- Stop favoritism and establish fair market principles
- Deploy long term bonds
- Increase emission through bonds
- Dont burn IB proceeds – airdrop to long-term bond holders
- Make (4,4) the new (3,3) now
As described in my post “Fishes vs Whales: a BOND story” I have illustrated how the policy setup is tilted in favour of whales. Those who already own a lot, are awarded contract after contract that further extends the whales allocation of wealth vs the regular ohmies. Furthermore, we are at the cusp of introducing Inverse Bonds, which (as I have commented on in IB threads) is another gift to the whales and will be used to sap quality assets out of the Treasury. This is perhaps, an unintended slow rug.
In a fair society all classes share pain equally. In a fair society, all classes share equal opportunities. Olympus is not that fair place today. Likewise, the US so called “capitalistic” society, failed miserably to follow this simple principle during the handling of the Credit Crisis (2008-2009). The US (and other countries) was perceived to favor and hold banking Elites under their arms with their bail-outs. That is not capitalism. That is favoritism, and obnoxious.
Somethings are outright ugly, and present not a little moral hazard, but extreme moral hazards allowing societies to rot from within. Somethings however, are just what they are. And the Federal Reserve system (central banking) is just that. In fact, the reserve system is an ingenious creation. This is what has been created with Olympus. And everybody needs to understand this beast to make Olympus succeed.
The reserve system is NOT a malign wealth transfer mechanism from poor to rich. That is a misconception, and I myself have been member of that misguided camp. But the reserve system needs be seen for what it is: a regulator of ACTIVITY. At worst, it can be viewed as a tool for population control. Because lack of activity in a society leads to riots and rebellion. Too much activity, leads to hangover and again lack of activity down the road with riots and rebellion. Thus, we strive to regulate the right level of activity. The value of the USD stems from the markets trust in the capability of the US to manage activity levels.
When activity levels are too low, the Fed INCREASES emission / money supply. When activity levels are too high, the Fed DECREASES emission / money supply. Increasing emission does transfer wealth. But not from poor to rich, but rather from passive agents to active agents. If society needs activity; if it needs somebody to do something to put milk on the tables again – why should it not reward those active agents? And somebody needs to pay for it; there is only one other group that can pay: the passive agents. And this is what it is. Labor is crucially needed, but does not equally contribute to activity as those who enabled that labor in the first place. Thats why we witness engineered wealth transfer. Inflation / dilution is the burning flame that chases the butt off those who are passive. And we may not like how it impacts us individually, but on the grand scheme of things it works bloody well.
This is the nature of the beast. This is the nature of Olympus. Now we need to unleash the burning flame at our disposal.
With OIP-85 there are however renewed calls to reduce emissions. But for what purpose?
DO NOT FEAR emissions at low backing/mcap or rfv/mcap. This is precisely the moment when emissions are needed. Emissions are the tool at your disposal to regulate activity. If at anytime you should fear too much emission, it is at high multiples.
You want to stem sell pressure. You worry that emissions and rebases are cause for this sell pressure. But you hold the tool to regulate this in your hand – don’t put that tool in a drawer.
The old mantra was spot on: ‘don’t focus at price – focus at market cap’. What was less explicit was to focus on ones share of market cap. The new mantra is: ‘don’t focus on price, nor market cap – focus on backing/unit’. This is deeply, deeply flawed unless you aim to make OHM into a stablecoin. It creates a mental magnet that price belongs at the level of backing. It is an instruction to the market to not believe in Olympus capability to manage activity levels, but to (value) trade OHM at below backing and trade it with IB for better assets. This is what everyone is waiting for (goal-seeking). It glues price to backing. This is like valuing USD to the value of its gold reserve only. Together with a reduction in emission, this is death and depression – zero activity. It is why the fractional reserve system was invented in the first place; to fight from this scenario ever occurring.
Worry less about emissions per se, but Do be concerned about how emissions are distributed. The more you emit, the more power you have. Emit nothing, and you have no power over activity. So who does contribute to Olympus ? Who do we want to incentivize? Who does remove sell pressure? And who does not?
Who are our passive agents ?
1. OHM cash holders
2. sOHM/gOHM cash holders
Who is an active agent contributing in a meaningful way?
3. bond holders
4. select members of the DAO and partners
Cash holders of OHM are already penalized for their passivity, which is good. But we must not baby sit cash holders of sOHM/gOHM. They are also passive, in the sense that they chose 100% liquid positions. Yes, this is antithetical to 2021 narratives of (3,3). But it must be done. Wealth must be transferred from passive to active. (4,4) is the (3,3) narrative of 2022. Keeping cash in a mattress or a bank account – I am sorry – you need to be, and will be diluted for the better of society. The share of emissions needs to be increased to benefit bond holders. How are they active? They buy/sell/trade plus actively REMOVE SUPPLY from the market. For this, they contribute hella lot more than the minimal risk-taking cash holders.
Everybody must ascribe to (4,4) in 2022, or perish and begone. But DAO must do its part, by changing the policy of favoring whales and instead equalize the (4,4) opportunities to all through longer-term bonds. Who cares about discount levels? It is not important. It is what it is, whatever the market decides. Because – given equal opportunity, we are all the market. We shall all be (4,4).
What is important, is to begin regulating activity. To create entropy. Make way for winning and losing, but on a fair arena. Not rigged as today.
Lastly, IB’s. They must not be primed for whales and allow them to sap prime assets from the Treasury. IB’s should be used to sell off subprime assets that are not wanted on the balance sheet. If IB’s do deploy, the proceeds ought not to be burned. Burning OHM unfortunately benefits active and passive agents equally, whether holding unstaked (the DAO), staked (minimal risk, passive) or locked up (bond holders). This is flat mindless. Instead, the proceeds should be airdropped or similar to the locked up bond holders to incentivize and reward their willingness to lock away supply. The longer vesting period of held bonds, the greater share of the airdrop the bond holder should be awarded.
A lot of long-term minded (3,3) OG people asked for lockups in the past. Well, with V2 its here as (4,4).