The first major upgrade changes how the Otter Treasury interacts with and supports the CLAM token. The old buyback mechanism was fine as an emergency safety net and for some investor peace of mind, but would result in loss of treasury funds if it was ever executed (which it was not, by the way).
This degradation of treasury reserves could have threatened the long-term viability of OtterClam. Furthermore, the "hard" backing at $1 also isn't overly reassuring for any CLAM holder who bought into CLAM above $1 - which is currently all of them. OtterDAO thought that this could be improved upon, and so our Otters took action.
Thanks to , which was voted on by the DAO in mid-January, the Otter Treasury now earns LP rewards with about half of its reserves. , which just passed a vote at the beginning of February, will now leverage these new LP rewards to directly benefit the CLAM token.
Prior to CIP010, new CLAM emissions were quite high, which was the basis for such a high APY for our PEARL chest holders (even with previously high emissions, there are still only about 560k CLAM currently in circulation, because the protocol started from 0 CLAM). Alas, such APY comes at a cost, in the form of dilution of existing tokens. As we mentioned in one of our first Medium , these mechanics were never designed to be sustainable in the long-term. CIP010 represents step 1 in the evolution of the CLAM token.
A “backing price” for CLAM has always existed. It is calculated as follows:
USD value of the Otter Treasury / circulating CLAM supply
Before CIP010 was passed, this backing price was really nothing more than a gauge of how healthy the treasury was in relation to how many CLAMs were in circulation. After passing the vote, CIP010 removed the “hard backing” at the $1 mark completely, and instead moved to a “soft backing” at the actual backing price. What does this mean for CLAM?
You can see on our Dashboard that the backing price of CLAM is currently around $4.85. That is higher than the current market price of CLAM at the moment (which is about $3.60). When the current CLAM price is lower than the backing price, new CLAM emissions stop, and yield rewards from the Otter Treasury (new rewards, not underlying principal) are used solely for buying CLAMs and passing them along to PEARL chest holders and stakers (if you're unfamiliar with the relationship between CLAM and PEARL, there's a helpful article explaining that
This buyback mechanism creates protocol-driven buying pressure, continues to reward long-term holders (although at a reduced rate compared to when they received new emissions), and does not degrade existing treasury funds.
The buybacks will continue until the CLAM price is above the backing price, at which point CLAM emissions will resume, and Otter Treasury rewards will be reinvested instead of being used to buy more CLAM. The higher the current CLAM price is above the backing price, the higher the new CLAM emissions will be until the standard emission rate is achieved (which provides higher APY to stakers & PEARL chest holders).
To prevent undue selling pressure in the future, emissions in general will not return to prior levels. Take heart though! Even without emissions, and with only CLAM buybacks being passed to long-term holders, the APY for the 180-day chest is still about 320% today. That’s very good for a token that is currently experiencing sustainable upward movement by the protocol’s design, without even factoring in outside buyers.
This development offers even greater peace of mind than the original buyback protocol, because the Otter Treasury is now optimized to reach, and then maintain the backing price, and can do so indefinitely. There is now no better time to buy CLAM than when it is below its backing price.
SuperCharging Treasury Yield, Focusing on Amassing Qi
The second proposal that passed, , only adds more strength to the new buyback mechanics set forth in CIP010. Remember that about half of the Otter Treasury is currently producing yield. Well, CIP011 is putting the other half to work. In addition, OtterClam is restructuring the treasury to earn maximum rewards in the QiDAO ecosystem (more on that later).
Our original treasury reserves were composed almost exclusively of MAI, FRAX and CLAM. We maintained MAI/CLAM and FRAX/CLAM liquidity pairs on QuickSwap and SushiSwap, respectively, so our Otters can purchase more CLAM. CIP008 moved all of our MAI not providing liquidity on QuickSwap into the MAI/USDC farm on QiDAO to earn Qi rewards (currently around 14% APY). CIP011 took that a step further, converting all FRAX into QI and locking that Qi up on QiDAO for 4 years. This locked Qi will be perpetually relocked. This boosts the voting power of that Qi and entitles us to dividend distributions.
Our previous FRAX/CLAM LP wasn't getting much attention, so we sent those funds to the Qi/WMATIC farm on QiDAO for higher rewards (currently sitting around 70% APY). We will incorporate a Qi bond where Otters can contribute Qi to the treasury in return for discounted CLAM, and that new Qi will also be locked up for rewards and voting power.
This puts the entire Otter Treasury to work earning a very good yield, which can be used to perform more buybacks when CLAM is below backing price, thereby increasing APY for all stakers and raising CLAM’s price at a faster rate. When CLAM is above the backing price, those rewards will be auto-compounded to grow the treasury and increase the backing price for a future rainy day.
Future Developments
Now, there's one more piece of the tokenomic puzzle that I haven't mentioned yet, and it's a big piece. Our Otto Genesis NFT Collection drops next month, along with our very own NFT marketplace called PAW Market. The NFTs will be minted with CLAM and that CLAM will be burned. There will also be breeding of Otto NFTs and customization options, all requiring CLAM.
When released, all of the new NFT activity in the PAW Market will create a constant burn on the supply, both raising price and backing price. With the circulating supply being so low at the moment (560k CLAM), these impacts could be significant.
Conclusion
From the token’s humble beginnings just 4 months ago, the brain trust at OtterDAO is creating a truly unique product in the DeFi space. Our new buyback mechanism from CIP010 creates consistent buying pressure on the CLAM price.
CIP011 ramps up these buybacks with additional treasury yields, along with giving OtterClam a true niche position in the Polygon ecosystem. Finally, the CLAM burning mechanism from our impending PAW Market will put even more upward pressure on market price.
These upgrades and the innovative nature of the OtterDAO community ensure a very bright future for the Otter Kingdom. If you'd like to know more about us, stop by our Discord with the link below and check us out!
Raft together Otters!
app.otterclam.finance
Discord: discord.gg/gRJDX5NXFA
www.reddit.com/r/OtterClam/
