Motivation - “how do we make 80% of OHM productive?”

The objective of this initiative is to formalize a strategy of turning the currently unproductive staked OHM and encouraging more productive behavior in the ecosystem. The projects outlined in Olympus DAO’s 2023 product delivery lineup are all huge steps forward in building out the OHM ecosystem, but the current staking model is not really compatible with them. Specifically, staking acts as an unnecessary hurdle for these projects to clear.

We should have a plan in place to encourage transitioning from staking to these new products as they go live. There are three Options below, which range from gentle to aggressive in terms of transition speed.

Option 1: One-time OHM bond as a temporary replacement

Steps taken:

  • Wait until lending AMO test is concluded, and for Flex Loan and alOHM have decent alternatives

  • Issue a single bond market at fixed 7.33% to mature in 6 months

  • After bond market closes, begin turning staking to 0 (cliff or slower decline tbd)

The problem solved:

Several projects are more complicated to complete due to staking existing and the gOHM token’s ubiquity: OHM bonds, on chain gov, LP farming, and lending OHM for example.

However, moving staking to zero now without an acceptable replacement risks a very poor user experience with no solid timeframe for improvement.

The compromise is to use an OHM bond to fill the gap while these projects are being worked on. Users who want “simple” yield can get into the bond. Meanwhile the “use case” projects are easier to complete since they don't have to compete with gOHM anymore.

Option 1 Pros:

  • Projects have better chance of success and are simpler to execute

  • Lowers emissions now; saves potentially $millions in OHM emissions

  • Maintains a base use case for users; “softens the blow”

  • “Forces” users to search out better yield opportunities and use their OHM

Option 1 Cons:

  • More complicated to manage vs keeping staking around

  • Requires partnership buy-in (flex loans, alOHM, Euler/Silo)

  • Potentially high dev effort to make fixed rate OHM bond at scale

  • High user effort; must unstake and move to OHM bond to maintain yield

  • Potential for above average sell off on maturity

  • Short term solution that will need addressing in a fixed time frame

Option 2: Wait to touch staking until suitable alternative projects are completed

Steps taken:

  • Wait until the following projects are implemented and successful:

    • Lending
    • Leverage
    • LP farming
    • OHM bond vaults
  • Once the above list is satisfied, reduce staking to 0%

The problem solved:

Staking is the core of the protocol currently, and gOHM is everywhere. Killing gOHM’s “simple yield” option before alternatives arise is a surefire way to put the protocol in a bad position.

We need to give the market time to find other solutions organically. We shouldn't ram through massive changes without having solid solutions in place first.

Option 2 Pros:

  • Simple, “wait and see” approach

  • Low risk of community disillusion with yet another change, Gives community plenty of time to warm up and embrace the idea

  • Gives partners plenty of time to find alternative yield paths

Option 2 Cons:

  • High cost in emissions vs ending staking sooner, potentially in the $millions

  • Does not solve the issue of staking cannibalizing on the success of other alternative projects (OHM bonds for example)

  • Impacts the likelihood of users seeking out of alternative yield sources while they are being rolled out (think: lending, LPing, or things under discussion like a passive OHM pool for Gearbox)

  • Potentially negative feedback loop of “wait and see”, but the problem could be staking so we never get to see

Option 3: Stepwise staking reduction

Steps taken:

  • Wait until Lending AMO test is finished (a few weeks, target completion is Week 13)

  • Reduce staking to 2.33%

  • Wait until the projects list from Option 2 is complete

  • Reduce staking to 0%

The problem solved:

This option is a bit of a compromise between the two other ones. It's less risky than Option 1 while still reducing the long term protocol cost. It's “smarter” than Option 2 while still avoiding complexity.

Option 3 Pros:

  • Relatively simple

  • Lowers cost to the protocol

  • Allows other projects to somewhat breathe and buys them time to be successful before fully killing staking

Option 3 Cons:

  • Kicks the can down the road, doesn't fully simplify other projects like OHM bonds

  • Does not solve for gOHM token making other projects more complex (like on chain gov)

  • Doesn't save as much as Option 1

Voting process:

Discussion in this OIP is to give final thoughts and add any important pros and cons to the respective lists. An informal poll will be active for 2 days, followed by a Snapshot lasting 3 days. The informal poll on this post is not binding; all three Options will go to Snapshot for an official vote. I've also added a "None of the above" option to reject all three strategies and go back to the drawing board.

The most voted-on Option in the Snapshot will be the selected strategy for the DAO to follow.

Which strategy should the DAO follow?

This poll has ended.

Ideally, one could just go with Option 1, but for a maturity that is exactly as long as it takes to effectively realize Option 2. sort of analogous to the difficulty bomb, but in that context we would be cornering ourselves into reissuing bonds. obviously just a theoretical solution with no practical sense. however, I still think there is a value to passive emissions: the forcing function to outgrow the market. I'm a little disappointed that Olympus Give didn't gain traction, because I do think that splitting emissions make a lot of sense if the recipient minimizes the cost of growth for the econOHMy. this is not what staking is atm, but if we go with Option 3, I would want to see a bond vault that specifically resembles that split. arguably, the onchain governance will retain some sort of discretionary complexity, and likewise there are going to be future options for passive self-governance (e.g. Allo Protocol). my point is, staking served a purpose at some time, imho it's worthwhile to ask whether the alternative projects are sufficient enough, or incompatible enough, replacements to justify a 0% emission for staking when a perceived 2.33% might suffice in the right context.

I am in favor of Option 2. Except just waiting until cross-chain OHM is ready before moving on to Option 3 or 1.

Reason is, any "product" that is built on mainnet is going to be useless for most of the OHMies. As unbanksy recently shared, >90% of wallets hold <1 gOHM. Anyone holding <1 gOHM pretty much can't benefit from anything built on mainnet, since the contract interaction itself will eat up most of the yield.
e.g. OHM-FRAXBP currently can yield >20% but the steps involved in getting to that point only make sense for someone starting with at least $10k of capital. All of this will become a bit more affordable on Arbitrum e.g.

We should be building for the future, but not at the cost of leaving 90% of our holders potentially behind.

    Voted for option 3:

    • it has the benefit of stakers not having to take immediate action
    • allows time for build out of alternative OHM utility options without holders being forced into a 0% yield ultimatum
    • allows partners time to adjust/pivot products built with the staking rate in mind
    • reduces the utility hurdle rate
    • sets a base rate and allows us to build a yield curve on bonds on top of the real world meme of inflation rates being between 2-3%
    • it can happen immediately

    Option 3 holistically is the only way that I feel we can go without causing a lot more issues than we solve with the move towards ending staking.

    • As Mark11 said above, stakers don't have to do anything right now - that is good because for many stakers they'll need time to get their heads around the other options available to them.
    • Most of these are known quantities but as discussed not yet live/widely available, which means there is opportunity both for partners to pivot/get ready built into Option 3 and also for education on why the move from staking is ultimately a positive move (I certainly believe it is but the low IQ take on this needs to be managed).
    • Bonding has obviously received more and more positive feedback as it moves from 'experimental' to a more mainstream acceptance (long way to go obviously) - this narrative can be built on given some time, which again Option 3 provides.
    • Given the position >90% of wallets hold <1 gOHM, more time to build value in alternative utility to replace staking makes sense.

    In the wider market context and also in context of Ohm's major narratives Option 3 seems the most protocol-positive - users are brought along for the ride, users understand that the protocol-positive outcome aligns with the most user-positive outcome…

    When OHM starts trading at a premium over RFV, RBS system will sell reserve/LP bonds at discount and increase Ohm supply. Will it not dilute the existing Ohm holders in the absence of staking APY? Or are we planning to never use reserve/LP bonds to increase Ohm supply? In absence of staking rewards, only highly professional supporters of Ohm with huge capital can benefit from its echonomy. Retail investors will benefit only from its price stability, not from the growth of the protocol. Please comment

    z_33 I'm with Z.

    Especially cross chain makes a huge difference for UX. I don't think the wait for that will be dramatic.

    I'm not sure if removing the staking rate will impact product performance dramatically in the next few months, while I do think it carries risks for our user base. In a perfect world, interest rate fall, and OHM starts being used way more often as a borrowing/collateral asset. However, especially ohmies will know that the creation of financial opportunity does not always mean it will be capitalized on.

    Cross-Chain will put a lot of eyeballs at OHM again, that awareness is what I believe will impact the success of our products a lot more. Even the ones on Mainnet.

    Voting option 1.

    The last OIP we had on staking indicated we're moving towards a bond centric future. Lets stick to that and really commit. Staking rate to 0, bond markets full force.

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