FAQ
Frequently Asked Questions around ImpDAO
What is the unique selling point of ImpDAO?
ImpDAO will be a decentralized investment fund but also a medium of exchange as well as a store of value. Leveraging the Olympus tech to bootstrap initial liquidity, ImpDAO will focus on supply growth through rebases and bonding as well as price appreciation from an active deployment of the treasury into investment opportunities in the market.
After the Impgnition phase, we will pause bonding and open it only when we are ready to take more capital in. Our treasury will always be optimized and will grow as we grow. We don't plan to take more funds than we can manage. This way, holders of IMP can likely achieve superior returns to most other fractional reserve currencies.
Is IMP a stablecoin?
No, IMP is not a stablecoin. Rather, IMP aspires to become an investment asset with currency-like features backed by an actively utilised treasury. Similar to the idea of the gold standard, IMP provides free-floating value its users can always fall back on, simply because of the fractional treasury reserves IMP draws its intrinsic value from. However, unlike gold standard currencies, ImpDAO has the ability to trade into and out of different assets to provide additional treasury growth and price appreciation.
IMP is backed, not pegged.
Each IMP is initially backed by 50 DAI, but not pegged to it. The initial backing of 50 DAI will change over time as treasury assets are actively utilised to generate returns for the protocol thereby likely increasing the current backing value above 50 DAI in the long run. IMP could always trade below or above it's backing value but we will make sure we don't stay long below backing by implementing smart buyback strategies and in the proceed increasing the backing value by buying IMP below its intrinsec value.
How does it work?
At a high level, ImpDAO consists of its protocol managed treasury, protocol owned liquidity, bond mechanism, and staking rewards that are designed to control supply expansion.
Behind the scenes, the protocol managed treasury is actively invested into opportunities after careful evaluation by the Impvestment Committee to generate returns for the protocol and its owners, the IMP token holders.
Why is PCV important?
Protocol controlled value describes the funds in the ImpDAO treasury, IMP can only be minted or burned by the protocol. This also guarantees that the protocol can always back 1 IMP with the current backing value. You can easily define the risk of your investment because you can be confident that the protocol will indefinitely buy IMP below the current backing value with the treasury assets until no IMP is left to sell. You can't trust the FED but you can trust the code.
As the protocol accumulates more PCV, more runway is guaranteed for the stakers. This means the stakers can be confident that the current staking APY can be sustained for a longer-term given that more funds are available in the treasury.
Furthermore, ImpDAO's investment strategy will also adapt to the PCV, available opportunities and current macroclimate. In the long-run ImpDAO aims to scale the treasury's position automatically based on the current PCV. Until final implementation, treasury positions will be adjusted manually by the Impvestment Committee.
Why can the market price of IMP be volatile?
It is extremely important to understand how early in development ImpDAO is. A large amount of discussion has centred around the current price, treasury asset portfolio and their expected as well as discounted returns. The reality is that multiple effects influence IMP initially. The network is currently tuned for expansion of PCV, which when paired with the staking, bonding, and yield mechanics of ImpDAO, result in a fair amount of volatility.
IMP could trade at a very high price because the market is ready to pay a hefty premium to capture a percentage of the current market capitalization. However, the price of IMP could also drop to a large degree if the market sentiment turns bearish. We would expect significant price volatility during our growth phase so please do your own research, whether this project suits your goals.
It is important to note that ImpDAO will be a treasury focused protocol and will enact monetary policies to avoid a significant decoupling from the backing price through monetary policy. Too many forks have traded at large multiples during the latest uptrend only to come crashing down to their backing at the expense of all stakeholders - ImpDAO will be different.
What is the point of buying IMP when it already trades at a very high premium?
When you buy and stake IMP, you capture a percentage of the supply (market cap), which will remain close to constant. This is because your staked IMP balance will also increase along with the circulating supply. Therefore, you are capturing a larger percentage of the market cap when buying IMP during a lower market cap. The underlying expectation of a buyer, in that case, would be that an IMP's current backing value will continue to increase which, in turn, would have a positive effect on price and market cap. As ImpDAO is actively utilising its treasury, backing value is very likely to increase.
What is a rebase?
Rebase is a mechanism by which your staked IMP balance increases automatically. New IMP tokens are minted by the protocol as a percentage of the total supply. A large portion of this rebase goes to the IMP stakers.
What is the reward yield and rebase rate?
The rebase rate is the % rate by which the total supply of IMP tokens increases (similar to an inflation rate). The reward yield is the percentage by which your staked IMP balance increases on the next epoch. The reward yield is different to the rebase rate as most of the newly minted IMP tokens during the rebase are distributed to the smaller number of IMP stakers (assuming that % staked is < 100%). You can find this number on the ImpDAO staking page and the hellish overview.
What is APY?
APY stands for annual percentage yield. It measures the real rate of return on your principal by taking into account the effect of compounding interest. In the case of ImpDAO, your staked IMP represents your principal, and the compound interest (reward yield) is added periodically on every epoch thanks to the rebase mechanism.
One interesting fact about APY is that your balance will grow not linearly but exponentially over time! Assuming a daily compound interest of 2%, if you start with a balance of 1 IMP on day 1, after a year, your balance will grow to about 1377.
How is the APY calculated?
The APY is calculated from the reward yield using the following equation:
It raises to the power of 3 because a rebase happens 3 times daily. Consider there are 365 days in a year, this would give a rebase frequency of 365 * 3 = 1095.
Reward yield is determined by the following equation:
The number of IMP distributed to the staking contract is calculated from IMP total supply using the following equation:
Note that the rebase rate and therefore reward rate are subject to change by the protocol.
Why does the price of IMP become less relevant in long term?
As illustrated above, your IMP balance will grow exponentially over time thanks to the power of compounding. Let's say you buy an IMP for $500 now and the market decides that in 1 year time, the intrinsic value of IMP will be $100 given the initial backing value of 50 DAI (c. $1) plus the return generated on treasury assets over the period proportional to each token. Assuming a daily compound interest rate of 1%, your balance would grow to about 38 IMP by the end of the year, which is worth around $3,278. That is a cool $2,778 profit! By now, you should understand that you are paying a premium for IMP now in exchange for a long-term benefit. Thus, you should have a long time horizon to allow your IMP balance to grow exponentially and make this a worthwhile investment.
What will be IMP's intrinsic value in the future?
There is no clear answer for this, but the intrinsic value will be determined by the treasury's investments and subsequent performance. For example, if the treasury generates a 100% return on its assets, it would automatically guarantee to back every IMP with 100 DAI. Depending on the future DAO the current backing value could also be increased artificially decoupled from treasury returns. For example, if the DAO decides to raise the price floor of IMP, its intrinsic value will rise accordingly.
Is ImpDAO Audited?
ImpDAO is currently unaudited but KYC'd with Assure DeFi! It is a fork of Olympus DAO on the Fantom Network, audits will occur after launch. Stay cautious and DYOR!
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