Treasury Split

Liquid stables/illiquid RWAs

Designing a stablecoin backed by real world assets that do not have existing liquidity to tap into is a new design space. While there is no perfect answer it is possible to learn from user behaviour of existing stables, observing staked/unstaked ratios, % of supply being redeemed during panic moments, correlationg of Mcap and yield, type of utlity that can be designed etc.

In light of all these data points this is the tentative structure we intend to maintain. Increasing allocation from 15% to 60% as the treasury grows. Idea is that as we scale we continue raising awareness amongst holders about the nature of the currency and its backing with the intention that over time they are comfortable holding and using K1 knowing the robustness of the collateral backing instead of seeking redemption for the underlying liquid backing. Looking at the peak redemption figures for USDT/USDC/USDS they have not gone beyond 25% even on the worst days (LUNA crash, SVB collapse). While their holders know these stables have liquid backing so the bank run on them is fairly contained, we need to be prepared for tougher conditions. The answer as of now lies in being able to effectively communicate the value prop of this stable, ensure high quality of energy projects acting as collateral, create enough utility on & off chain, build deep liquidity against a variety of high quality crypto assets and continue providing strong yields.

With most stables you observe that APY trends downwards as they scale Mcap but we expect the opposite to take place as we are able to allocate a bigger portion of our treasury to energy projects. With increasing APY the increase in looped APY also increases more with lesser leverage as the difference between APY and borrowing cost increases. Fun times ahead.