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DeFi Deep Dive #10: Olympus Finance
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DeFi Deep Dive #10: Olympus Finance

Profiling Protocols Featured on DeFi Llama

DefiLlama
Jul 29, 2021
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DeFi Deep Dive #10: Olympus Finance
defillama.substack.com

🦙 DeFi Llama tracks over a hundred protocols. How well do you know them all? Each week our staff of llamas perform a deep dive on one of the protocols🦙

What’s up, OHM-ies!

Olympus DAO is building a decentralized reserve currency called OHM. Much like traditional stablecoins, OHM is backed by dollar-pegged cryptocurrencies (ie DAI, FRAX). However, it does not have a strict 1:1 peg with the backed assets, instead utilizing a floating market price with an implied floor price of the backed assets.

OHM backing by tokens

The Olympus protocol is designed to adjust the supply of OHM based on its price. When OHM trades significantly above its backed assets, it mints new OHM. When OHM drops below its backing, the protocol buys back and burns OHM.]

The DAO controls all major actions within Olympus. Since its launch, OHM has voted to stake its excess reserves into protocols like AAVE and Convex to earn yield on its treasury, currently $70MM

OHM holders have two actions they can perform with the protocol, staking and bonding.

Staking is referred to as (3, 3) per the game theoretical parlance, and intended to be a long term strategy. Yield from bond sales are distributed to stakers at every rebase interval. This yield is currently a whopping 16,000%, you should research for yourself whether such high yields are likely to persist.

Bonding (1, 1) is a more active short-term strategy. Bonds serve as “a cross between a fixed income product, a futures contract, and an option.” Bonds vest at a fixed price over a span of days, and since the price of bonds can fluctuate wildly on secondary markets this requires active management to optimize.

Some investors are rightly nervous of the 5 (previously 6) digit APY, which is often a sign of scams. However, it’s worth highlighting that OHM has performed relatively well during the crypto market downturn of the past few months, seeing its TVL continue to rise throughout. If you are worried that OHM is simply in a growth stage and could collapse just as quickly, consider this thread on how OHM may perform in a doomsday scenario.

Twitter avatar for @ishaheen10Asfi (3,3) @ishaheen10
Simulating a bank-run on @OlympusDAO : a thread exploring the absolute worst case, doomsday scenario for stakers committed to (3,3) TL;DR: you get your money back and a slight return. Read on for the longer answer with context, mechanics and math 👇

July 9th 2021

61 Retweets206 Likes

The protocol is designed with a heavy nod to game theory. Rounding out the staking and bonding actions are selling actions, which they consider to be a negative value. They’ve therefore built out their incentive structure to penalize selling in true Prisoner’s Dilemma fashion:

With such a strong control over their treasury, their DAO has a lot of power. As of a month ago, Olympus DAO had 98% control over their Sushi pool.

Twitter avatar for @d0mPablo($OHM, GOD) @d0mPablo
Olympus absolutely dominates their own sushi pool. I mean it speaks for itself. They own 98%+ of their own liquidity, and even earn all that delicious $xSushi rewards (more passive income). This is highly important for Olympus the long term and aiming to promote stability.
Image

July 9th 2021

1 Retweet27 Likes

Having compounded such a large treasury, they are now looking for opportunities to spread OHM as the default reserve currency in DeFi. In this recent podcast, they discuss the idea of a “treasury-as-a-service”, to allow other protocols to tap jnto OHM’s reserves when they are most in need.

Twitter avatar for @TheRogue_UchihaRogue Itachi | Yunt Capital @TheRogue_Uchiha
Super excited to drop the first episode of our pod GoodWill Yunting! We couldn’t have asked for a better first guest than the brilliant @Fiskantes to discuss @OlympusDAO. My IQ went up 20 listening to him and @YuntChef. Don’t miss out on all this alpha
“What is Olympus DAO?” featuring Fiskantes and JaLaListen to this episode from GoodWill Yunting on Spotify. In the very first installment of the much anticipated Yunt Capital podcast, GoodWill Yunting, we take a look at one of the most innovative and seemingly complex protocols in DeFi, Olympus DAO. I am joined by two of the biggest big-brains in th…open.spotify.com

May 31st 2021

38 Retweets175 Likes

They are also looking into adjusting their tokenomics a bit for the long term, slashing rewards for the sake of increasing supply. It may be unpopular with the high yields, but it’s encouraging to see them looking for the long term.

A protocol as complex as OHM, we’ve really only scratched the surface. For more detail, this thread is recommended:

Twitter avatar for @the_alphatradesAlpha Trades @the_alphatrades
(1/n) @OlympusDAO Ω $OHM is using community-governed monetary policy to reach a lofty goal — Unpegging #DeFi from fiat currencies How?  A DAO-governed treasury that’s expanding quickly and creating the right participation incentives to keep the gods happy. Thread 👇
Immortality113, CC BY-SA 4.0, via Wikimedia Commons

July 26th 2021

30 Retweets122 Likes

If you are interested in Ohm, check out their active Discord, Github, Twitter, blog, or website.


Would you like us to profile any of the protocols listed on DeFi Llama? Send us a note in the comments!

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DeFi Deep Dive #10: Olympus Finance
defillama.substack.com
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