In DeFi 1.0, we are all too familiar with the phrase Liquidity Mining, this tool helps projects attract liquidity from LPs in the beginning, but unintentionally, if the reward is too large, it causes selling pressure. and discounts on the project’s native token
Besides, after the liquidity mining program ends, it is also time for LPs to leave the project to move to another project that can make more profits. That is also the point that needs to be overcome for Defi 1.0 projects.
Defi 2.0 was born and is developing with typical names such as Olympus Dao, Alchemix, Temple Dao,… Today you and I will learn about the Olympus Dao project together.
What is Olympus Knife?
Olympus Dao is a protocol on Ethereum for decentralized currency management.
Olympus is building a community-owned, decentralized, censorship-resistant currency backed by highly liquid assets called OHM.
Mechanism of Action
First, we will take a look at the 3 main features of the OHM Token:
- Fully collateralized (100% Guaranteed): Every $1 OHM will be backed by $1 of assets in the treasury, it can be DAOI, FRAX and there are some proposals to add ETH and BTC as collateral assets . Thus, each $1 OHM will be guaranteed many times over by different types of assets.
- Algorithmic Stablecoin (Algorithmic Stablecoin): OHM will not be pegged at a fixed price of $1, but it will be guaranteed by $1 of assets in the treasury. The protocol will manage and operate the supply of OHM so that when the value of each OHM on the market is less than $1, the protocol will buy it back and burn it. If the OHM on the market is worth more than $1, the protocol will mint more to ensure the value of each OHM is always stable at $1.
- Free-floating (Floating price): Because it is not pegged to $1 like other stable coins such as USDT, DAI,…, so the price of the OHM token will be allowed to float on the market and we can see the OHM token price at different price levels.
Olympus Dao’s main activities: Staking, Bonding and Treasury
Staking plays an important role in the Olympus ecosystem. Stakers will deposit their OHM into the protocol, which contributes to the long-term price stability of OHM. In return, stakers will receive staking rewards. After staking OHM tokens, you will receive gOHM tokens in return. The amount of gOHM rewarded from the staking process will be based on the Base staking rate.
BSR will be governed by the protocol. We have gOHM = OHM * index. Where Index is an increasing index that depends on BSR.
Bonding is also quite active in the protocol. Bonding can be simply understood as selling your assets be it DAI, FRAX or LP tokens in exchange for OHM at a discounted price and is usually paid within 5 days. In turn, the bond sales provide additional liquidity and reserve assets to the Olympus treasury, contributing to the stability of the protocol. Therefore, 99% of the total liquidity is owned by Olympus (Protocol Owned Liquidity). Bond classification in the protocol:
- Reserve Bonds (Reserve Bond): A bond that sells OHM at a discount to purchase treasury reserve assets. Reserve bonds serve a dual purpose, not only stabilizing the price of OHM (when the price of OHM is >1$) but also accumulating profits from these bonds in the form of treasury reserves.
- Inverse Bonds (Inverse Bond): A bond that sells reserve assets (usually DAI, FRAX) in exchange for OHM. Like Reserve bonds, these bonds are used to stabilize OHM prices. The difference is that they are issued immediately and are the core mechanism to absorb selling pressure from the market when the price of OHM < 1$.
- OHM Bonds (OHM bond) is a bond that sells OHM for OHM. The purpose of these is to move from gOHM staking, which is perpetual and fully liquid, to liquid, time-limited staking.
- Liquidity Bonds (Liquid bonds): Similar to Reserve Bonds, except that they are LP Tokens, by Liquidity providers from exchanges like Uniswap, Sushisap sell their liquidity tokens in exchange for OHM at a discounted price. These bonds are used when the protocol has a need to accumulate additional liquidity.
Treasury: Is a treasury that holds the protocol’s assets. It is reserved by selling Bonds and is the main source of revenue for the protocol.
There is a special and very cool part of the Olympus protocol, which is that they use game theory to determine the behavior and decisions of users in the protocol. From there, there is an effective strategy for project development. Olympus identifies three main user activities in the protocol: Staking, Bonding and Selling.
- Staking is the most beneficial activity for the project so it gets +2.
- Bonding is an activity that helps the project have more liquidity and profit, so it gets +1.
- Selling is an activity that the protocol does not want to happen the most. When everyone sells their tokens, it will be completely bad for the project. Protocol
Here, Oympus Dao uses game theory to manage the system. For each user in the protocol there will be 3 main activities: Staking, Bonding, Selling
- Staking: Each user’s staking activity will be counted as (+2) because this is the best activity for the protocol
- Bonding is an activity that brings liquidity and income to the protocol so it will be counted as (+1)
- Selling is the most unfavorable activity for the project. When users sell their tokens, this activity will be counted as -1.
There are many users in the protocol, but here we will analyze the behavior of two representatives in the protocol. We will have pairs (3,3) which means both people stake, (-3, -3) means both people sell. Analyzing the above, we will wonder why staking activity only has a score of +2, but below the table it is +3, because before staking, users also have to buy OHM tokens, this will causes the price of OHM to increase, which also causes the stakes to increase. Therefore, when both people stake, the value they create will be higher so it will be (3,3). On the contrary, when selling OHM, it will cause the OHM price to decrease and the staking reward to decrease accordingly. When both people sell, it will create a double negative effect, so it will be (-3, -3).
Obviously, the protocol would like everyone to stake, because then everyone would benefit, however, the truth is not like that. Everyone participating is different, so someone with a lot of profit will sell, someone with a small profit will stake or bond. If the ultimate trade-off for the protocol is that everyone buys the bond. This will help the protocol develop healthily and sustainably.
Protocol Revenue
Olympus generates revenue by buying and selling OHM, in addition they will receive transaction fees from LP tokens in the Treasury and from lending activities of assets in the Treasury. 10% of revenue from the project will be shared with the Stake team and the remaining 90% will be shared with OHM holders.
Development Roadmap
I will summarize a few important keys in Olympus’s development roadmap in the fourth quarter of 2022:
- Explore risk prevention solutions to increase OHM reserve assets.
- Find solutions to expand the scale of operations.
- Support plans to establish the Olympus ecosystem on Balancer through asset deployment, asset acquisition,…
- Acquired Aura/veBAL.
- Pending approval, supports Treasury restructuring proposal, which will help achieve increased decentralization of Olympus through on-chain governance.
- Attract more liquidity from OHM holders.
Core Team
Because Oympus is operated and managed by DAO, there is no information about the founder or core team of the project. Everyone has the right to propose and govern projects through DAO.
Tokenomics
Information about the Olympus DAO token
- Token name: Olympus
- Code: OHM
- Blockchain: Ethereum
- Token classification: ERC-20
- Contract: 0x64aa3364f17a4d01c6f1751fd97c2bd3d7e7f1d5
- Total supply: Unlimited
Token Use Case
OHM can be used for staking, rewards, and voting on important protocol changes.
Exchanges
Currently you can buy and sell OHM through Curve Finance, Sushiswap, Banlancer,…
Olympus Information Channel
- Website: https://www.olympusdao.finance/
- Twitter: https://twitter.com/OlympusDAO
- Telegram: https://t.me/OlympusTG
- Github: https://github.com/OlympusDAO
- Reddit: https://www.reddit.com/r/olympusdao/
Summary
Olympus is a pretty good project, starting the Defi 2.0 trend. Olympus opens up the concept of Protocol Owned Liquidity as a new development direction, helping protocols control their liquidity and earn profits from it. However, along with the decline of the mayor, the price of the OHM token also decreased significantly. Downtrend is the time for projects to build products, let’s follow Olympus’ footsteps with us to see if the project can survive this downtrend season.
