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8 min read

Olympus DAO

Published on
October 11, 2023
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What is Olympus DAO?

Created to provide a new decentralized infrastructure for finance that is community-driven, Olympus DAO was ubiquitous with the (3,3) meme, which came from the famous “Prisoner’s Dilemma” model of game theory.

The Goal And The Origin

Olympus DAO set out to address one of the major problems of the crypto ecosystem – reducing cryptocurrency’s dependency on fiat currency and providing sustainable liquidity for native tokens. As defined in their website, “Olympus is a decentralized reserve currency protocol based on the OHM token. Each OHM token is backed by a basket of assets (e.g. DAI, FRAX) in the Olympus treasury, giving it an intrinsic value that it cannot fall below.”

Created by Zeus (pseudonym), and built by a distributed pseudo-anonymous team, it was introduced on February 1, 2021. As constructed, Olympus completely is DAO-governed. This means that all potential decisions or actions are formed by community members on the forum and then voted on and acted upon by token holders through snapshot voting. In 2021, Olympus caught the attention of many crypto users, growing to a market cap of $4B in just over 6 months. The current market cap, as of April 2022, is about $500M with OHM token trading at $31.

The Problem With Stablecoins, and The OHM Solution

In DeFi, stablecoins are directly tied to a stable currency or commodity to eliminate price volatility. But, the majority of stablecoins are pegged to US dollars and hence, vulnerable to the inflationary policies of the Federal Reserve, a fact that flies in the face of DeFi’s true rallying cry. 

This contradiction has led to the entry of algorithmic stablecoins, designed to move away from fiat, by manipulating supply, to maintain stability and manage volatility. Olympus advanced this concept using a floating-market-driven price for OHM stabilization.

“What does that mean? OHM token is backed by a treasury reserve of crypto assets with DAI being the major asset, rather than USD.”

When the value of OHM outpaces the reserve’s floor value (trading at a premium), the protocol could mint new tokens and dilute supply to drop the price. Similarly, if the value of OHM falls, the protocol buys back and burns OHM from the supply to increase price. Despite this, the price of OHM has been ‘free-floating’, changing as per the supply/demand in the free market. The Risk Free Value (RFV) determined by the nominal value of the treasury-held assets is basically the 'true floor' for OHM, discounting unaccounted risks.

What made Olympus DAO different? 

The protocol has certain unique features that ensure that the OHM token acts as a store of value, not pegged to the $1 mark.

  • Olympus DAO owns its liquidity instead of depending on users to provide liquidity. In addition, its DAO-governed treasury consists of unique DeFi assets such as stablecoins DAI, FRAX, which allows Olympus DAO to create a credible price floor.
  • The protocol stabilizes OHMs value by controlling the OHM supply.
  • Olympus DAO is governed by the holders of OHM tokens. There are no separate governance tokens, meaning, the currency (OHM) holders determine monetary policies.

The simplest model of Olympus has three possible actions: Stake (Buy), Bond, Sell.

Staking is the primary value accrual strategy of Olympus. Once you buy OHM, you can stake it to earn rebase rewards, where initial stake auto-compounds at fixed time intervals (every eight hours, i.e, 3 times a day!). The current annual percentage yield (APY) is 960.3%. It is a passive long-term investment strategy. Currently, about 77% OHM supply is staked. When OHM is trading at a premium, the excess assets in the reserve (treasury) are used to mint new tokens. These new tokens are then distributed to the stakers, allowing Olympus to achieve high yields. As the value of the treasury grows, so does the possibility to increase yield.

Bonding is the major innovation of Olympus DAO.  It is an active short-term investment strategy. Users can buy OHM from the protocol at a discounted price in exchange for various assets like stablecoins, ETH or liquidity tokens. It has auto-staking and flexible vesting options with different vesting terms, introduced in the v2 migration. 

Bonding allows the protocol to accumulate more assets in the treasury and thus, increase liquidity. Olympus protocol owns and controls its own liquidity, allowing it to earn trading fees as a Liquidity Provider. They also get revenue from yield farming. These further increase the value of the treasury.

Olympus DAO migrated into v2 with new governance token gOHM replacing wsOHM. Key features include on-chain governance via gOHM, automatically staked bonds and cross-chain functionality through gOHM. 

OlyZaps is a new feature in the Olympus App that introduces a “zapping” mechanism to provide easy access for staking or bonding OHM from any asset. It allows to exchange (zap) any assets into sOHM or a bond in a single operation, without leaving the Olympus App.

Olympus Pro was introduced on September 17, 2021 to allow DAOs and projects to take control of their token emissions and liquidity mining programs through protocol-owned liquidity. It is a bond marketplace, providing an integrated front-end solution for users to quickly and easily create and manage their bond positions on a familiar, unified user interface. As of Jan 2022, it had onboarded 40 partners across four different blockchains, helped projects bond >$45,000,000 in liquidity and produced >$2,000,000 in revenue for the OlympusDAO treasury.

Olympus has recently moved some of its liquidity to the Balancer ecosystem, to set up OHM as a liquid asset. By migrating $7.5M in OHM, ETH, and DAI to Balancer, an automated portfolio manager, users can now pool their OHMs and participate in Liquidity Bootstrapping Pools (LBPs).

The Fall in Price of OHM Tokens

OHM token is trading roughly 97% below its all-time high price of $1,415.26 recorded in April of last year.

On January 17, a whale sold off 82,526 OHM coins (worth $13.3 million at the time), triggering a series of liquidations, which caused a snowball effect on the OHM token’s price. 

OHM price is considered risky as it depends on several market factors, requiring users to participate together and maintain a balanced relation, in contrast to the dynamic cryptocurrency market.

OHM's early success triggered the creation of a large number of additional forks based on OlympusDAO codebase. Majority of these developers are unknown, creating concern and the necessity to proceed with caution.

Future of Olympus DAO

Olympus will continue its efforts to preserve OHM’s purchasing power and drive its use as a trusted backing. Their goal is to continue to release outstanding products and services that inspire new users to join their econOHMy, with specific focus on building across three pillars: reserve, liquidity, and utility.

The Reserve Pillar: responsible for OHM’s growth and utility

  • Olympus Pro: bonds-as-a-service
  • OlyZaps: one click zapping into staking and bonding
  • Bonding
  • V2 Bonds deployment
  • Hermes: tokenized bond market and yield curves

The Liquidity Pillar: responsible for increasing OHM’s liquidity and tradability

  • Going Multi-Chain
  • Proteus: the cross-chain initiative for gOHM partnerships and liquidity deploying on; Ethereum, Avalanche, Arbitrum, Polygon, Fantom, Moonriver, Terra
  • Cross-chain native: fully implemented Olympus branches with native tokens on all major chains
  • OHM Debtor function: Treasury asset + liquidity unlocked
  • OHM concentrated liquidity

The Utility Pillar: responsible for increasing mass-adoption of OHM

  • OlympusDAO: continue scaling with 150+ contributors
  • Olympus Give: yield redirection for perpetual no-loss effortless donations
  • 3, 3 Together: a no-loss savings game
  • Olympus Grants: funding Ohmies contributing to the ecOHMsystem
  • Olympus Incubator: funding new protocols that utilize or build on OHM or other Olympus products
  • Olympus Odyssey: a liquid secondary market for NFTs
  • Agora News Network: media for Ohmies, by Ohmies

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