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:

$$
500/OHM∗55,000 OHM=$27.5 million\$500/OHM * 55,000\ OHM = \$27.5\ million$$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."
$$

Ok I'm going to take a stab at providing some answers to my own question, though I'm still a little unclear on some things. Here goes:

Suppose there is a bank run and all but 3.3% of staked OHM gets unstaked. Let's suppose this amounts to 55,000 OHM. And suppose the people who originally bought this paid 500 dollar per OHM. This means they collectively paid 55,000 * 500 = 27.5 million dollars.

As of September 15, 2021, the total OHM supply is 2,082,553 OHM. I don't know why this matters, stating it just confuses the issue. But as of September 15, 2021, it is also true that the RFV is $47,041,833. (In other words, there is enough in the treasury to back each OHM with about$ 22 worth of assets). But theoretically, each OHM is backed by 1 DAI (with a value of 1 dollar), so if the RFV is $47041833, then the total number of OHM that can be minted is 47,041,833 OHM. Since there are 2,082,553 already minted, then there are (47,041,833 - 2,082,553) = 44,959,280 more OHM that will be minted.

The next sentence suggests that these will all be minted over roughly the next year. Why is that? I have no idea.

But we'll go with it. So over the next year, the HODLers will get that extra 44,959,280 more OHM in their accounts, bring their totals to (44,959,280 + 55,000) = 45,014,280 OHM. Even if the price of each OHM is now only $1 (1 DAI), the total value of their investment is now$ 45,014,280. So at the start of the bank run they collectively had $27.5M and now they collectively have$ 45M, so even though the price of OHM tanked, they still made a 63% return on their money over a year.

Parts of this are still a little hazy to me, but I think this is the gist of it.

2 months later

Thank you Zortag! I was also confused by the bank run section, which I believe is the crucial part of its mechanism. There are actually a lot of hypothesis to be made for the idea to make solid sense.

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