Hey folks,
I'm an analyst on the Messari Governor team, and I recently published a short piece primarily focused on the DAO's plans to reduce the rebase rate titled: Governor Note: Olympus Says Goodbye to Staking APY. I aimed to highlight the importance of reducing the rebase rate to establish OHM as a crypto-native reserve currency and overview each option's implications.
I hope you enjoy reading the free article on Messari, but if you don't want to make the click, here's a quick preview:
Key Insights
The launch of the Range-Bound Stability (RBS) system can provide the stability OHM needs to gain acceptance as the crypto-native reserve currency.
Olympus DAO has big plans to expand the supply of OHM sustainably, but the protocol’s rebase rate (staking rate) is suppressing the development and adoption of new projects.
The DAO is currently discussing the best way to transition the staking rate from 7.35% to 0%, with options ranging from a wait-and-see approach to killing staking emissions all at once.
Introduction
Olympus has long sought to establish OHM as crypto’s decentralized reserve currency with autonomous and dynamic monetary policy governed by Olympus DAO, OHM’s central bank. Recently, Olympus has pivoted away from its ultra-inflationary bootstrapping tactics to double down on the stability, sustainable growth, and adoption of OHM.
A few months ago, Olympus introduced a Range-Bound Stability (RBS) mechanism through OIP 123 and launched a lending market pilot program with OIP 127. Olympus is now considering designating Lending Algorithmic Market Operations Controllers (AMOs) as a key focus area in 2023 per OIP 130. Going forward, Olympus has an ambitious project list for the rest of the year.
Despite an ambitious 2023 roadmap, Olympus’ overall goal of the widespread adoption of OHM as a reserve currency has suffered at the expense of the fixed 7.35% rebase rate (staking rate). This risk-free rate gradually dilutes the liquid backing per OHM, while limiting the functioning abilities of projects focused on OHM utility. A thread was recently shared on the Olympus Discord to create a plan to bring Olympus’ once astronomical staking rate down from 7.35% to 0%.
Understanding OHM
Stability
In November 2022, OIP 123 introduced a Range-Bound Stability (RBS) system to mitigate OHM’s price volatility relative to a specific reserve asset held in Olympus’ treasury contracts. The stability of OHM as a reserve currency is fundamental to both Olympus’ vision and product roadmap.
The RBS system works by guiding market participants with economic incentives. RBS allows Olympus DAO to define some parameters to smoothen the market price of OHM, including a dynamic target price and the range in which OHM should float relative to the target price.
To finish reading this free Governor Note, head to Messari!
