Proposal: Mint Up To 175k UMAMI To Enable A 1m USD Fundraise, Umami Team Vesting Contracts & Deeper UMAMI Trading Liquidity
Vote on Snapshot here. Voting begins on Friday, April 29, at 12:00 am UTC & ends on Sunday, May 1, at 12:00 am UTC.
SUMMARY
The Umami Finance team is asking the community to approve the minting of up to 175k UMAMI to enable an OTC fundraise via a Dutch Auction, provide the core team with 12-month UMAMI vesting contracts and deepen UMAMI trading liquidity.
The auction will seek to raise up to 1 million USD in assets for the Umami treasury to cover operational expenses (OpEx) for the remainder of 2022, including the cost of a rigorous code audit and Umami’s upcoming DeFi product launches.
The newly minted UMAMI tokens will also be used to cover current & future team token compensation and to enhance liquidity for Umami’s Uniswap v3 LPs.
The Umami team has not yet received 12-month UMAMI vesting contracts. Umami has used nearly all of the UMAMI in the treasury for LP liquidity, asset swaps with partners, compensation for contractors and small OTC swaps for needed funds.
The OTC capital & newly-minted UMAMI will support some of Umami’s most critical initiatives, including:
- Covering the cost of a thorough code audit by a reputable auditing firm
- Compensating the full-time & contracted devs who are building Umami’s upcoming DeFi products & revamped Front-End
- Providing UMAMI token allocations for current & future team members to maximize the team’s incentive alignment with the protocol
- Increasing UMAMI token liquidity & building new UMAMI-paired Uni v3 LPs
With this in mind, the Umami team proposes the following allocations for the up to 175k minted UMAMI:
- Approx. 50k to 75k UMAMI for an OTC capital raise of ~1m USD via a Dutch auction at the highest possible price per UMAMI token.
- Up to 75k UMAMI tokens to be kept in the Umami treasury to cover current & future team compensation.
- Up to 50k UMAMI to deepen liquidity for UMAMI-paired LPs on Uni v3.
OTC investors will be compensated with staked cmUMAMI on a 6-month linear vesting schedule.
The OTC fundraise will enable Umami to execute on its ambitious plans on Arbitrum, including its upcoming high-yielding USDC Vault and other DeFi products. The Umami team is confident that any near term dilution to existing holders from the raise will be offset by the following benefits:
- Increased yield on mUMAMI, cmUMAMI & stARBIS due to greatly enhanced fee revenue from upcoming DeFi products
- Heightened demand for the UMAMI & ARBIS tokens & the projects’ DeFi products following a thorough security audit
- Greater liquidity for UMAMI & increased fee revenue from Umami-owned Uniswap v3 LPs
With these benefits in mind, the Umami team encourages the community to vote “YES” on this proposal.
MOTIVATION
Umami is building multiple new DeFi products, many of which will launch as soon as May. The team believes Umami’s product launches will greatly enhance the value of the ARBIS & UMAMI tokens.
The upcoming DeFi products include:
- A USDC vault tokenized via the ERC-4626 standard that is expected to generate 30%+ APR for depositors.
- In-app integrations of Socket & Banxa APIs to enable users to seamlessly deposit into Umami products from any chain or fiat accounts in a single txn.
- Multiple new autocompounders covering farms & LPs for Dopex, Sperax, JonesDAO and Balancer
- A growing array of highly capital efficient, low slippage LPs on Uniswap v3 to fill liquidity gaps on Arbitrum & generate trading-fee revenue for Umami’s treasury
At the same time, Umami is making significant investments in other critical areas of the project, including security, transparency, governance & regulatory compliance. They include:
- Hiring a highly-respected auditing firm to conduct a thorough code audit
- Completing a full transition to a DAO model
- Establishing itself as a legal DAO entity in a DeFi-friendly jurisdiction
- Bringing on a fully-doxxed Legal Advisor to guide Umami on all compliance questions
- Developing dynamic calculator APIs to provide real-time data on all of its products
The Umami team expects that these investments will generate very significant benefits for UMAMI & ARBIS holders, including higher passive income for stakers, improved smart-contract security, and heightened visibility for the project.
A Runway For Growth
The Umami team strongly believes that the investments described above will establish Umami as one of the premier DeFi projects on Arbitrum, with commensurate improvements to its market capitalization, protocol revenue & TVL.
To get to this point, however, Umami must invest considerable capital. Major costs include:
- USDC & equity compensation for core team members & contracted developers
- The six-figure USD expenses associated with a formal audit
- Other operational expenses including enterprise-level development & communications platforms
- Additional costs for contracted services including legal council & governance advisory
So far, Umami has relied on small (<350,000 USD total) OTC investments to cover OpEx using available, already-minted UMAMI in its treasury. An additional 1 million USD in OTC capital will provide Umami with a stable runway for future growth.
Improved Security & Visibility
For Umami’s new DeFi products to succeed, depositors must feel confident that their deposited assets will be secure & that they will have a voice in Umami’s & Arbi’s governance. Therefore, a thorough code audit and an accelerated DAO transition are top priorities for Umami.
Further, OffChain Labs, the developers behind Arbitrum, has informed the Umami team that it can provide significant additional marketing support for Umami once it completes an audit.
Improved Liquidity for UMAMI & More Fee-Generating Uni v3 LPs
Umami Finance’s growing Uni v3 LP management platform provides liquidity for partner projects on Arbitrum via capital-efficient Uni v3 LPs, which generate significant trading-fee revenue for Umami’s treasury. Umami’s primary UMAMI-ETH LP is also on Uni v3.
Umami’s current Uni v3 LPs include:
- UMAMI-ETH
- UMAMI-USDC
- ARBIS-ETH
- ARBIS-USDC
- ARBIS-UMAMI
- TCR-USDC
- TCR-UMAMI
- IMX-xIMX
These Uni v3 LPs account for approximately 10% of Umami’s protocol revenue. The team plans to scale this revenue stream dramatically & improve UMAMI-ETH trading liquidity. To do so, Umami plans to allocate a portion of the newly-minted UMAMI tokens to expand its Uni v3 LP platform & enhance liquidity for existing LPs.
Dutch Auction Details
The Umami team believes that conducting its OTC raise via a Dutch Auction is the best strategy for minimizing potential dilution for existing holders.
The specific parameters of the Dutch Auction will not be finalized until the day of the OTC fundraise. However, the general mechanics of the auction are as follows:
- Bidding starts at an UMAMI price well above its current trading price
- The bid price of UMAMI drops steadily; the available allocation of UMAMI in the auction begins to fill up
- Once a price is reached at which all available UMAMI are allocated, the auction ends and all bidders receive UMAMI at that price
The Dutch Auction format creates a strong incentive for bidders to pay the highest price for UMAMI they are comfortable with.
OTC investors will be compensated with staked cmUMAMI on a 6-month linear vesting schedule. This will greatly reduce the potential for sell pressure from increasingly circulating UMAMI supply. Any future mints of UMAMI will also require DAO approval.
Team & Contributor Compensation
So far, in an effort to keep dilution of UMAMI holders to an absolute minimum, the Umami team has not taken any significant UMAMI token compensation. However, it is in the long-term interest of Umami for current & future core team members to have significant UMAMI token allocations to maximize team <> community alignment.
The Umami team proposes that 75,000 newly minted Umami be kept in its treasury to cover UMAMI token comp for current & future team members & contributors.
After the proposed minting of 175k UMAMI, the true total supply of UMAMI will be ~525,000 (Over 90,000 UMAMI are permanently locked in legacy Marinate v1 contract, and are therefore effectively burned). The 75,000 UMAMI that will be set aside for team comp will equal ~15% of total UMAMI supply.
All sizable UMAMI allocations will be held in 12-month linear vesting contracts.
Compensation schedules are still being finalized but the general framework, subject to minor changes, is as follows:
- Executive Chef (Eng): 2.5% of total UMAMI supply
- Executive Chef (Biz): 2% of total UMAMI supply
- Senior Staff (Eng): 1% of total UMAMI supply
- Senior Staff (Biz): 0.5% of total UMAMI supply
- Advisors: 0.25% to 1% of total UMAMI supply (varying based on time commitment, seniority and specialization)
- Other Core Team: (FT & PT): 0.1% to 0.5% of total UMAMI supply (varying based on time commitment, seniority and specialization)
- DAO Working Group Leads: 0.1% to 0.25% of total UMAMI supply (varying based on time commitment, seniority and specialization)
Internal models suggest that following initial distributions of 12-month vesting contracts, approximately 10% of UMAMI total supply will have been allocated to core team members & advisors. The remaining ~25,000 UMAMI not distributed immediately to team members will be set aside to compensate future team members and contractors.
Going forward, Umami plans to retain an approximately 15% UMAMI token allocation for team & contributor comp.
Team members and contributors will also be eligible for ARBIS compensation. They may also receive bonus compensation in USDC, UMAMI or ARBIS for exceptional performance. Core team members receive monthly USDC stipends to cover living expenses & avoid sell-pressure on UMAMI from team token allocations.
PROPOSAL
The Umami Finance team is asking the community to approve the minting of up to 175k UMAMI to enable an up to 1 million USD OTC fundraise via a Dutch Auction, provide 12 month UMAMI vesting contracts to the core team, and deepen UMAMI trading liquidity.
OTC investors will be compensated with staked cmUMAMI on a 6 month linear vesting schedule.
Umami team proposes the following allocations for the minted UMAMI:
- Approx. 50k to 75k UMAMI for an OTC capital raise of ~1m via a Dutch auction at the highest possible price per UMAMI token.
- Up to 75k UMAMI tokens to be kept in the Umami treasury to cover current & future team compensation.
- Up to 50k UMAMI to deepen liquidity for UMAMI-paired LPs on Uni v3.
VOTE
The Umami team encourages holders to vote YES on the proposal to mint 175k UMAMI to raise 1m USD, provide UMAMI token comp for the team & increase UMAMI liquidity.
Voting is limited to holders of mUMAMI, cmUMAMI & staked cmUMAMI, which represent the three long-term holding options available to the UMAMI community.
Vote on Snapshot here. Voting begins on Friday, April 29, at 12:00 am UTC & ends on Sunday, May 1, at 12:00 am UTC.
