Mark11 Great questions! Let me go through them one by one:
Does this become, effectively, POL because it socializes the volatility of wstETH?
In some way, yes. But we cannot really categorize it as POL because it's not entirely owned by the protocol itself, and the liquidity is not permanent/guaranteed as depositors can always leave the vault when they want to.
How does this impact RBS? Are we not limited in the amount we can expose the protocol to? How much is that amount?
For these BLE deployments we would ideally strive for the liquidity mix that is set by the treasury team. As outlined in the new treasury framework proposal there is an ideal ratio between different types of LPs. On top of that - depending on the success of this vault - the treasury team could decide to remove some of the OHM/ETH POL to make sure the ratio doesn't skew too far while at the same time reducing the IL risk on the pairs that we directly own. I.e. we could potentially externalize the downsides of having ETH POL.
How much of our AURA voting power are we using for this strategy/ is authorised? How much will each party commit to the incentivization?
The treasury team currently manages the exact voting power split and as the vault grows they will likely allocate more voting power. The incentivization split aims for 50/50 but obviously depending on the LDO token price and the exact BAL/AURA rewards per unit of voting power, this will not always be equally split.
Why is this better than just locking up protocol owned ETH as wstETH and providing that as liquidity? which would also give the benefit of incentives to the protocol and holders instead of wstETH holders
First, we reduce the IL risk on volatile pairs. Second, I consider this to be a B2B product - meaning that we can create vaults in collaboration with other protocols for multiple high-quality assets that we would normally not LP ourselves. Then, on the long term, this also opens up two other things: 1) we can create more of these pairs, so that OHM could become a routing layer between various LSDs and stablecoins, and 2) you could argue that POL doesn't scale indefinitely, especially in an environment where there are no new bond sales. So through this product we could more efficiently scale our liquidity. For example, one option that we've been thinking about is using this product to bootstrap OHM liquidity on L2s.
How will we benefit from fees if they are set to zero? Why is a zero fee selected?
Olympus will get part of the trading fees accrued in the LP token. The vault fee is set to zero at the start since we want to test these vaults and see the results before determining a fee structure. This product is not meant to create revenue at the start, but rather to scale our liquidity and grow the OHM routing layer.
Does this not compete with the objective of OHM utility and building OHM as having a monetary premium, because it cannibalises OHM utility/liquidity options?
I would say it doesn't and I think it's important to not view this as a zero sum game. In fact, this product really adds to the overall utility of OHM because we start to create a routing layer for OHM that could settle transactions between various LSDs and other assets (and realistically, we wouldn't pair against all these assets ourselves without this product). It also (re)introduces DeFi users to Olympus since entering, exiting and viewing the vault can only be done on the Olympus front-end. Plus we intend to partner with various protocols so it also brings more exposure to the protocol and the recent changes we've made (RBS, utility, liquidity products, etc).
Also worth noting that the launch of this product doesn't mean that we will stop creating options for retail users to LP with OHM themselves. There are still pools being incentivized with voting power, the treasury team is looking into bribes, and we are actively exploring passive LP products for retail users with other protocols.