• Proposal

  • OIP-6: Wrapped OHM and Improved Staking

Zeus

Wrapping sOhm and putting wOhm on FUSE are two very different proposals. We should separate the two issues for a vote.

Old 3,3
Ohmies stake on OLYMPUS and do nothing but watch the money pile up. Price stability is what they want or if prices go up even better. If price goes down they're not concerned as long as they see other Ohmies holding strong (e.g. the % staked doesn't change). Price stability > 3,3 > Price stability self-reinforcing cycle due to low liquidity and 3,3 mentality. Non-Ohmies see Ohm price stay the same during a bear market they want in. There's no tail risk because the Ohm staking contract doesn't interact with any other Protocol and there's no price oracle. Sure Ohm whales can sell and do whatever with the DAI they'd get, but they'd be giving up the 100K APY so it would not be a decision to be taken lightly. 3,3 is Game Theory approved and battle-tested during the last downturn (2 weeks ago).

New "3,3"
Ohmies stake on OLYMPUS. Most choose to "wrap" their sOhm so they can lend on FUSE b/c they get the rebases + lending rate. On the surface there's no difference between staking on Olympus or depositing in FUSE. However, they don't price-in the new risk factors. FUSE pool has liquidation risk and smart contract risk (price oracle / flash loans). It's possible even probable (given long enough time horizon) that they could lose wOhm even if they don't borrow anything. Only Whales have enough Ohm to bother with borrowing (at 800% collateralization ratio). So they're not "selling" their sOhm/Ohm but they are putting it at risk. They can "lose" their Ohm to liquidators who will then immediately sell on Sushi so saying the whales aren't the ones selling is disingenuous. Tail risk is increased but nobody knows by how much.

Now (3,3) has been split into two camps: W(3,3) vs S(3,3) with very different risk profile. S(3,3) get none of the upside for the volatility but they do get hit with the downside. They also realize that they are essentially subsidizing W(3,3) behavior. Why would the S(3,3) stay put?

We already know what happens when there's a price shock. Not even a week ago the Sushiswap price oracle was broken and everyone thought the price was still at $1500 when it was actually at $1050. When that error was corrected, it launched a wave of unstaking and selling which we still haven't recovered from. Why wouldn't FUSE exacerbate this?

To be clear: I'm FOR FUSE. I'm also FOR wOHM. I'm AGAINST wOHM on FUSE. You want to leverage and take on FUSE risk? Unstake and concede your (3,3) rewards. There's no reason why leveraged Ohmies should be rewarded for putting their stash at risk in a degen pool. If they put up regular Ohm in the FUSE pool, they are essentially getting 10X leverage already (using $80 IV as the baseline) giving up a 100K APY is not unreasonable.

      If this gets passed, what about a whitelist instead of a blacklist? i.e. everything thats not blacklisted is whitelisted. This way it can start rari only, and then we can vote here or on scattershot to add new protocols as desired by the community.

      i've been on the fence about this proposal since it was brought forth mainly because it's brought up a fair bit of conflict and I think that can be detrimental to a nascent protocol as innovative as this one, which is already difficult for most people to wrap their heads around as is.

      I've voiced various concerns in discord, however I do think that IF done well (and I do have a lot of trust in the Olympus team), then this can really grow the protocol and give us that money legos boost.

      I think for the most part I am for this proposal, however, due to how much confusion this has brought up, I think if this update is pushed, it will need an immense amount of care when it comes to the UX/UI with little question mark-y hover-your-mouse-over pop-up windows explaining things VERY clearly.

      Why not distribute the first wohm via airdrop? This would kickstart liquidity. Unstaked ohm holders could be airdropped wohm proportional to the rebase amounts they lost out on.

      This would help expand sohm ownership base to anyone who held a good deal of ohm for some time (o*t)

      We could also do the drop on matic

        publio

        I'm not sure you understand how the protocol works, feel free to hop into the discord and check out some of the forums or ask around to get some explanations.

        Also, I think olympus dao should steer clear of matic and all layer2 until they are thoroughly battle tested, and even then maybe it should stay on L1 forever since it isn't a tx heavy ux.

          I am FOR wOhm, Fuse and keeping sOhm. I would like us to do a cautious rollout of the Fuse pool, with initially high collateral requirements (can only borrow up to 20%) to maximally reduce the odds of liquidation. I am against any fee on wrapping.

          Reasonning:

          • I think we should support all the usecases that DAI supports, including composability. I think this is a core value proposition of OHM long term. If we can execute on this vision, Ohm will be a black hole absorbing the stablecoin market.
          • We're small and nimble. We can afford to make small mistakes, I think we should open the door with the fuse pool and reevaluate IF bad stuff happens. Move fast and break things, it's ok to make mistakes and learn.
          • We need to start building trust with the defi ecosystem and key partners. Rari is one of these, among many others.

            _mp_ yeah okay this, super on point. I'm officially super FOR wOHM, rari, and definitely keeping sOHM.

              luxophyBBZG
              My question is if we dont allow lending wOHM on Fuse, but only allow OHM, then why would anyone use it? Like you said at current APY you are essentially getting 10x leverage. That exceeds the amount of leverage that you can get through just staking OHM on Fuse by an order of magnitude, and just staking OHM still has liquidation risks that could induce a selloff. At that point why would there be incentive to use Fuse at all? The integration wouldn't be worth it.

              I think it is a valid point though that we should separate out the proposal of wOHM and wOHM on Fuse. Though if wOHM proposal goes through, im not sure if there is anything technically preventing wOHM from being used on Fuse or on other protocols like Fuse so it may be a moot point.

                  Bento Let's not forget what FUSE actually is: A degen pool for leveraged arbitrage between lending and borrowing rates that is also filled with liquidation bots. The normal (3,3) Ohmies would not use it, but Degens are always going to degen. We watched in real-time somebody sell 150 Ohm to buy AKITA. You let an ape borrow against their Ohm they'll probably do it just for fun because they're sitting on a huge stack and are just itching to do something with it. Using Ohm means INCREASING leverage because an unstaked Ohm is actually depreciating over time (which again is why we encourage the 3,3 mindset). The difference between using Ohm and sOhm in the leveraged FUSE pool is that the high APY associated with sOhm prevent casual unstaking hence reinforces the (3,3) mindset. If you put wOhm in the FUSE pool you are still getting the rebases so now you're incentivized to lever up (instead of discouraged).

                  By limiting FUSE pool to regular Ohm-DAI, the vast majority of the circulating supply will stay on Olympus in the form of sOhm and not in the FUSE Pool in the form of wOhm. Whatever shenanigans happens on FUSE will have a relatively muted impact on the price of Ohm (from which we derive the Premium). But if on the other hand, a majority of the circulating Ohm gets wrapped and sent to FUSE now Olympus is now exposed to much higher volatility and systemic tail risks that no one can fully quantify (cascading liquidations, hacks, flash loan attacks, etc).

                      luxophyBBZG Wait what? Fuse doesn't offer leverage... Do they?

                      I'm confused, are you for, against, or some middle ground?

                      Also the flash loan attack scenario was already addressed I believe.

                          Dudemyguy You do have leverage on FUSE. If you deposit 10 wOhm in the pool and the current Ohm price is $800 you can borrow up to $1600 DAI against that pool and buy 2 more Ohm. That gives you 12 Ohm exposure to price or 1.2X leverage. If Ohm price drops to $160 (an unlikely scenario) your collateral would be liquidated bc your collateral value is now the same as your debt. The details of the liquidation might be slightly different for FUSE but overall mechanics are similar. You might say that's crazy Ohm wouldn't drop that low. I would say that $160 is still 2X over intrinsic value so you tell me what multiplier is too low for a stable currency.

                              luxophy ah okay i understand. Well, yeah i guess that's a risk some people will take. I think the overall benefits of this composable wohm far outweigh the detriments, mainly that olympus dao, as @_mp_ so vividly expressed in a comment above, "ohm will be a black whole absorbing the stablecoin market".

                              If needed, maybe we could further protect against stability risks due to loan liquidation by, at times, heavily incentivizing the LP bonds and growing protocol owned liquidity that reflects the potential risks of collateral liquidation. Just a thought, not sure how this would work exactly and I'm no expert here, just riffing.

                                JFry4 whitelist by forum or scattershot vote, at least for a while. Like a guarded launch. then maybe move to an open system with blacklisting. Just my opinion. Seems logically cautious though.

                                  I'm for wOHM, as it is a necessary step forward to bring use case for OHM into the defi world.

                                  I'm also for new staking contract to combat against abusing the rebase timing.

                                  For wOHM in fuse pool, I don't have a clear opinion but here's my take:

                                  What attracts me to OHM is the powerful game theoretic cooperation in 3,3.

                                  This is a quote from Zeus's medium post comparing OHM vs ESD.

                                  Olympus sells new supply itself, ensuring that the profits from market operations are shared by all stakers, regardless of their sophistication or market activity.

                                  I think as a protocol we should make sure there's no dominating strategy vs 3,3 because it defeats everything if there's a superior strategy existing over 3,3, sophiscated or not. From the sound of it, put wOHM in fuse pool and borrow against it will be a better off strategy than 3,3. Maybe it will be better if 3,3 staker can share the profit generating from wOHM in fuse pool by some mechanism.

                                  luxophyBBZG you seem to trying to defend (3, 3), but you say people should unstake in order to do something with their OHM. That is somehow backwards for me. As I see it wOHM encourages more (3, 3) with the addition of more market risk exposure. Now I am with you that we should be careful, but being careful should not stifle progress. If we want to grow we will have to be integrated into the whole market, and that balls deep. So there is no way around dealing with things like liquidations. I say let the market sort itself out. We just have to make sure that there are options for OHM to flourish. So I am for keeping sOHM and adding wOHM after all, because I see it being good for (3, 3). Let us make sure the DAO owns the Fuse pool so that we control the liquidation parameters.

                                  I was checking in with Rari because I wanted to check if we could limit the initial volume for the Fuse pool. So an idea would be to configure a proxy/bookkeeping contract which is the only authority allowed to interact with the Fuse pool. Then we could say only 5% of circulating supply are allowed to lend and borrow wOHM to begin with. We provide the interface and are full in charge of our market after all. That way we can test the waters with the money lego and ramp up over time if the DAO things this is the way to go. @Zeus what do you think about this approach?

                                    Zeus

                                    Been busy and haven't had a lot of time to contribute to these great discussions. But a few things:

                                    • wOHM should absolutely be wrapped sOHM. Otherwise it's completely pointless. We already have naked OHM. OHM is already transferrable. OHM doesn't need to be wrapped in anyway. The point of the entire thing was to make sOHM more useful across DeFi. If it's not wrapped sOHM then we don't need wrapped anything.
                                    • To make it less confusing, the actual name I think should be wsOHM (include the "s "in it).
                                    • This should absolutely be a "pro" tool. I don't even think it should be in the main navigation. Let's not confuse the (3,3) meme. Let's not confuse the dominant, winning strategy for OHMies. wsOHM should be hidden on some obscure subdomain for pro OHMies who know what they are doing. It does not need to become an alternative strategy to the game. It should not confuse people in anyway. It's a pro feature for pro OHMies.
                                    • The conversation of wsOHM is getting too muddied with the exact logistics and parameters and configuration of Fuse. I think people are getting too concerned about the nitty gritty of exactly what happens on Fuse, liquidations, etc. Fuse is just one of many possible integrations that becomes possible by wrapping sOHM. We shouldn't let that specific protocol sway our decision-making process around making sOHM more useful broadly across DeFi.
                                    • DeFi is meant to be composable. It's meant to be open. I'm against any sort of special whitelist of protocols (i.e. Fuse only). Either we let wsOHM fly with its own wings and be open for business to anyone in DeFi, or we don't. It's understandable if we decide that it's not quite ready to fly on its own. That's a fair argument. But the whole point of wsOHM is to make it more useful. Be open for business. Let people integrate with Olympus. The whole point is to make the (3,3) meme much stronger, not less. Make sOHM more useful. sOHM is (3,3).
                                    • Zeus replied to this.

                                        Mick

                                        • it was wOHM for meme and linguistic purposes (wsOHM kinda hard to say cleanly) but yeah that adds a level of confusion that isn't worth it. wOHM = wsOHM but we should definitely call it wsOHM
                                        • Agree on last point, but what do you think of blacklist for pools? My only real concern with transferrability is a pool opening with the staked token that just provides a constant drag on price because some LP is greedy and wants staking rewards plus trading fees from everyone needing to arb the pool back together with OHM.

                                            One thing I want to point out for the people that are concerned about liquidations introducing more volatility to OHM: The single largest day of liquidations in $ on Defi lending platforms was on 02/22/21, which had about $129m in liquidations, vs. a TVL in lending protocols of 8.973b, meaning about 1.40% of the TVL in lending protocols was liquidated. Lets say the Fuse pool is able to capture half of the sOHM that is staked. Given our current marketcap of $132m and that 90% of supply is staked, we end up with about $60m in wOHM as collateral in the Fuse pool. Using the 1.40% figure from 02/22/21, this would equal about $840k of wOHM being liquidated, or about .06% of current supply.

                                            However, I think this scenario is very unlikely for the following reasons:

                                            • The collateral threshold that is being discussed has been in the 20-30% range, which would mean that OHM price would have to drop by 70-80% to trigger a liquidation for someone who borrowed the max amount of DAI from the pool.
                                            • Given the high collateral threshold, if price is dropping, those who borrowed against their wOHM in the pool should have enough time to manage their positions before being liquidated, I dont foresee that kind of drop happening without everyone being aware that they need to add more collateral.
                                            • wOHM should be increasing in value as time goes on due to staking rewards, therefore lowering the ratio of borrowed DAI to wOHM collateral and decreasing the likelihood of a liquidation event.

                                            Additionally, I don't think at our current market cap a 840k sell off would really matter that much in the long term and we would recover.

                                            Some caveats to the above numbers:

                                            • This is pretty rough back of the napkin math, and is just to illustrate a scenario where liquidations could happen and what those numbers might look like at current MC.
                                            • Data for Defi lending/liquidations was taken from Debank, you can play with the numbers here: Debank Lending TVL

                                            Some great points and scenarios posed by all. I've gone back and forth all day, but you've swayed my vote over to the camp 'for, keep sOHM'. Just submitted my vote.

                                            Cheers OHMies!

                                            Wrapped, Staked OHM will be a necessary transitional step for OHM as a currency. It should help Olympus transition from high yield driven demand to stable and abundant collaboration driven demand. I see wsOHM as the key to getting OHM in the door with most protocols.

                                            However, I think the conservative voices are right. We should wait. This is a great idea, but it's time is most likely after V2 launches and OHM has greater liquidity and a larger market cap. Further exposure to the rest of the market when Olympus is still relatively small and large market corrections are likely seems like the wrong move.

                                            My high level thoughts on how this plays out over the next 2 - 5 years:

                                            1. Degens flock to sOHM yields
                                            2. Protocols grows and more features are added as it becomes harder to push around.
                                            3. sOHM yields begin a very slow, gradual adjustment downwards.
                                            4. wsOHM enters the fray, driving degens to look for ways to earn further yield on top of their sOHM. This spurs on protocol collaboration and is the first use case for OHM outside of OHM that makes sense.
                                            5. sOHM yield continue its gradual downwards trend and OHM sees signs of consistent stability
                                            6. wsOHM is now used in many other protocols. sOHM yields are entering low enough territory that other protocol yields begin to compete. OHM starts to see use cases as a relatively stable currency.
                                            7. OHM collaborations and use cases continue to increase as stability continues to improve, even through bear markets
                                            8. sOHM yields finally begin to range 2-15% and is now viewed like a savings account. wsOHM enables easily moving your "savings account" around DeFi to earn further yield. OHM is now the most stable, multi asset backed algo currency in DeFi. Most in crypto chart against OHM instead of USD. Other protocols offer crazy incentives to attract Ohmie's savings accounts.

                                            Zeus

                                            Somebody in the Discord called me Captain No-FUSE (s/o G_MON3Y). While hilarious, it is untrue. I've had more than my say on this issue so however the vote goes, I'll support what the community decides. But if I have to be Captain Cassandra so be it.

                                            The fundamental issue here is not FUSE or even wOhm. The issue is the vision of Olympus. What are we? Zeus has been an amazing leader but I feel that the vision needs to be better articulated and not scattered in bits and pieces during random ZAD sessions and months-old Medium posts. It's not that Zeus knows best (although I think he does) but without that clear vision, everyone will push Olympus in the direction that they want to go and hence we have this divide.

                                            I believe that the heart of Olympus is (3,3). This meme perfectly encapsulates what actually separates Ohm from other hyperinflationary shitcoins. Game Theory and community spirit is what binds us, not the 100K APY and not autocompounding. (3,3) MUST remain the dominant strategy which means HODLers receive the best RISK-ADJUSTED gains. Anything that could undermine (3,3) needs to be scrutinized.

                                            The thoughtful Ohmies makes various arguments about how (3,3) won't change. However their very words belie that very thesis.

                                            "Let's tax wrapping" - A tax separates those who can pay the tax and those who can't afford it; the Privileged from the Plebs. Progressive income tax, Wealth tax, Carbon tax. Need I go on?

                                            "Normal Ohmies don't need to wOhm. It's only for Pros" - Dividing the community into Pro(3,3) and SD(3,3) is a good thing? How is this not splitting (3,3) community? What do you tell new Ohmies who come into the Discord? If you're a Pro you do this. If you're a Pleb, you do that. Let's start selling Pro(3,3) hats in the merchandise store. It'll be a smash hit.

                                            "We can mitigate risk by playing with CF ratios and liquidation levers and anyway liquidations should be embraced" - Translation: SD (3,3) should know their place and sit tight and watch the Pro (3,3) brag about their yuuge gainz during bull cycles (aka Genius szn) and tighten their seat belts during 20% market drops because volatility is awesome for a coin that aspires to be a fully-backed crypto stable currency. Surely no one will discount VOLATILITY into Ohm price when they make their purchase decisions. Need I remind everyone that our runway and treasury value comes from Premium and that Premium comes from high Prices?

                                            "Volatility is okay we don't need to be scared of it" - I must have missed the Medium article where Zeus talked about Ohm as a degen leverage coin that also gave you 100K APY. All the Medium articles I read were about controlling our own destiny, RISK-FREE value, boring discount bonds, and defending a price peg. Does Olympus want to be HIGH beta or LOW beta vs the DeFi market? Being LOW beta has worked out well so far but the Pros tell us that increasing our beta will take us to new heights. Nobody knows if that's true or not. It's disingenuous to present that notion as DeFi gospel.

                                            "New integrations are good" - New integrations are good if they ADD value and are not moving Olympus further away from what it is or aspires to be. DeFi is full of shitholes. Piling shit on top of more shit doesn't make things less shitty. I concede that Whales will do what they want so let them use Ohm if they want to take on more risk.

                                            "wOhm is a better collateral than Ohm because Ohm decreases value" - This is a feature not a bug. At some point sOhm will not emit 6-digit APY inflation gains and so you're just left with vanilla Ohm. Should we build deep integrations around this temporary and artificial construct? Should we incentivize MORE degen behavior by giving them huge IV leverage PLUS huge rebase APY?

                                            "You're still staked it's just a representation of sOhm" - If you have a Certificate of Deposit (CD)-which is a decent analogy to sOhm-that's an asset and you can add it to your net worth. If you could somehow take this CD to the casino where the game is totally rigged in your favor (99% chance of winning) and put it up as collateral. Is it still an asset? No by definition it's now a collateral. You have conceded a degree of control and ownership to the casino. What people actually do is PULL THE CASH OUT and then go to the casino. And in the case of wOhm you have not only risked your own stake, but the stake of others by exposing them to price risk that they have no control over and reaping the gains for yourself.

                                            "Whales who want to degen would otherwise unstake their sOhm and sell if we don't wOhm" - By allowing wOhm to be used, the best RISK-ADJUSTED return belongs to Pro(3,3) not the SD(3,3). If we have all these Ohm whales are just itching to sell their huge stack WHAT ARE THEY WAITING FOR? Maybe it's because they'd be giving up the 100K APY and they would be unable to get back to their original entry price. Maybe they want to have their cake and eat it too.

                                            New use cases are good. Integrations that are in alignment with the Olympus vision are good. I don't understand why I need to keep reiterating this point but I am FOR wOhm and FOR FUSE pools (and other pools) that are integrated with regular Ohm. But more importantly I am for keeping boring (3,3) as the UNIFYING DOMINANT STRATEGY with the BEST RISK-ADJUSTED RETURNS.