Summary
As the APY received by staking OHM decreases, new incentives must be implemented to encourage OHM holders to keep their OHM tokens staked and to attract new capital. One way to achieve this would be to distribute a percentage of the ever-growing profits of the Olympus DAO Treasury to holders of sOHM. Each month a percentage from the Treasury profits can be used to buy OHM tokens in the market and then distribute the purchased OHM tokens to holders of sOHM. Each holder of sOHM will receive an amount of purchased OHM directly proportional to the owned amount of sOHM.
Motivation
The inevitable decrease of the APY has reduced the profits received by owners of sOHM and the competitiveness of the Olympus DAO to attract new capital or retain old capital. At the same time, the Olympus DAO Treasury has grown and now generates significant profits. The main focus of the Olympus DAO should always be to grow and expand. Nevertheless, new avenues to reward owners of sOHM must be explored and implemented.
Here, I propose to use a percentage of the profits generated by the Olympus DAO to purchase OHM tokens on the market and distribute the purchased OHM tokens to holders of sOHM. Each holder of sOHM will receive an amount of purchased OHM directly proportional to the owned amount of sOHM. Ideally, owners of sOHM should be able to decide in advance if they want to receive OHM, sOHM or gOHM.
The actual percentage of the profits dedicated to this proposal should be determined by the Strategos after taking into consideration the profit done by the Olympus DAO Treasury. The actual percentage cannot be high enough that it interferes with the growth and expansion of the Olympus DAO or that results in an unsustainable profit distribution. It is better to start with a consistent low percentage that can be gradually and steadily increased. The distribution frequency should be quarterly at the very least but ideally monthly. Importantly, no interest generating tokens, for examples LP tokens, should be considered in the calculation of the profits to be distributed as result of this proposal or sold to comply with this proposal.
Implementing this proposal will be beneficial both for the Olympus DAO and for the owners of sOHM.
It will be beneficial for owners of sOHM because the APY will increase.
It will be beneficial for the Olympus DAO because:
1. The Olympus DAO will increase the reward for stakers of OHM tokens without emitting new OHM tokens and only using the profits generated by the Treasury assets.
This is directly related to the accusations of the Olympus DAO being a Ponzi scheme. If we are here is because we do not believe this accusation. But the false accusation will be dead forever the moment the APY received by stakers of OHM tokens proceeds mainly from the distribution of profits generated by the Olympus DAO assets, for example LP fees, Olympus Pro, etc and not from new bond sales.
2. The buying pressure exerted by the Olympus DAO on the market will act as a price stabilization mechanism during sell-offs and bear markets.
I know keeping a price range for the OHM token in the market is not an objective of the Olympus DAO. However, as indicated in the Docs everyone benefits from a stable and high OHM price. For example, bonds with higher discount can be offered. Even more, a whale sell-off event will be changed from a negative event right now into a positive event for owners of sOHM. The reasons for this are that the sell-off reduces the price of the OHM token in the market and increases the percentage of sOHM hold by the persons that do not sell. Therefore, the Olympus DAO will be able to purchase more OHM tokens with the profits to be distributed, and each owner of sOHM tokens that does not sell will receive a higher percentage of the purchased tokens.
3. Distribution of actual profits will differentiate the Olympus DAO from the many forks and competitors that can only offer a high APY but no real profit distribution thus increasing the power of the Olympus DAO to attract new capital.
Right now, the small APY offered by the Olympus DAO is or will become a major hurdle to attract new capital. Implementing a profit distribution program will resonate with all kinds of investors and new capital will keep flowing into the Treasury. This works too as an incentive for owners of sOHM to remain staked.
Example
Let’s run a quick example with the data found here: https://dune.xyz/queries/239518/448322.
I will consider only the LP fees obtained by the Olympus DAO during January, 2022. During this month the LP fees amounted to $7,757,934. If we decide to distribute a 10% of this amount, a total of $775,793.4 will be used to buy OHM tokens in the market. With the current price of $61.17 (31.01.2022 22:07 CET https://coinmarketcap.com/currencies/olympus/) 12,682 OHM tokens could be bought and distributed among owners of sOHM.
Proposal
To use a percentage of the profits generated by the Olympus DAO Treasury to buy OHM tokens on the market and distribute the purchased OHM between the holders of sOHM. Each holder of sOHM will receive an amount of purchased OHM directly proportional to the owned amount of sOHM.
