DIP-2: Buyback 4,000,000 DRIFT

General
1

Author: Proph3t
Date: 8/13/2024
Discord Proposal Link: Discord

Proposal Summary:

  1. Use $1,000,000 to buy back DRIFT tokens from the open market.

Overview:
We propose that Drift DAO use $1,000,000 of its $16.4M in protocol-owned assets to buy back DRIFT tokens. This will signal to the market that Drift DAO is willing and able to distribute its cash to tokenholders. As a means of doing so, this proposal would place a limit order of $1,000,000 for 4,000,000 DRIFT tokens ($0.25 / DRIFT).

Rationale:
DAOs are a new kind of entity and governance tokens are a new kind of asset. There is considerable uncertainty around whether governance tokens can be intrinsically valuable. The best proof that Drift DAO is able to provide value to its governance token is Drift DAO providing value to its governance token.

There’s reason to believe that DRIFT is undervalued at current market prices because of this uncertainty. As a dominant trading platform on Solana, DRIFT should provide beta on Solana. Yet SOL trades at a 265 P/S ratio while DRIFT trades at a 23.8 P/S ratio. Some of this may be due to other factors (e.g., L1 defensibility), but it’s likely that a portion of this difference is due to the clear value accrual for L1 tokens via fee burn and the uncertainty of value accrual for governance tokens.

Technical Specification:

  1. Flow of USDC: 1,000,000 USDC to be sent from a Drift program to a DAO created vault, with a delegate 2/3 multisig comprising Proph3t (MetaDAO), Barrett (Ranger), and Dirt Diggler (Future).
  2. Limit Order: 1,000,000 USDC placed at a price of $0.25 / DRIFT for 4,000,000 DRIFT, placed on Drift.
  3. Finalization: upon placing of limit order, the delegate shall remove itself as the delegate. This will allow the DAO to use these funds as it sees fit.
3 Likes
DIP-2: Use Forfeited and Unclaimed DRIFT to launch the Drift FUEL Fund
2

Why set the price at 0.25 ?

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If we set a price higher than spot at the time of execution, that opens up the opportunity for the DAO to get MEVed. 0.25 gives Drift DAO some margin of safety.

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4

If approved (think there may be legal input needed here), I think the funds should be slowly twapped into DRIFT on a longer time interval rather than a limit order at 25c, in order to minimize any effects on token price action.

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5

I can change it to a TWAP if there’s enough interest from the community

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