Shifting to Utility — $OHM

This article is a sequel to: ‘Understanding OlympusDAO in early autumn 2021’

The world has always changed through innovation. If you’re reading this, you might already be somewhere in the forefront of innovation. What OlympusDAO is building is the most innovative, fast, and unprecedented experiment in DeFi.

I’m an OG Ohmie and have watched(and contributed to) Olympus since its early phase. Since then, there have been several crises or FUD-heavy occurrences that have impacted the community. Despite this, as time progressed, I became increasingly more confident in Olympus.

Through this article, I’m going to try and demonstrate how far Olympus has come and what we are moving towards. If you’re not familiar with Olympus, please read the previous article.

Defi Reserve Currency

The goal of Olympus is to become a Defi Reserve Currency. The last article started with this topic and I’m going to revisit it here again. In March 2021, when Olympus was first launched, many of us did not fully understand this concept or had difficulty capturing it’s vision in our minds.

You can think of dollars as an example of a reserve currency, but it’s more difficult to imagine a reserve currency for DeFi. Olympus has delivered a lot of products to-date, so the whole picture is beginning to become clearer. To start, let’s look at some key features of a reserve currency.

Reserve Currency characteristics:

• Exchange should be free and easy
• Liquidity must be deep so it isn’t highly volatile in the event of a crisis
• The operating entity must have and manage liquidity
• Portfolios must be diversified to reduce currency risk and maintain healthy credit
• You should be able to trade for various products

If you have followed Olympus, some of the items above will stand out. Which stage is Olympus in?

Bootstrapping is over

In order for the currency to be used and distributed, issuance must be emphasized to create liquidity. Despite inflation caused by the high APY, the initial issuance of OHM has allowed the protocol to own the majority of its liquidity by building a backing of assets in the treasury through Bond sales and (3,3). Olympus has succeeded in bootstrapping via these mechanisms, with the total supply of tokens currently approaching 10 million of OHM and have a treasury of assets worth approximately $500 million.

However, this process was not easy for several reasons. While Olympus has been building liquidity via high APY so far, speculators who want to make quick profits, as well as those who believe in Olympus’ innovative mission, have flocked to OHM at the same time. This has created an out of control hype cycle. Zeus shared his concerns with the community several times in regards to the premium, and inevitably, the market cap grew too fast and recently decreased rapidly.

Forks outlook

In addition, numerous forks (hereinafter referred to as Forks) who witnessed the viability of Protocol Owned Liquidity (POL) appeared. The highest number of protocol forks since Ethereum. What’s interesting is the majority of the forks advocated becoming a Reserve Currency and users seeking high APY would invest in those protocols for their high APYs. The problem was, the high APY phenomenon obscured the essence of Olympus’s mission and it’s goals.

Do you remember the characteristics of a reserve currency listed above? Almost all forks targeting reserve currency status are in a position to compete with Olympus at the start, but they can never keep up with Olympus’ unique community and growth (I respect their pure efforts tho). However, there are some exceptions. Rather than targeting reserve currency status — several forks adopted the Olympus bond mechanism and were launched to support the Olympus ecosystem or have their own unique goal, see KlimaDAO, RomeDAO, etc. The market ultimately decides which protocols survive, but those who understand the value Olympus is trying to bring to Defi are able to identify which protocols have less legitimate missions.

It should be emphasized that the high APY was only for bootstrapping liquidity, not the purpose of Olympus itself. So, what is Olympus’ next narrative at this stage where 10 million tokens have successfully been minted, OIP-18 and OIP-63 having passed, and APY decreasing?

Shifting to Utility

APY still exceeds 3,000% and we need to make liquidity thicker and increasingly more stable. We need to expand to more platforms to make it easier to exchange tokens (not long ago, governance passed a vote to hire market makers for CEXs). All of these are interconnected and naturally increase use. Let’s find out which use cases have been developed so far.

Lending platform -

• Rari Capital, already well known, is a platform that allows you to borrow crypto with gOHM as collateral. For Pool 6 and 18, $150M of gOHM has been supplied as collateral.
• Vesta Finance is one of the Olympus incubator programs and is a lending protocol set to be released at the end of January. There is no interest expense outside of the one-time fees incurred for loan origination and repayment with gOHM serving as collateral.

Derivatives -

• Using Dopex’s Single Staking Option Vault (SSOV) to predict the price of gOHM and supply liquidity, you can receive a premium depending on your position.

Bootstrapping -

• Olympus will supply OHM liquidity to the Balancer protocol for OHM to be used for Liquidity Bootstrapping Pool (LBP) through CopperLaunch and PrimeDAO. Debt DAO will be the first case of LBP using OHM.

Backing asset -

• Volt is a debt-backed floating stable coin fork of RAI, which will be used to issue stablecoins via storing OHM in their treasury along with other assets.

LPs/Bonds(gOHM) -

• RomeDAO, REDACTED Cartel, Lobis, Tokemak, FiatDAO, TreasureDAO, Growth Depi, SquidDAO, Abachi(TBD), VOLT(TBD), etc.

Donation -

• FrenDAO, Olympus GIVE

Ecosystems are adopting OHM/gOHM in various derivative forms including loans, liquidity bootstrapping, bonds, LPs and donations. After the initial bootstrapping phase, OHM is shifting to utility, which is very encouraging for OHM to function as a currency.

In the future, there may be a day when you need gOHM in your wallet to utilize DeFi services. Additionally, after the V2 migration, gOHM is expected to gain more use cases as it expands, multi-chain, to Abitrum, Avalanche, and Phantom.

Treasury / Revenues

As the liquidity and utility of OHM, the currency, are increasing — how healthy is the treasury management and growth?? Is there risk that the portfolio will become too concentrated in one place? With token issuance not yet over, how is asset-backing growing in line with inflation? First, let’s dig into the financial resources of the treasury one by one. The primary metrics are based on Olympus’ web app and Fluidsonic’s Olympus Lookout.

Guidance: The numbers below are based on 30-day figures from December 22, 2021, to January 20, 2022.

Bonds -

In the period referenced above, bond sales amounted to $44m at an average of $1.4m per day. 8 kinds of bonds are currently live, including the recently added, UST and wBTC bonds. After governance determines which assets are considered safe and important, Olympus sells bonds for those assets to manage the soundness of its portfolio. Zeus mentioned, the number of assets that can be bonded is likely to reach 30 in the future.

LP fees -

Olympus has made $5m and $160k in average daily profit for that same timeframe. Most of the liquidity is positioned in SushiSwap, and OHM-DAI and OHM-ETH pairs account for the largest proportion. The more OHM is used as a currency, the more protocols will support it’s pairs. On the other hand, as Olympus’ liquidity grows and utility is increased, attempts are also being made to save platform fees by developing Swaps exclusively for Olympus (RangeSwap, Atlantis).

Pro -

Made $1m and $30k in average daily profit. Currently, there are about 40 cohort partners, and soon, when permissionless Pro launches, the protocol to build POL will increase at a much faster rate. The same applies to the 3.3% bond sales fee, so over time, Pro’s income will be another important pillar supporting Olympus’ treasury.

In addition to the above three financial resources, Olympus has acquired a low proportion of cvxCRV, or about $50m in the last month at an average of $1.6m per day, roughly projected out for a year, would reach about $584m.

Bribing/Swap -

In addition, Olympus is partnering with many other protocols at the center of the ecosystem or incubating new projects, receiving their various assets and adding them to the treasury. This plays another major role in the expansion of the treasury.

• Klima DAO: Receives 3.5% of the total supply of pKLIMA.
• REDACTED Cartel: Receives 20% of pBTERFLY (10% of total supply) and shares 5% of the revenue from external token bonding. An additional 20% obtained from Tokemak, Convex, and Frax will be bribed to Olympus.
• Lobis: Accepts 1.1% of all bond sales fees. Has 6M OHM-LOBI liquidity.
• PhantomDAO: Receives 3.33% of governance tokens. 10% of the initial treasury will be composed of gOHM, and the proportion will be increased according to the governance vote.
• DebtDAO: Receives 3.33% of governance tokens. Added OHM to the loan options.
• Volt: Receives 6% of the total supply of VCON, a governance token.
• Umami Finance: In the long run, more than 25% of the treasury will be paired with gOHM and gOHM pairs, and $1m will be supported for gOHM-UMAMI pairs. Umami uses gOHM as their primary collateral asset.

Bitcoin is Dead, over +400 times.

So far, we’ve looked into whether OHM is appropriately built to function as a currency. Do you think OHM can qualify as a reserve currency? The dark side of innovation is that there is always skeptical public opinion that stands in the way of innovation. Bitcoin has died more than 400 times. There have been numerous occurrences of FUD for Olympus. It’s amazing that the Ponzi story still comes out. Most can’t tell the difference between a Ponzi and Ponzi frauds.

Regarding the intrinsic value of the tokens you’ve held, consider whether they continue to make profits or grow their cash flows to support the token. For OHM, token issuance is decreasing. This likely means the downward sell pressure on token prices will decrease as well.

Bond sales have resumed and bond types will be increased. Pro will be upgraded to create more partnerships. More ecosystem projects will want to partner and share their assets. The token’s intrinsic value and the premium will adjust accordingly in the future. I leave it to your imagination regarding how that will look like in the future

DAO

Numerous talented Ohmies continue to make Olympus better together. In addition to the above, many new internal projects including Agora, Olympus Incubator, Sherpa Library, and Playground are being carried out or developed.

These days, the DAO itself is receiving more attention than ever before, but OlympusDAO is still one of the most active communities in DeFi with 166 Ohmies contributing and receiving rewards (as of December 2021). Most of these ohmies do their best to support the protocol even if others don’t ask them to. As the scale has grown, the DAO is currently changing its organizational structure for V2.

Beyond (3,3)

The community, which started with 3,3, has made amazing achievements over the past 10 months. What was surprising about writing the above, is most of the new partnerships and places of use were created in the four months after the last article. Olympus’ fundamentals have been stronger and expanded. (3, 3) is still in good shape, but OHM is facing an expansionary phase as the utility will help Olympus take a step further towards becoming a true DeFi reserve currency.

I’d like to wrap up the article with Zeus’ words. “Bet big on projects and people you believe in.”

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And…written by @Davi_GMI

Big thanks to fluidsonic