Token listing: cMETA / vMETA

Just opening this thread to discuss the creation of a Serum market for cMETA and vMETA. This will allow current and prospective investors to be able to access liquidity. It also has benefit in offering a traded price for cMETA which can serve as the net asset value (NAV) of the treasury (though until we have sufficient liquidity the price will not be very informative and likely very volatile)

As already discussed on discord, having a traded token also means that the treasury can capture a discount/premium in cMETA and mint/burn tokens to capture it, though I would wait before engaging in this with the treasury to see how liquidity plays out at first

A potential drawback is the likely high volatility / low volume especially in the first period after listing, though I guess this is bound to happen sooner of later

4 Likes

Agreed, I would expect extreme volatility, and probably on the upside. I doubt many early investors are looking for a quick cash-out given the nature of the DAO structure, and an initial rush of buyers who don’t understand the DAO might try to profit thinking it’s like a ICO.

While I think it would be best for current META holders for the treasury to capture some of the mispricings that will occur, if the price gets really out of wack I might sell some of my Meta and buy back once the pricing stabalises around NAV. not that I hold a significant stake or anything.

1 Like

To make the value of cMETA strictly pegged to NAV it’s necessary to set a claim mechanism of the proportional value in $ of the deployed assets, this way there will be arbitrage opportunities, otherwise buying tokens to burn will be strongly dependent to treasury funds

@PorcoRosso agreed, anyone can trade the arb of course (though it’s an “arb” only for the treasury, for everyone else it’s more a bet that the price will go back to the NAV eventually)

@MauroG when we were discussing the token dynamics we briefly discussed this but ultimately decided against it. For one, the treasury holds illiquid assets which are not trivial to value on a redemption. Moreover, this could exacerbate some market dynamics which ultimately wouldn’t benefit the DAO in my opinion. Especially in the beginning, I don’t see cMETA not being pegged to the NAV a big problem. Some volatility is to be expected and if the gap is wide enough anyone could trade it without necessarily having the treasury stepping in. If this is a discussion we want to pursue let’s open another thread as I feel this is something we need to evaluate properly and should have a broad support before changing it

In terms of costs, creating a new market on Serum costs around 4 SOL per market

But if it’s not pegged to the NAV then what gives value to cMETA?
If this is not to be discussed in here, I don’t really see the point of this thread. A market for cMETA and vMETA has to be created at some point and volatility is to be expected since there is always a phase of price discovery where the market decide the right price for an asset…

Not having a peg doesn’t mean that cMETA has no value. cMETA remains the ownership token of MC, if there is a wind-down or distribution of dividends then that would still be to the benefit of cMETA holders. A on-demand redemption mechanism is very tricky and not optimal in my opinion, funds can be distributed in many other ways (eg DAO could vote to give back $100k to holders)

Having the token listed and having the redemption mechanism are linked but not necessarily dependent on one another, hence why I suggested opening a separate thread.

1 Like

I think the listing of the token is a major step for the DAO, therefore we must have the house in order before we make it.

The statutory role of treasury does not bother me too much, because in case of major gaps between NAV and trading price - in our very decentralised world - there are a number of subjects who could step in (I would consider doing it!).

The issue that worries me the most is the mark-to-market of illiquid instruments / unrated liquid instrument in the DAO treasury. Right now, if I am not wrong, the treasury gives no value to illiquid instruments (e.g., VC investments) and certain “exotic” liquid instruments it does not cover. This issue results in the NAV being understated. How do we make sure that people not actively involved in the DAO understand and appreciate this technical issue? Until this issue is solved, I am not sure I want to list the tokens…

2 Likes

Sure but where the value of cMETA comes from must be clear before listing it, otherwise there will be no incentive for people to buy it. So if you want to create a separate thread to discuss it I’ll be more than happy to move the discussion there, but as I said it must be sorted before listing, otherwise cMETA will have no value which will imply people will just sell it and nobody will buy it

I agree with this last statement 100%. The technical issue is very important! Knowing and showing the true value of the treasury is essential. If it can not be done in the current format at least share daily in discord with the breakdown before solution is found. Maybe a weekly/monthly update about treasury and big deals/moves made. This would keep the community aware of the situation at all time with transparency. Doesn’t have to be long, just key details for % of portfolio through farming, token selection, and VC etc.

@MauroG The value of cMETA is not only in the pure assets held by the MC. You are judging the project essentially. Do you believe long term in the management and the value of the assets? Governance in general, from rewards to voting mechanism will impact the valuation of the cMETA asset. The guidance of the team and key members of the community will play a part as well. Add all this to the “perception” of the crowd, the price people will pay to hold part of the circulating supply of coins.

@EliteMentality @clarosam agreed, this is a key factor. Most of the treasury assets can be seen on Sonar Watch. What is missing is Hubble which is not yet supported, and of course the VC investments.

We are currently redesigning the website and we’ll include an “analytics” section with a similar breakdown but also include illiquid/unsupported investments. In particular, for VC investments we plan to mint a commemorative NFT representing the investment, and keep it at book value until there is reason to do remark it (or if for example we receive the tokens and there is a traded price).

The full breakdown of existing pools (like Sonar Watch does) is not easy to do directly so while we wait for the Sonar Watch APIs (they said they are working on it), we will include the SW dashboard and integrate with what’s missing. Overall this should be finished in the next couple of weeks

1 Like

Keep in mind that cMETA has no governance power, its only use is the reflection of the value of managed asset, so if there isn’t a mechanism in place for it there will be no reason for people to buy it.
All the factors you mentioned apply more to vMETA, which is the governance token

1 Like

Just to be clear I think that it is important to be able to see the exact value of the assets that cMETA is tied to, which is why the effort of the team to fix this is important.

I belive the cMETA assets are in the hands of the vMETA community. Importantly the community can directly influence the assets in the cMETA. So although there is no governance power by holding cMETA the assets that represent cMETA is affected by it.

I believe cMETA allows a user to invest not just in the current assets but the management of the community. The difference in my opinion of the two is:

cMETA = Token backed by actual assets and semi-pegged to them! In theory can go to 0 but only if all assets go close to 0. Allows users that are interested in the project to partake without having to involve themselves in the governance of the project. They do however trust the governance and community in place with their money to manage a portfolio in the SOL blockchain, something that due to knowledge or time they can not do.

vMETA = A token tied to no actual value other than people’s perceived value. This token in theory can go to 0 cent when the asset is trading highly (obviously not the same in practice due to demand dynamics). This token IMO has been designed for the extra invested people in the community that want to help the community with the guidance of the team. These members are people with good experience and knowledge who help the growth of the project. People who could want a certain amount of control of the project can try and acquire high amounts of vMETA. The team of course are vMETA holders too and there is the possibility of grants given to projects.

It is reasonable to think that some people will buy vMETA in order to try and profit off the growth of the project, becoming “idle” users who do not participate in forums and governance. They could do this simply because they think there is the most value in vMETA vs cMETA at current prices or due to perceived value in tokenomics. This will be an interesting dynamic that I can not wait to see play out over time.

The key differences to me is that cMETA is backed by assets and if the price of the token fluctuates too much from the assets the team can manipulate the supply of the asset by supplying more cMETA when it’s price is too high compared to assets or by buying it using funds from treasury. vMETA in theory can fluctuate as much as it wants and should be more volatile. Just my 2c, sorry for rant haha.

What if we calculate recent NAV and based on we fixed the cMeta and vmeta price and then we put a big buying order at that calculated price point. so if anyone want to sell he may sell at that price. Now after 24 or 48 hours or any random time but not more than 48 hours, we evalute again NAV and based on that we cancelled earlier order from market and put new order based on current NAV. so if some one holding this cmeta from 2 days and in between if price is decreased or incresed of trseary then he may book profit or loss on the order that tresury put on market. let me know guys what you think about it.

My Quick take:

  1. We shouldn’t list until we can provide a clear and realtime analysis of NAV. I like the VC NFTs to illustrate the holding. Sonar watch is not sufficient, so wishing good luck to the team and their dev efforts. The result should be front and center on the metacollective homepage so newcomers clearly understand what they are buying/selling.
  2. I’m on the side of the treasury not taking too active role in providing liquidity. I would maybe just implement some buy/sell orders at 80%+/- estimated NAV in case the market goes wild, for the next month or so.
  3. Likewise I don’t think a redemption mechanism really adds value. If you want to redeem, just sell your tokens.
  4. Dividends look interesting, but don’t make much sense practically as unlike a company, we will always have some profitable ways to deploy the funds (farming etc). Furthermore as a community we want to see NAV climb as high as possible.
  5. Lastly - an important conceptual issue to address: who will be providing liquidity? who will be selling especially? I feel the market will be very misbalanced and we won’t see any clear answer. So something to think about before we list.

vMeta will be very interesting to watch. I have absolutely no idea how to start thinking about pricing voting rights… Here is a parallel discussion (by the great Matt Levine) about index fund voting rights and the idea of splitting it as META has: https://archive.fo/mMMcx might spur some ideas.

If I understand you correctly, the main problem I see with your suggestion is that you are asking the Metacollective treasury to implicitly take a view on the value of the assets every 24/48h. VC investments in particular are really hard to value. This also wouldn’t provide the kind of realtime liquidity the crypto space is now used to.

Maybe it’s just me because I don’t understand correctly the mechanism, but I find the treasury buying up cMETA a very inefficient and exploitable mechanism:

  • where does the treasury finds the funds to buyback from the market up to the point cMETA is worth the NAV? Those funds won’t be infinite either.
  • If there is a guarantee the treasury will always bring the value back to NAV then people can simply buy cMETA when sits below NAV and sell when it’s at NAV, draining slowly but steadily MC funds
  • If we don’t want to have cMETA pegged to NAV, then I simply don’t see why people should care how well the managed assets are performing since there will be no way to take advantage of that. The whole point of buying a token that represents a pool of tokens is that it reflects the value of the pool, otherwise there is no point in buying/holding it.
  • Value of illiquid assets like VC investment isn’t a problem since if they’re not available to the treasury as locked then they shouldn’t be redeemable, because by the time the treasury has access to them they could very well have gone to 0
  • The problem of valuation will be for NFTs, in that case an oracle will need to be developed if we want to start investing into NFTs as well.

Some very good questions! I look forward to discovering the true answers over time. I’ll take a stab at it though.

The treasury potentially running out of cash/stablecoin in the future is a very important point and needs to always be tracked. For me it highlights why the fund will always need to keep cash or stablecoins in hand in order to fulfil these obligations (exception perhaps if there was a recent succesful buyback). Do not forget that if the opposite affect happens and the assets are lower than the price of the token the team resupply the treasury through token sale but, that doesn’t mean the treasury is protected as they could invest the extra capital before needing buyback.

In terms of buying and selling the token to manipulate the buy backs I don’t think some one could do this by buying and selling. An individual would only be able to buy less than is being sold in the market for the team to trigger the mechanism. If the individual is buying more than the market is selling the price will go up and the mechanism will not be triggered. There could be insiders or people who get lucky buying just before the buy back, but the incentive to be these people will often lead to higher demand when the token is below asset price, thus meaning that instead of the team stepping in with buybacks, retailers will step in with actual demand. This mechanism can however be exploited by a large wallet looking to offload a big position. This is the security offered by cMETA being semi pegged and is a very important function in taking risk off the table for investors large and small. It is why in my opinion cMETA must be semi-pegged.

Thanks everyone for sharing your opinions! Really appreciate seeing this much engagement. I will make a few posts to avoid too much text.

A few things I would consider:

@MauroG

If there is a guarantee the treasury will always bring the value back to NAV then people can simply buy cMETA when sits below NAV and sell when it’s at NAV, draining slowly but steadily MC funds

this is not correct. First when people buying below the NAV / selling above is itself a force behind keeping cMETA around the fair value (as was mentioned above, if the gap is sufficiently large anyone could try to capture it).

Moreover, the treasury never loses money when it does a buyback/new issuance. That’s because it burns o mints new cMETA in doing so (the tsy is the only one capable of doing this, hence the only one able to capture the arb). To make a concrete example:

Imagine the treasury’s assets are worth 100$ and there are 100 cMETA. Now there are 10 cMETA on offer at 0.50$. The tsy can buy those for 5$ and burn them. There are now 95$ in assets and 90 cMETA meaning the remaining cMETA holders benefitted from the arb (the fair value of cMETA was 1$ first and 1.056$ after the trade)

The NAV has some uncertainty around it (coming from illiquid investments), then before the tsy can act the gap needs to be wide enough, and inside it other people can trade.

2 Likes

@MauroG the fact that there is no redemption mechanism, doesn’t mean there is no implicit peg. Imagine cMETA trades at ~0. I would happily buy all of them knowing that when there is wind-down or dividend, I will receive all of it. What if it trades at 10x the fair value? I would happily sell them there and buy it back when it’s lower as the price is not supported by the fundamentals. In other words there is a “soft peg” from the fact that any proceed from the wind-down of the DAO or other distributions will benefit only cMETA holders.

On this point, @EliteMentality mentions some dynamics which I mostly agree with. However, I would add that even the tsy buying back it’s not a guaranteed mechanism. At any point in time, we as DAO members, have to decide whether the best use of the cash is to buyback some cMETA. This is a function of the gap cMETA-fair value, outside opportunities, and also general trading activity by insiders and externals as well

1 Like

Finally I pretty much agree with @PorcoRosso here. As for liquidity, agreed probably there won’t be a lot of selling especially at the beginning. Will be interesting to see how liquidity develops for both cMETA and vMETA, and at which levels

@Sagar98253 I think to have continuous auctions every 1/2 days would not be ideal for similar reasons that a redemption mechanism is not optimal and can create distorting dynamics