Will Bond Protocol raise funds for operational expenses? or is it currently self sustaining?
RFC - Deploy Permissionless OP as Bond Protocol
Makes total sense indeed. A clear win-win is possible here, as both parties will have skin in the game. The team created a super valuable product for the entire econOHMy. Well done!
It's a shame to see such a successful arm of Olympus spinning out on its own, but the logic laid out in this proposal makes sense. Couple of questions:
- Will the tokens accrued through OP that sit in the Olympus treasury remain, or be transferred to the new OP ms?
- You mention Olympus retaining ownership and gov rights in Bond Protocol, can you share more about how this will work? Through a token?
- Will there be any sort of revenue share between Bond Protocol and Olympus?
- Do you see foresee bonds protocol offering OHM bonds itself in the future? Or is the idea more to be a piece of infra that other teams can utilise?
For now against this proposal as I don't see the reasons or the value. The proposal still reads like there's some other reason that isn't being said out loud here because none of the reasons or "value-add" to Olympus sound like value-add. I'll go through each one by one:
"In order for Olympus Pro to scale and meet the demands of DeFi, it must be a credibly neutral platform laser-focused on bonds-as-a-service."
Permisionlessness is enough for being credibly neutral. Not sure how exchanging Oly multisigs for a different set of multisigs that includes Oly people changes that. Also not sure why laser focus can't be maintained while staying as an Olympus DAO team… it's already an independent team.
As someone else has helpfully given this example Oly Pro / Olympus relationship can be viewed similar to AWS /Amazon relationship. It can exist as an independent product while staying within the DAO.
"There is an increasing divergence between the development efforts of both a reserve currency and a dedicated bond platform."
Again, this divergence in itself shouldn't preclude splitting away from the DAO. Oly Pro is already an independent team within the DAO. I'm also not sure if Oly Pro is "divergent to reserve currency" goals to begin with. It was pitched as and continues to accumulate a wide variety of DeFi tokens that we'd otherwise have to either do strategic swaps or accrue through bonds. If those tokens don't add any value to our treasury, why did we accumulate them and continue to do so? why were they not dumped as soon as possible to realize profits? (my understanding is, it's because we saw value in accruing a wide variety of tokens)
"Assets acquired via Olympus Pro are an important, but relatively small, percentage of overall Olympus holdings and revenue streams. For example, every $1 in OP revenue is currently being priced based on the market’s perception of OHM."
just because it's a small revenue stream (I'd argue it's only one of the two "real" revenue streams i.e. non-dilutive) doesn't mean it'll stay so. I have no idea what the example is trying to say.
"By deploying OP as its own protocol, we believe that it will provide more value to Olympus than keeping it in-house and allow Olympus Pro to achieve a true appraisal of revenue streams and growth potential."
This is extremely vague, how?
"Importantly, there will be no fees charged for Olympus bonds deployed from Bond Protocol."
lol, this isn't a value-add. obviously there should be no fees charged for these bonds. They were envisioned and developed in-house by and for Olympus.
"By releasing Olympus Pro as its own protocol with its own mission (bonds-as-a-service), Olympus further focuses on its core product"
Again, the Oly Pro team is independent. See Amazon/AWS again.
"Olympus has made a large investment in developing Olympus Pro, while OP has accrued substantial revenues to the Olympus Treasury."
so has OP accrued substantial revenues, or has it not? because the proposal earlier states that it is one of the minor revenue streams. And if that revenue stream of a variety of tokens isn't something olympus needs to continue accruing, what we have accrued is also useless (or like 80% less useless now then back when it was accrued), so Oly Pro has developed as a brand on the back of "olympus treasury will likely not sell your tokens" meaning we end up sitting on huge loss in $ value accrued while OP spins off?
"Olympus will still benefit from Bond Protocol’s success and maintain substantial influence in its development through ownership and governance rights in Bond Protocol."
this is ill-defined. what does "ownership and governance rights" mean? how much ownership? and why should Olympus give up on 100% ownership and 3.3% fees for partial ownership and 0% fees?
tex OP revenue is currently being priced based on the market’s perception of OHM
My personal opinion - Feels to me that this is the central thesis behind this proposed splitting off and I don't agree with it.
If the problem is the market's perception of OHM, the answer is fixing the market's perception of OHM, not chopping up its pieces and selling it for parts.
I can't help but feel we can deploy permissionless bonds/pro under the Olympus umbrella w/o spinning up a separate entity, similar to how Amazon gave open-access to its infrastructure under the AWS arm. AWS could have been its own business with Amazon as a free user, but I'm confident that over time AWS (if it was separate) wouldn't eventually try to get Amazon to pay.
z_33 let me see if I can explain the example about OHM revenue in a way that makes more sense. Typically service models like bonds-as-a-service are priced according to their potential revenue streams. The market is not pricing in future revenue streams for Olympus Pro and are instead anchoring the value of OHM and the total assets in the Olympus Treasury. The analogy here is that Olympus Pro revenues are priced at 1x (or lower) price/earnings ratio. Independently appraising the value of bonds-as-a-service would likely result in a higher valuation, so even with partial ownership it would be a net gain for Olympus' balance sheet.
z_33 Also not sure why laser focus can't be maintained while staying as an Olympus DAO team… it's already an independent team.
That independence is actually a drag when you need to fight for resources which are currently being laser-focused on OHM as a reserve currency. There is a fundamental tension here that I do not believe will be resolved by keeping Olympus Pro in-house. The solution would require ramping up spending on OP at a point in time where budget is already stretched thin. Given the current state of the market, this would require running Olympus Pro at a substantial net cash burn.
As one of the developers of the new system and having thought about this a bit, I believe this is a good idea for both Olympus and the OP team moving forward. Here are the points that most resonate with me:
1. The new system is essentially a permissionless OTC market creator. At its core, it enables anyone to create a market to exchange one asset for another without requiring external liquidity. When viewed from this lens, there are a number of different products that can be built on top of it, not just the "Olympus-style" Bonds as we know them (I call these Repeating Dutch Auctions or Continuous Dutch Auctions - CDA was previously used by Paradigm to refer to a different mechanism so may be less clear). Examples include a dutch auction NFT mint, token launches, collateralized bonds, etc. However, a number of these products are not related to Olympus' core mission of creating a decentralized reserve currency; therefore, it doesn't make sense for Olympus to use cycles/pay to develop these kinds of solutions.
2. As its own protocol, the Bond system would be similar to a "hyperstructure" with very low or zero fees at the platform level and allow front-end operators to charge referral fees to markets that they route traffic to, similar to Liquity. A neutral protocol that provides infrastructure for this type of financial primitive will allow tokenized payouts to concentrate in the same asset for equal products. A different way of saying this is that allowing anyone to build off the protocol with no fees removes the risk of forks/vampire attacks and providing network effects for tokenized payouts like more liquidity. Similar to UniswapV2, the permissionless nature of the system makes it a potential target for forking. Instantiating the system as a neutral protocol with no/low protocol level fees removes two motivating factors to fork it and focuses on network growth. The current 3.3% fee model is not likely to be competitive in the future. Other offerings that achieve similar outcomes to OP have come out since that structure was put in place, e.g. Porter Finance and Solv Protocol, and others are being built, e.g. Concave Finance. Therefore, past/existing revenue streams from OP should not be taken as a given for Olympus. Significant work will need to be put into continued innovations on front-end applications (as one in the larger ecosystem), business development, and differentiated services (such as white glove operations and marketing) for partners to continue justifying that type of fee in the market. This will likely require more investment in the near-term than revenues generated by the current service given market conditions (not including development of new products). A separate Bond Protocol allows the team to raise funding to support these efforts instead of Olympus paying for them.
3. The protocol has been developed with Olympus' requirements in mind. All of the types of bonds that Olympus issues (reserve, inverse, and OHM-OHM bonds as well as both fixed-term and fixed-expiration vesting) can be handled by the system. Additionally, the "callback" functionality of the Bond system would allow Olympus to update custom payout handling logic as needed without changes to the core protocol. Since Olympus operates its own interface for bonds and the protocol will not charge Olympus a fee at the infrastructure level, Olympus would not be charged to use the system. Essentially, Olympus doesn't have any operational disadvantage by spinning off the system and has ownership in the new protocol to benefit from the up-side of growth in existing or new market offerings.
Largely agree with z_33 @dr00 so I will try to add new thoughts only
TL;DR For now, I see a need for better frameworks to provide resources to what has been one of our more successful P2P offerings, but I am unsure about spinning it out.
I read and hear (from the community call) the argument about pricing and price premium of the revenue made through OP as:
OP represents a very small portion of Olympus treasury, so there is no premium placed on its cash flow projections, getting this premium would allow for "true appraisal of revenue streams and growth potential".
The idea that spinning out = price premium with which to drive development is already speculating on how the market will value this, and whether whatever treasury the new project has will be more than what is provided by Olympus
The want/need to place a speculative or future-looking premium looks to be an argument about money and profit, not about what is good for Ohm or for OP. Just because it can have a token that the team can buy/sell at their discretion to fundraise doesn't mean that it should. (At what point do we say enough to extract value by selling a new token?)
Olympus can have separate teams, with separate and contained executive decision power over their own products. Instead of spinning out, the DAO should look to ways by which to staff/resource/provide capacity to these independent teams as well as empower them to do any necessary fundraising.
Mixed and hesitant emotion. But also delighted to hear v3 is on its way.
After reading the RFC, comments above and listening to the cohmunity call I am holding these beliefs:
- A split will sharpen the focus of "OP team", as well the "reserve currency team"
- Sharpened focus will speed up development, time to market and increase overall quality and control
- DeFi overall will benefit the better and faster these teams can launch products/services
Productivity will increase, and productivity is a public good.
The "tokenomics" or game theory of who gains, and who loses value is not addressed in the proposal so cant really comment on that. But to me, that is neither the main point. If it serves a public good, then that is the way to go.
I did once propose a "unified market place" to drive more volume to OP, but maybe it makes sense to keep and increase the separation just like its separated in tradfi between the Federal Treasury Bond market and the corporate bond market. Even more so if the target customers of the different bond types are likely to diverge come the future.
Excited for a permisionless version of OP to roll out and neutral on spinning it off under a new name. Someone mentioned how Amazon and AWS both coexist together so I have no issue with still calling it Olympus Pro.
Just to respond to the Amazon and AWS analogy, this is one of the points that I find doesn't make sense when you think about it. In our case, the more apt comparison would be if the Federal Reserve wanted to offer cloud computing services. There are also some risks that are being overlooked by comparing Olympus to a service company like Amazon/AWS. Olympus isn't trying to be a tech company, its mission is to make OHM a decentralized reserve currency.
Additionally, there is a difference between developing an MVP and launching a product with a significant development roadmap. Creating a separate protocol will allow us to raise external funds for development while reserving equity in the protocol for Olympus. The mechanics of how this will work are still pending some feedback from Council members, but we want to move forward with community approval for the strategic direction.
I fully support this proposal as someone who has followed OP (and worked on it in the beginning) since its ideation stage. Olympus Pro was always a separate product, meant to prove the concept of protocol-owned-liquidity by offering it to other protocols as a service, something I believe it has successfully done.
The teams working on OP and Olympus are very much separate even now, even though we're always there to advise and help each other out. I don't think that would change by OP becoming its own protocol, nor would Olympus development be hurt by it since contributors already focused their effort on one or the other.
What I think would be gained by this spinoff is that the OP (Bond Protocol) would have more flexibility in how they operate, not necessarily being constrained by Olympus and its relationships.
OP, like Olympus, is being valued at a negative premium to backing, something pretty unheard of in DeFi for a product such as this. Treating OP/Bond Protocol as an AMM is much more in line with the current reality, and you don't see anybody valuing Uniswap or Sushi based on their treasuries. Thus, I believe a spinoff would unlock more value and let the protocol have a life of its own. Note: None of this is financial advice, purely stating my opinion based on evidence in tradfi and the crypto industry.
tex fair enough. I think the problem here is it's hard to make this call without having at least some base estimates on what "bond protocol" would be valued at. I'm still finding it hard to see if giving up 100% control and 3.3% fee for some number greater than 50% and no fees is a good deal for Olympus.
I don't pretend that I have any idea how OP was created. What I do know it was created out of OlympusDAO, I saw it happen. That being said It was our DAO that funded OP, with our treasury. I appreciate all the brain work that went into OP, to make it successful. This was created from the risk that each and every person over the year put into this creation. It would be wrong to split off. Most deals I see in the news or have read about there is a negotiation, there is none here. Tex, I hear you speak and see things done that you seem like a fair person. Ohmies need to be apart of OP, or some form of compensation based on OP value. I have always gone with the majority because I saw a lot of smart things being done and tried. This in no exception, this could be a really good thing but done the right way. rant over thank you guys