Note: This post refers to a white paper that provides additional details about the strategy outlined below. (View the white paper as a PDF, View the white paper in Markdown.)

Over the last 10 months, Olympus has been optimized for hyper-growth. Bootstrapping efforts have been successful, leading to a Treasury valued at nearly $550 million and a 100,000+ Ohmie strong community across 5 chains. As we mature, mechanisms and structures that were previously unavailable to us (as a function of low capitalization or low participation, for example) become viable, and may be preferable.

In light of this, I propose a next step in the evolution of Olympus toward its vision of providing the digital world with its own currency:

Internal Bonds

The suggestion is that Olympus position itself toward a bond-emphasized model of token emissions and distribution: dubbed here as “Internal Bonds.” These Internal Bonds would be similar to the current "external" bonds. However, instead of providing a token such as DAI or ETH, bonders provide OHM.

For each 1 OHM provided, the depositor is given a note granting their claim to X OHM at Y date. Bonds set to expire at the same time would be tokenized as composable ERC20s. For example, a set of bonds that expire on September 15, 2022, or December 15 2022. At expiration, bond holders would be able to claim XX OHM.
These liquid markets would allow us to minimize and regulate bond yields (as they now trade in a two-way market), and maximize protocol benefit of token emissions.

Bond Vaults, Trading and Lending

To help facilitate the buying of OHM bonds, we would strongly encourage third party development of bond vaults. These vault applications would allow users to engage in automated bond strategies. We expect vaults to compete on strategies that will optimize yield for depositors. They may also serve as social groups akin to houses or clubs, creating new sub-communities within the larger Olympus community.

Those directly interacting with bonds would still expect to find liquidity because:

  • Bonds may be traded: As standard ERC20 tokens, we can expect markets to emerge where participants can trade their bonds on DEXs for OHM before expiration at their fair value, as determined by the market.

  • Bonds may be used as collateral: We can also anticipate that bond lending markets would emerge where individuals will be able to borrow other assets against their bonds, increasing capital efficiency while segmenting risk to the broader Olympus economy.

Implementation Overview

The intent is not to introduce this in the near term. If signaled to be pursued, we would aim to implement this in the coming twelve to eighteen months. Action items during that period include, but are not limited to:

  • Research and development, especially with regard to automation and PID control.

  • Extensive modeling around the proposed implementation to properly understand potential outcomes and our means to manifest intended behavior.

  • Contract audits to ensure protocol safety.

  • Encouragement, and possibly incubation, of vault protocols and other relevant supporting entities.

  • Market maturity, to ensure participation and competition within the bond marketplace.

  • Education and communication to thoroughly inform and prepare the Olympus community and all relevant partners and participants.

Signaling

This post seeks to determine whether the overall structure and design is worth pursuing in the eyes of the community. I believe it would strongly enhance our prospects of long term success following thorough preparation. There is a lot more in there than what is listed in this post, and I hope I can count on your help in dissecting, discussing, and communicating the ideas presented. This is the first of several papers I and others hope to publish in the coming weeks focused on determining and quantifying our long-term goals, designs and milestones in the development of this network. I am excited to dig in.

Please comment below whether you:

  • Support the ideas presented

  • Do not support the ideas presented

Link to the PDF or Markdown if you did not see it above.

I think:

    Zeus These liquid markets would allow us to minimize and regulate bond yields (as they now trade in a two-way market), and maximize protocol benefit of token emissions.

    This part is a bit unclear for me. Could you explain why it maximizes protocol benefit of token emissions?

    Overall I like the idea as a whole. And strongly favour we should pursue this.

      Turtleback with a secondary market, you remove the time component from the bond game. Instead of needing to watch (or have a bot) to get the discount, you just have a market that people are buying/selling into perpetually. It should make it much easier to participate, and wider participation should mean lower discounts.

      benefit greater than or equal, emissions less than or equal

      We may be interested in researching and offering bond strategy vaults with jAssets at Jones DAO.

      Is it correct to say this whole new mechanism in general makes staking less attractive (as it is now the "baseline" rate instead of the dominant strategy)? I think it also means there is an increase in dilution experienced by stakers. Should there be concern that this leads to more short-term activities and incentivizes higher risk taking (e.g. leverage), or is that an overreaction?

        after reading this and the paper proper to me; partner protocols like DPX and Jones DAO seem excellent as initial vault / repot market participants

        I'd really put emphasis on the ability to deploy such a program on arbitrum and perhaps eventually zksync
        I would think that enabling the less economically empowered but still sophisticated actors of many hands could help bring balance to such a system…

        all and all -- while V2 was a good step V2 on L2 could be an excellent interim step towards this end vision.

        Thanks for writing this paper out in a manner a midbrain lazy moonboi can digest.

        I cannot stress enough that USER EDUCATION -- a playgrounds V2 would need to be a pillar of such a new paradigm

        cheers Zeus - Indigo

        biscuit

        I would ask many of the same questions, what I like so far is it introduces longer term staking essentially through long expiration dates. I don't mind simple staking that you can enter and exit with minimal friction as a "base rate", its already the case that its a base rate compared to say depositing gOHM into an SSOV on Dopex or in Jones DAO.

        biscuit well biscuit … with the vesting V2 (4,4) bonds.. assuming you're 3,3 and have the time / means to sell and snipe bonds.. you'd want to bond everytime the margin is > than the friction to sell and rebond right?

        This to me finally delivers on a pseudo locked stake type mechanism for those longterm 3,3 ers giving them a straightforward enough means to gain share.. and compete with bondors as they exist today.. and cuts the sell pressure out of the equation while doing it

        I'd see myself cutting my bag up into 3 sets of rolling 90 day expiring bonds… or eventually to a vault partner to manage such a strategy

          Churchee agree with you and @ptp1600 . Long dated bonds in theory become the optimal play for those with a long-term outlook, but then you are taking on interest risks, which current staking does not have due to liquidity. I guess it shifts the types of participants a bit towards more sophisticated and full time traders rather than just casual retail. That should bring in more and bigger players, leading to higher volume, deeper liquidity, and more products around the ecosystem…. All that is to say I think I am beginning to see the vision.

          Dopex or Jones DAO then becomes more vital for those retail players that want to set it and forget it with a high conviction play on the long-term success of Olympus.

          Is there any intention or possibility of adding a coupon rate to the internal bonds down the line if we move in this direction?

          • Zeus replied to this.

            This in effect will force more people to lock up ohm to search for higher yields causing a supply shock in addition to lowered emissions for single staking causing upwards pressure on ohm price.. am I'm on the right track??

            How would this new model effect staking? Would it still even exist? Speaking as someone who has only ever 3,3.

              CosmicRadii from what i understand staking will still be available but it just wouldnt be the exorbitant triple digit percentages. if you want to receive those rewards you have to take the risk of being illiquid for a certain amount of time.

                Zeus sure - so far all our bonds have been 0% coupon rate - you get the discount you agreed upon at purchase upon term expiration plus auto staking rewards in the interim (but I don’t THINK those are analogous to coupon payments) If we shift to a model with longer dated bonds, one way to dampen interest rate risk is to purchase a bond that pays out some “cash flow”(OHM) along the way. Sorry if I missed any details explaining such a mechanism in the paper.

                • Zeus replied to this.