OIP-100: Adjust Reward Rate

abipup

Summary

Adjust reward rate to 0.1186%, the minimum of the current range according to OIP-18, which translates to around 266% APY. This adjustment will be spaced out across 21 epochs, with the reward rate adjusting each epoch. The change will extend Olympus’ runway, improve protocol sustainability and maximize the impact of Inverse Bonds, allowing Olympus to better manage potential lengthy bear market conditions.

Motivation

Our current reward rate tier is highlighted in the chart below:

The past few months have shown us a few things.

For one, Ohmies remain strong together. The number of staked OHM is still hovering around 80%, and inverse bonds are cushioning the market from irrational sells. The spirit of 3,3 has never been more important.

Second, the bear market may potentially extend over a multi-month to multi-year time frame. Our goal is to put Olympus and OHM in the best possible position to not only survive the bear market, but thrive. Part of this strategy is to calibrate the network’s growth rate to overall demand for OHM, in order to maintain healthy market conditions. The ideal balance for the market is for supply growth to closely track the growth of the ecosystem over the long term. In the stability phase of OHM, during times of low demand, supply growth should slow as well. A well-balanced emissions rate that tracks with demand for OHM has the following benefits:

1. It makes market operations (specifically Inverse Bonds) more efficient
2. It helps to dampen OHM volatility, which benefits OHM users (individuals, protocols and others), and makes OHM an attractive reserve asset
3. It ensures that the protocol can continue to back and support each new OHM for years to come.

To that end, the DAO is working on an updated Reward Rate framework. Our goal with the new framework is to make reward rate adjustments more aligned with changing market conditions, overall OHM demand, and set up to be automated in the future.

In the meantime, Olympus DAO proposes a reduction in the current reward rate to the lowest end of the current rate tier. A lower reward rate at this time provides major benefits for the protocol.

First, the Treasury will fight less against itself. Inverse Bonds effectively cushion the market and remove OHM from circulation. Emitting more tokens just after this operation works against that supply lever, so reducing the reward rate makes inverse bonds more effective long term.

Second, the protocol will emit fewer tokens during a time when OHM demand is lower. This adjustment will bump the runway to over 700 days. Further, it gives room to continue building the Olympus econohmy in 2022 in a sustainable manner, despite significant adverse macroeconomic headwinds.

Proposal

Adjust reward rate to 0.1186%, the minimum of the current range according to OIP-18. That would be a 0.1186% reward rate, which translates to around 266% APY. The adjustment will be spaced out across 21 epochs, with the reward rate adjusting each epoch.

For additional context, be sure to read the previous reward rate proposals and their discussions:

https://forum.olympusdao.finance/d/755-oip-63-reward-rate-adjustment

https://forum.olympusdao.finance/d/77-oip-18-reward-rate-framework-and-reduction

https://forum.olympusdao.finance/d/37-oip-11-reducing-reward-rate

Vote

For: Adjust reward rate to 0.1186% of circulating supply (from the current 0.1587%)

Against: Do nothing

BullGates

Lowering the rate seems like the best move in this environment. Lower emissions should ease sell pressure and dilution in a time where its needed

BullGates

GG's policy

bone

Why does it make inverse bonds more efficient?

Wartull

bone

Inverse bonds take supply of the market and reduces downwards pressure, inflation through staking rewards basically counteracts that. By lowering emissions, the effect of inverse bonds is larger/more efficient since you achieve the same effect for a lower capacity.

Shpadoinkal

I am so supportive that I hit the first button and voted against. I am supportive of making this change. Longevity and runway is most critical.

cpt_zeke

I see the Reward Rate as the highest level protocol lever, which basically reflects projected protocol growth rate (if the goal is to minimize volatility). Adjusting this lever to changing macro conditions will only make all other protocol mechanics more effective.

dr00

Have we considered trying a value between our min/max, rather than the nuclear option of bottoming it out?

I'd like to consider it if we have not, it doesn't feel like a very scientific approach as it stands.

Anyone have thoughts?

streetjesus

dr00 if this works to make inverse bonds more efficient what is the benefit of a middle ground? Wouldn’t it be best to support the option where inverse bonds as as efficient as possible?

abipup

dr00 honestly I'd prefer to lower the rate even more than what's allowed by the current framework. Imo even a 266% 1 year network growth rate is ambitious given the market uncertainty.

High APY will not encourage buy behavior, that meme ship has long sailed. Protecting backing and effectively using our inverse bond tool is what instills real confidence in the protocol

KRDeez

I support this proposal, we should make IB more effective while they are active and keep the price stable.

ether0

against.

dio

Is this going to be like a floating rate dictated by market conditions?

theswanwar

While I understand the benefits of reducing reward rate, particularly in these market conditions, I do wonder what the motivation is for going to the absolute lowest rate in the current range. Also with the new frame work we are working on that will reflect a reward rate better suited to market conditions, does this then mean at some point in the future the rate ‘could’ then increase as sell pressure decreases and market demand increases so long as we are within a certain supply range? Or are we to expect a continual decline in reward rate from here on out?

dr00

theswanwar +1

theswanwar

theswanwar also, I don’t understand why the only options are lowest rate and ‘do nothing’ I have yet to vote because I don’t disagree that inflation right now can be an issue but would like to see a breakdown of some sort as to why a specific reward rate is chosen. As it stands I would have to vote for do nothing because I don’t know why I’d vote for the lowest possible without some metric for that option. I’d certainly consider lowering the rate to increase efficiency. Or maybe a proposal where we reduce the rewards for LPs? Just a thought. How productive has the previous OIP where stakers split rewards with LPs been? Are we seeing clear measurable benefits from this? To be clear I’m not saying we aren’t seeing benefits. I’m genuinely curious on the performance of our actions and if reducing rewards based on this proposal make the MOST sense.

DarkLord_gr

I agree why go to the bottom, we should go at the middle first and check for the lower possible %? We want to attract more investors at some points for bond revenue no?

dr00

DarkLord_gr +1

dr00

We should consider targeting 333% APY as a compromise and evaluate from there.

From a marketing & community standpoint this memetic quality would be welcome. I can just picture it now, all of the "WE'VE HIT 333% APY FOR THE FIRST TIME IN PROTOCOL HISTORY" memes and tweets.

It'd be an incredible missed opportunity if we bottomed it out the range immediately.

Wartull

dr00 we set reward rate, not APY, so it would be v hard to have that for more than a few epochs

GMasterFunkflex

333% surely???!!!

111-altrektcrew

Wartull i would prefer a more gradual reduction but i sense urgency in the need to deal with selling... inverse bond capacity can only take so much, it's using our treasury dai to fund? thus lowering reserves.. a conundrum...we've got to be able to weather this storm/bear and macro is shit and will be for a while

dr00

Wartull this isn't necessarily true anymore since we changed APY calc to use circulatingSupply rather than percent staked. We have maintained a constant 467% for many weeks now.