- Edited
The OlympusDAO FAQ has a discussion of what would happen in a bank run. Despite having a PhD and 40 years of experience as a senior technologist, I have found it impossible to understand what this discussion is trying to say. Can someone please explain in more detail what this answer from the FAQ is trying to say? Where do these numbers come from? Where does the number 44,959,280 come from? None of this makes any sense to me. Thanks.
"OHM does not have FDIC insurance but it has an incentive structure that protects stakers. Let’s take a look at how it performs during a hypothetical bank run. In this scenario, we assume the majority of stakers would panic and unstake their tokens from Olympus - the staking percentage which stands at 92% now quickly collapses to 3.3%, leaving only 55,000 OHM staked.
Next, we assume the Risk-Free Value (RFV) inflows to the treasury completely dry up. For context, RFV is currently growing at about $1 million every 2 days. However, during a bank run this growth will likely stop.
Finally, we assume that those last standing stakers bought in at a price of $500 per OHM. The initial investment of these stakers would be:
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500/OHM∗55,000 OHM=$27.5 million\$500/OHM * 55,000\ OHM = \$27.5\ million$$500/OHM∗55,000 OHM=$27.5 million
As of September 15 2021, the total OHM supply is 2,082,553 and the RFV is $47,041,833. Remember that 1 OHM is backed by 1 USD (DAI or FRAX). By subtracting these two numbers, we know 44,959,280 OHM will eventually get issued to the remaining stakers. In roughly a year, these stakers who are holding 55,000 OHM will have:
$55,000+44,959,280=45,014,280 OHM55,000 + 44,959,280 = 45,014,280\ OHM$55,000+44,959,280=45,014,280 OHM
$27.5 million investment made by these stakers will turn into about $45 million based on cash flow alone if they stay staked (recall that 1 OHM is backed by 1 USD). In this bank run scenario, the stakers who stay staked not only get their money back, but also make some profit. Therefore, (3,3) isn’t just a popular meme, it is actually a dominant strategy."
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