TLDR
- OHM LP's drain value from Treasury because of rebase dilution (staking APY > fee APY)
- OHM LP's are listed on Dashboard as productive assets - when in real they are wasting Treasury value
- Maximize capital productivity by pairing only with a network's dominant (native base) token
(acknowledging OIP-86 and @cpt_zeke .. cant wait for v3)
Analysis
Here is current snap from sushi:
We have:
- 95M in OHM-DAI, processing 3M daily volume
- 30M in OHM-ETH, processing 3.3M daily volume
- 12M in OHM-LUSD, processing 0M daily volume
The OHM-WETH is processing 10% more trades, while only locking 1/3 the value of the OHM-DAI pool.
Meanwhile, OHM-LUSD is locking 12M without processing any volume at all.
Furthermore, a 95M OHM-DAI pool… Lets round to 100M for simplicity… A 100M OHM-DAI pool locks 50M DAI and 50M OHM. This pool is generating <5% in fee APY. So thats at best 5M per year. Meanwhile, OHM is has a staking APY of ~ 900%. By math, this means 100 OHM today is equivalent to 10 OHM at end of year. Thus end of year value of this pool shall be 100M + 5M - 45M = 60M …. The cost of providing this liquidity for a year is 40M … Pretty big, continuous drain on the Treasury!
This shows importance of minimizing the use of OHM when pairing for liquidity.
It also shows that LP assets should not be listed as Productive Assets with positive yield on the dashboard. It is misleading. Here is snap from current dashboard giving a perception of 1% APR when it should be printed as -40% :
To further increase capital efficiency, Olympus should pair only with the dominant token of a network. These DEX'es are fully capable to doing the routing themselves. No need for Olympus to deploy unproductive capital across multiple pairs. Collecting LP fees is anyhow a losers game - if ever there is excess fee collection, competition will rush in and deploy capital at better risk/reward profile than Olympus is able to.
Take that unproductive OHM out, and consider burning it. Its would be so much better use than current waste.