Down the Rabbit Hole: OlympusDAO, the decentralized reserve currency

Down the Rabbit Hole: OlympusDAO, the decentralized reserve currency

Olympus is a decentralized reserve currency protocol & it is based on OHM (token), and each OHM token is backed by a basket of assets (like DAI, FRAX) giving it an inherent worth that it cannot go below. Through staking and bonding, Olympus also offers novel economic and game-theoretic dynamics to the market.

Zeus ideated Olympus, which was developed by a distributed pseudo-anonymous crew and is DAO-governed. Token holders make all decisions through governance.

They offer staking and bonding of OHM & LP token respectively.

The primary goal is to create a policy-controlled currency system where the DAO has high control over the OHM token's behaviour. Olympus believes that this mechanism can be used to optimize for stability and consistency in the long run, allowing OHM to serve as a global unit of account and an exchange medium.

OHM Token

The Olympus DAO platform's native token is OHM, which is backed by basket of assets. When users bond their crypto assets, OHM are minted. They can then stake their OHM tokens.

Token backed by basket of assets have potential to be more valuable than the underlying assets. While, tokens pegged to another asset (be it fiat or crypto) are tied to the price of underlying asset. Hence, the growth of OHM token price will be significantly higher than the underlying assets.

Use cases for OHM Token

  • Staking: Users stake their OHM tokens on the Olympus DAO to receive OHM from bond sale proceeds.
  • Governance: Stakeholders of OHM receive sOHM tokens in a 1:1 ratio, reflecting voting power on the platform.

How do I get involved in Olympus?

Staking and bonding are the two major strategies used by market participants. Bonder supply LP or DAI tokens in exchange for discounted OHM tokens after a predetermined vesting period, while stakers stake their OHM tokens in exchange for more OHM tokens.

Participants in governance can participate in debates on OlympusDAO's forum and on the community, along with the DAO discord server.

Staking:

  • Olympus' essential value-adding technique is staking. Stakers can earn rebase rewards by staking their OHM on the Olympus website. The rebase rewards are derived from bond sales proceeds and might vary depending on the number of OHM staked in the protocol and the monetary policy reward rate.
  • Staking is a long-term, passive approach. As your ownership in OHM grows, so does your cost basis, which continues to shrink until it reaches $0. It means that even if the market price of OHM falls below your initial purchase price if you stake for a long time, the increase in your staked OHM balance will eventually overtake the price reduction.
  • You lock OHM and earn an equal amount of sOHM when you stake. In the end, your sOHM balance is automatically rebased. sOHM is a transferrable protocol that can be combined with other DeFi protocols.
  • You burn sOHM and receive an equivalent amount of OHM when you unstake. The user will forfeit the forthcoming rebase reward if they unstake. It's worth noting that the forfeited reward only applies to the amount that was not staked; any remaining staked OHM (if any) will continue to receive rebase benefits.

Bonding:

  • Olympus' secondary value accrual strategy is bonding. It enables Olympus to obtain its own liquidity and other reserve assets by selling OHM at a discount in exchange for these assets. The protocol provides the bonder with information such as the bond price, the number of OHM tokens that the bonder is entitled to, and the vesting period. The bonder can claim some of the rewards (OHM tokens) as they vest, and the whole amount will be available at the end of the vesting period.
  • Bonding is a short-term, active strategy. Bond discounts are more or less unpredictable due to the secondary bond market's price discovery mechanism. As a result, bonding is regarded as a more active investment method that requires regular monitoring to be more profitable than staking.
  • Olympus can use bonding to build up its own liquidity, referred to as POL. More POL ensures that exit liquidity is constantly locked in the trading pools to improve market operations and protect token holders. Since Olympus became its own market, the protocol has accrued more and more revenue from LP awards, bolstering its treasury and providing extra certainty for OHM investors.

Growth of Olympus

Stakeholders benefit most from increased supply. The protocol generates new OHM tokens from the treasury, with the majority of them going to stakers. As a result, stakers' gains will come from their auto-compounding balances, while price exposure will still be a factor. Stakers will earn if the increase in token balance outpaces the possible decline in price (because of inflation).

The most significant advantage for bonders is price stability. Bonders invest money upfront and are promised a fixed return at a certain time; the return is in OHM. Therefore the bonder's profit is determined by the OHM price at the time the bond matures. A growing or stable OHM price benefits bondholders.

89.1% of the total OHM is staked so far, with the treasury balance for OlympusDAO standing at 705,744,437 USD and the total value locked being 2,282,396,855 USD.

Here are a few key details of OHM Token:

Source: https://dune.xyz/shadow/Olympus-(OHM)

The market cap of OHM has also significantly grown up, and there is a rapid fluctuation in the staked/unstaked ratio for it.

Source: https://dune.xyz/shadow/Olympus-(OHM)

Furthermore, there is also a significant rise in the total value locked in staking as well as in the bond prices.

Source: https://dune.xyz/shadow/Olympus-(OHM)
Source: https://dune.xyz/shadow/Olympus-(OHM)

There are more stats related to OHM over here: https://dune.xyz/shadow/Olympus-(OHM)