Launch an Operator-Free Cooler Loan Clearinghouse

nicnombre

I think we should try to fight the fear that if treasury capital flows out to holders, it will never come back. I think thats only true if this network never delivers value in excess of the assets in its treasury. Otherwise only irrational actors default on loans. I think the positive outcome will be decided by whether the core components make OHM attractive enough from an r/r perspective to justify a premium. I do not think this is accomplished through treasury management and thus I see it as a positive to curtail these activities as a side effect of the proposal.

The question is: how much capital is needed to maintain those core components? I think that should be the guiding light. Inverse bonds would become irrelevant and bonds and BLE only require OHM, so the main uses of capital in my view become RBS and POL. Terms should be dictated by the minimum liquidity needed for those use cases.

0xTaiga But what will happen on Cooler when the price of gOHM will fall bellow 3k? The pool will be drained. Boorrowers will deposit cheap gOHM to borrow 3k, swap that for more gOHM and repeat. On Vendor oracle will automatically pause borrowing.

I don't think this takes into account the dynamics of the proposal. If the loan amount is available at all times to all tokens, there is no benefit to an automatic shutoff. In fact, I'd argue that would be more of a bug than a benefit, as it would act as a worst case arb. If the proposal was implemented without the full availability, this becomes a more legitimate concern.

Also, to be clear, I have nothing against Vendor. I just think the borrower-lender matching role (where Vendor adds the most value) is minimal here, and you can easily compute that hundreds of thousands of dollars would flow from this community despite it putting up the capital on both sides. With a viable alternative there's no reason to do that.

yieldohmie That being said, i think its super capital inefficient converting the entire treasury to dai and just let it sit inside the new protocol.

I think this misses the point -- the dai doesn't just sit there, it goes into the hands of the community who can utilise it as they see fit. I'd argue that this is more capital efficient than the status quo which is constrained and often conservative.

yieldohmie Olympus is right in the heart of DeFi and the next bull cycle will come eventually, the DAO has connections to every protocol imaginable and we will be for sure somehow involved in the next innovation that makes the DeFi market go 10x again.

I'd also caution against the speculation here. I'm all for keeping the call on this outcome (the proposal accomplishes this well imo) but it is by no means guaranteed and it worries me to see it taken that way and used to make decisions.

unbanksy33 I don't think I view the third party LP initiatives in the same light that you do. OHM today is a stable-ish coin that has perpetual bids as well as these programs that push incentives onto pools. It creates a farmers paradise countered only by governance risk at the expense of holders, who subsidise the yield with either dilution or exposure to volatile tokens to secure incentives. I don't see that as net positive until these two conditions are met: OHM trades above its backing (LPs take on risk) and there is ample volume flowing through pools to necessitate the liquidity. That said, it does have the benefit of reducing reliance on protocol owned xyk liquidity (which gets us closer to that second condition), and if this proposal were to pass you'd see the first condition met (or at least brought much closer).

On cross chain liquidity, I'm all for it, but I think you discount the effect that providing the community with liquidity can have (this actually circles back to third party LP too). Right now, you need to bring in external capital or sell tokens if they want to be an LP. With these loans, you could simply borrow against a portion and then pair it with another portion in an xyk or concentrated pool. Ample liquidity on Ethereum and other chains can arise from that if people see value in providing it.

0xTaiga

nicnombre Interesting take yet I can not agree. If you do not have this stop you essentially buying cheap tokens with DAO funds aka offering a backstop to gOHM price untill pool is drained. This could be a valid usecase but I do not think this was the intent of the proposal. At least I am not sure community understand the implications. Yet this also cone be done with Vendor by toggling one switch and oracle check will be omitted.

shadow

I can see the benefit of having a facility such as this in that it allows the community to tap into liquidity at a higher price than today, while still retaining exposure to OHM. However, if that is the goal of the people here, I think it's important that we fit this proposal into a vision where OHM can continue to be improved and worked on.

As a long-time community member and DAO contributor, I would be foolish not to recognize the stagnation in demand for OHM. However, I echo the belief that Olympus is in a unique position to innovate, pivot as needed and be an important player in this ever-evolving space. That is by no means guaranteed, but I consider our relationships, contributors, internal processes and overall credibility as a community an intangible asset, a form of goodwill that is easy to overlook, as the market is today.

Impact on DAO projects

Maybe you could argue drastic steps are needed to turn this ship around, but I am afraid that accepting this proposal as is would make it very difficult to continue improving on OHM, mostly due to the restriction on emissions. I've compiled a list of projects that would be made redundant by that lack of emissions.

It's completely fair if people don't want to pursue these projects anymore, but the community was excited about them and I want to explicitly point them out so that we're all on the same page on what we are voting for.

Emissions Framework - Redundant if no emissions

Automated Emissions Controller - Redundant if no emissions

OHM Bonds - Redundant if no emissions

On-chain Accounting - Redundant if no emissions

RBS 2.0 - Depending on capacity and price action. Could see increased usage and reserve bonds if a premium builds up. Could also end up with 0 capacity and the lending market being RBS if price trades at $3000 gOHM (price for loan purpose in proposal).

On-chain Governance - This project could still be valid, implementing it is a substantial task, so if all the protocol does is allow you to borrow DAI against OHM, it could be going overboard and exposing the protocol to unnecessary new smart contract risk.

Cross-chain (Mint & Burn) - Project is live and the Cooler proposal doesn’t interfere with it, lack of opportunities to use it cross-chain would probably be a consequence.

Boosted Liquidity Engine / Liquidity AMO - Redundant if no emissions

Lending AMO - Redundant if no emissions

Treasury Management - Redundant with the whole Treasury being DAI

More information about these projects can be found here.

Impact on the DAO

Naturally, we would also need to consider the DAO contributors here as well. If we are restricting emissions, then there would be a need to significantly cut the working DAO's budget and members. Again, this is completely fine if the community wants to vote for that, the working DAO just executes the community's vision, but I want to highlight that it will be difficult in the future to go back on this and get the DAO working as it is today.

Going back to having the ability to retain exposure to OHM and tap into DAI liquidity, my main concern would be what kind of asset are you retaining exposure to if we cripple the ongoing work on it.

Possible middle ground

I think that in this proposal already there have been good suggestions around reducing the LTV or limiting the capacity, or increasing the interest rate. For the capacity and/or LTV, we could go backwards and figure out an emissions budget we want for the various projects and working DAO to be able to use to continue developing OHM.

If Maker increases the DAI savings rate to 3.33%, I'd be keen on keeping the DAI in the DSR, withdrawing from there and charging the borrowers in Cooler that same rate.

Yella

Relwyn

I'd like to echo Relwyn's comment on brand consideration.

Olympus has gone through many phases. We've recently started to communicate more clearly and vividly what OHM is to the public, and I feel like this could shake things up again. It's important that we do not distort the desired perception of OHM too often.

However, this does fit well with the ''OHM as a store of value'' positioning. But I do not think it should go at the cost of our ''medium of exchange'' narrative as Unbanksy said.

Another consideration for marketing is the reentry of gOHM as an important asset of Olympus. A one-token system would be easier to communicate.

All in all, great proposal. Thank you.

Lienid

This just becomes a very convoluted RFV redemption. It makes OHM wrapped DAI and kills nearly every single project planned. If the community wants a redemption then that is a different discussion and should be made clear within its own RFC, not hidden behind a seemingly (on the surface) unrelated proposal. Broken down into a couple points:

In order to be able to be capable of servicing full subscription nearly the entire treasury has to be converted into DAI. That defeats the purpose of this being a loan where you can pay it back and get back gOHM in the event gOHM goes up. gOHM will not trade at a premium, and backing will never go up because we are 100% DAI and have a pseudo-redemption. You say "allows work to proceed in a positive-or-neutral (but not negative) manner into the future" but this is both strictly worse than a pure RFV redemption, and kills any positive accrual.
This kills almost every single project currently planned (basically everything outside of OCG, although that's pretty pointless too after this) because it eliminates the capacity for flexible monetary policy used to drive network usage of OHM. As Shadow laid out you can't do BLV anymore because it relies on minting OHM and potential emissions, you can't do Lending AMO anymore as the possibility of bad debt in a market would be dilutive to backing below the 3k per gOHM mark, you can't do OHM bonds anymore as that uses OHM emissions that may push us below the 3k per gOHM mark, and this defeats the purpose of RBS (and RBS 2.0) because there is no downside or upside being a DAI wrapper.

There are however benefits to lending out backing against OHM at much smaller capacities. If you maintain the current treasury composition and create Cooler markets against major backing assets you can effectively outsource treasury allocation by setting a hurdle rate for borrowers to beat. I would be for setting up Cooler markets against DAI, ETH, and some other major backing assets at 10-25% of holdings at interest rates in the 1-5% range. That would be much more in line with my vision for automating (and thus reducing reg risk) the protocol which is more ETH and other uncensorable assets as treasury holdings, Cooler markets at 10-25% of holdings for each to outsource treasury allocation, fixed rate markets (basically a CDP) that take in backing assets and lend out OHM (basically setting the base fed funds rate for OHM), and expanding liquidity experiments (like BLV or others).

abipup

If the intention is to make this long-term immutable then a constant 3k DAI per gOHM should be replaced by an oracle which tracks the various backing assets controlled by the protocol. Such metrics are already being worked on in the On Chain Accounting project so it shouldn't be too hard to integrate. I understand the focus on de-risking but it seems quite bearish to lock it in to 3k DAI valuation forever.

Some more general thoughts on the motivations:

Reduces OHM-collateralised debts with third parties by 40-100%, saving the network an estimated $325,000-$365,000 annually (interest currently flowing from Olympus to other protocols like Frax, Vesta) and grows the treasury by up to ~$900,000 per year on a interest-receivable basis.

Depositing 100% DAI into the DSR contract would yield more than this though, especially if it gets increased to 3.33%. But directly saving OHMies costs of loans from other protocols is an attractive motivation for sure.

Provides significant liquidity (~$175m in the case of full subscription) to holders.

Minimises discount-to-backing.

Can't this be more easily solved by moving the lower wall to 3000 DAI per gOHM? It already provides the unlimited liquidity in the case of full subscription.

Stems the continued contraction in supply.

Agree with this to a point, assuming loans are paid back it does stabilize supply vs capturing it permanently via cushion/wall mechanism.

I think I'd prefer interest to be paid up-front; as it stands these loans are interest-free if you don't pay the loan back.

I totally agree that the protocol is well-positioned to provide attractive loans to OHMies. My main concern is that the loans become a forcing function to essentially shut down the protocol in 1 year if we see full subscription and no one pays the loan back. Full subscription means that we've gone full-tilt into "store of value" mode and abandoned any hope of meaningfully becoming a medium of exchange. It'd be basically back to the old days of everyone just sitting in the staking contract. In my mind this becomes a self-fulfilling prophecy to doom our other projects to failure.

Overall I think it's best to separate the "graceful exit," high liquidity mechanism from the ability to lever up on OHM. Maybe a good compromise is to use the RBS wall for the former, and a limited $33mm capacity Cooler loans clearinghouse?

@nicnombre, do you think an "unlimited capacity" clearinghouse that provides up to the full TVL of OHM is critical? What happens if it's TVL-limited in a similar manner of the other projects? Thanks ser

Lienid

abipup def agree that the stemming the continued contraction in supply is beneficial. seems like as it stands we're on a slow grind to almost nothing in the treasury

0xRusowsky

Being able to borrow against OHM/gOHM at liquid backing is a really interesting dynamic, and something which I'm really interested in. With that being said, I'm not totally on board with the proposal. Some of the things which I'm not convinced about are:

Consolidating all treasury assets into stables/DAI: why would we do so? OHM would end up being wrapped(wrapped(USDC)). I personally value treasury diversification into permissionless assets such as ETH, and I think most of the ohmies do as well.
While low-interest rates minimize friction and should increase borrowing, I don't think 0.5% is a rational rate. As a lender, you want to capitalize on borrowing demand. Such low rates are not as profitable for the protocol as they could be (especially when market rates such as Maker's will most likely end up at 3.3%).
By offering unlimited capacity, we would basically be opening the possibility to completely unwind the treasury. (on top of that, if the borrowing rate is only 0.5%, it is quite cheap for people to default). As stated by other participants, I believe that such change shouldn't be implemented at once, and the capacity should progressively scale up (if the intermediate outcome is desirable as capacity progressively increases).

Finally, some final thoughts that may be useful for others:

I think this proposal can have unintended consequences. We should carefully think about all the potential implications before voting in favor of such changes.
Borrowing at LB is cool, but this number goes against the current RBS setup, where the lower wall is at -7.5% of LB. One of the implications of this proposal would most likely be to drive price up, but there are other mechanisms to achieve this outcome without the other collateral implications.
It is clear that this proposal benefits users who want to de-risk from OHM, but does it benefit the protocol enough?

Shpadoinkal

0xRusowsky .5% is what liquity is at and it's best in class for borrowers as far as im concerned. With that said for a non liquidatable loan I think the % could be higher. But we should be trying to make OHM the best collateral with the best borrowing opportunities. Right now ETH is still better when it comes to borrowing efficiency but not stability of course. If we can bridge these two areas into one solution we have a very powerful product.

0xRusowsky

Shpadoinkal I agree, offering the best rates in the space is definitely something compelling. Nevertheless, you need to think of it as a business. In the lending business you have 2 revenue sources: interest rates and liquidations.

If you offer such competitive rates, you should expect to be able to capitalize on liquidations to book some profits. My argument is that without liquidations that rate should be higher, otherwise, it is too easy/profitable to default.

Don_G_Lover

Disagree with moving treasury assets to DAI
Rate should be determined by market (standard slope & kink model is not great, but we should think about it more). Inverse FiRM has a model that I quite like.
The amounts should be capped - moving the full treasury (of whatever composition) to a new protocol is irrational in many ways

Shpadoinkal

Respectfully disagree. You can treat it as a business or you can look at it as a reason to hold ohm and ultimately becomes our best marketing capability. I believe this is a demand driver and could be a loss leader.

Jem

A lot's been said, I'm going to try and keep it brief.
Disclaimer: I'm a DAO contributor (dev).

I'll also add that none of this is personal. I'm trying to look at this from the perspective of what's going to enable the protocol to achieve its stated goal.

Motivations

nicnombre has since shared the motivation that the treasury is too large and too risky, and that this is a way to reduce the size of the treasury
He's also said that there's a lot of bloat, projects that add complexity on top of the existing protocol (RBS), and experiments that don't provide profit, and is in favour of cementing the protocol as-is, making the DAO obsolete and seeing what happens.

I mention these, because understanding the motivation and desired outcome is important in making an informed decision.

IMO:

Agreed on the end goal of making the DAO obsolete, but I don't think this is the right time. Olympus as a protocol does not have what's needed to be a decentralized reserve currency.
There are experiments (so much of what Olympus is doing, and DeFi in the wider sense, is new, and requires experimentation). Some will work, some won't, some will require tweaks to work. I would welcome more guidance and feedback on the kinds of projects/initiatives that the community thinks would drive the protocol towards the end goal.
If there is dissatisfaction in the community about the projects being worked on, and/or their efficacy and relevance, then I think it's important to have discussions around that.
I think there should be a roadmap (that gets updated based on learnings and community feedback) towards that end-goal.

Capping

It was mentioned earlier (perhaps in Discord) that nicnombre wanted the full treasury to be converted to DAI and available for loans. He's since mentioned that he's open to capping (but has concerns). So this isn't all-or-nothing.

IMO:

From a security perspective, it is unwise to give a smart contract access to any significant portion of the treasury. Especially one that has only had 1-2 audits (plenty of exploits of audited contracts) and has not been battle-tested. RBS has access to a limited subset of funds for this reason. We can be sure that a smart contract with access to a $200m+ treasury will get the attention of hackers.
I don't think Cooler loans is a bad idea or implementation, but I think it should be capped to an amount that enables the DAO to test the impact. There should be goals/metrics set accordingly.

Implications

Without capping, we risk the treasury being emptied (or very close to it), and crippling the ability to continue development of the protocol. (shadow and unbanksy communicated this more effectively.)

Additionally, I think many OHMies are looking at this as a way to achieve price appreciation without constraining supply further. This is one approach, but I don't think it is the only approach. If OHMies want price appreciation and treasury growth to support the implementation of a decentralized reserve currency (which I believe we're all motivated by), then we should instead of focusing on (as has been mentioned earlier):

Bring OHM above liquid backing, e.g. ongoing discussions on reducing POL to increase volatility and trigger RBS
Making OHM the liquidity rails of DeFi (cross-chain and BLV)
Increasing the utility of OHM, e.g. through lending/borrowing (of which cooler loans can be a component)
(Not an exhaustive list, just ones I'm more informed about - please see shadow's forum post for the list of projects)

I feel that the unamended proposal (without a cap) is a net-negative for the protocol and the holders in the long-term.

meesterfooly

Interesting ideas being discussed. So much content. So just posting quick thoughts on prop.

1. My view on prop is RFV redemption + retained upside if DAO can generate surplus value (get value now + maintain exposure. Problem is the interest rate model presents a "free-rider problem". Dilutive to non-borrowers if OHM somehow does well, but free exit at backing if nothing happens (tbh, fair).

This is in itself not bad, HOWEVER:

- Liq is utilized for "virtual redemption" (opportunity cost to generate surplus value). Non-borrowers give protocol power to generate rev. Borrows cap the ability for protocol to do this.
- When mixing in retained upside at interest free, max LTV loan, it's too OP to borrow and wait. Since everyone should be doing this, coolers should be max subscribed always since it's -EV to not borrow.

TL;DR on this section: you can't think of cooler loans in isolation; liquidity used to service loans must be weighed against opportunity cost of liquidity used for other purposes. The liq should generate more value than .5% on top in perpetuity, but it's not clear atm that it's doing that tbh (likely generating losses?).

2. Prop is correct in that there should be asset consolidation. I agree w/ sentiment, and we should be simplifying/reducing asset dependencies. Not sure if all into stable is the correct answer as it removes a lot of potential attractiveness to most people in crypto (nobody is in crypto so that they can hold nothing but stables, imo).

Having volatility isn't a bad thing, and we have built some tools to address this (RBS as part of the utility is ++ to me). Deep liquidity is another piece, but it seems to reduce the upside. I think we can address this by removing upside stability (keep market liq low, add liq to cushions/floor in RBS) and let OHM run up premiums, but inverse bond discounts. Prob a discussion for another time, but there are ways to address the current flatline.

Question is: how to consolidate assets? Prob getting out of treasury farming/active management solutions and move towards autonomous/protocol-internal sources of generation. Imo this is in lending facilities where I think the proposal does a good job of putting us in the right direction.

TL;DR on this section: Agree w/ prop to minimize dependencies. Have few assets in treasury. Not all are stables, allowing some vol in backing. Use RBS to absorb downside vol for those that want to RFV OHM and exit. But in this way, those that want to exit at full backing can, and those that don't want to can't, but you can't choose both: have full stable-denominated liquidity and upside from surplus value generated with liquid assets that remain.

IMO, why this prop may be contentious is that there are different people with different ideas on what the protocol should do. Some want to explore and have increased vol. Some want to build new products. Some want to exit at unlimited liq. Some want to do a little bit of everything.

In my eyes the proper solution is to design a solution that allows everyone to make the right tradeoffs but give access to all. The protocol should be a highway where everyone is driving on the same infrastructure but people can get off at different points, if they are headed to different destinations. The protocol should not be an airplane. This is done w/ the right combination of using liquidity controls, credit facilities (primary for leverage and opting into vol), and simplified dependencies (stop farming, stop collecting shitcoins, stop multi-faceted initiatives that reduce collective coverage of whats going on) so everyone at least has the same high level view. How that looks can be determined together in future iterations.

I do see a future where the vision/intention of the protocol is driven by the principles of this proposal, but not necessarily with the proposed implementation. I personally would like to see adjustments to the mechs to make the tradeoffs less OP (less +EV) for borrowers and more +EV for keeping backing liq within the protocol.

TL;DR for this section: unlimited cap cooler loans is basically forcing everyone to be for or against the proposal, which makes it hard for the protocol to be multifaceted. Can think of alternative mechanisms so that different people get what they want (DAI value up to backing for their loan) but need tradeoffs that don't make it the clear cut best option for what to do with their OHM.

Wartull

Having taken the time to read all the input by many stakeholders in this forum post, I wanted to add my 2 cents as well. I won't rehash most of what has been said already since walls of text generally don't really help, yet want to point out some points which are not sufficiently covered in my opinion.

Limited capacity at 3K is the worst option
Trading at a discount to NAV has been hurting the protocol
Interest rates are not important in the current form unless they are paid up front

Even without taking into account that the proposal would result in the discontinuation of the DAO, any limited capacity above current market LTV's is undemocratic and goes against most of the principles Olympus has been operated with to date. It would result in a situation where only a subsection of the holders can 'cash out' at RFV. It would also result in a short spike in price, while ultimately going back to the current state because the capacity has been filled. Unless there is a strong conviction that only a subset of people would use this loan and would voluntarily leave 170 dollar per gohm on the table, this option is not a feasible one.

Overall, the fact that we've been trading under our NAV has been an ever-growing stain on the project, the token and the DAO. Overall, outsiders and especially institutional investors see this as a validation that either:

- The project has been burned by its success and (according to them) downfall
- The DAO isn't providing any value and if anything is a detriment to the token
- There is no redemption at NAV, which justifies the discount
- There is no market for a token like OHM

While I'm convinced that the road we've been taking over the year (Implementing RBS, creating projects that drive utility) is the right one, I am conscious of the fact that the longer this situation exists, the worse it will get.

I personally do not believe people will pay back their loans, since most will use this as a redemption against the treasury. Thus, the interest rate, in its current design of it being harvested when paying back the loan, would never be called upon anyway. If anything, a high interest rate would deter people from paying back, in the case OHM would trade at a premium. On top of this, in the current design, the interest rates go back to the holders anyway.

An improvement in case of unlimited capacity would be to take the interest rate up front and use that as a working budget to maintain the website, secure the contracts and water the plants till the projects eventually doesn't need maintenance anymore.

Overall, I do think the current design is a clear choice between continuing on the journey we've set out a year ago or calling it a day. In my opinion, voters should be given a version of this proposal which could co-exist with current projects and the DAO should investigate measures to bring us to NAV in the short term since this clearly resonates with a lot of holders.

citizen_wayne

The elimination of the operator role represents a significant advancement. This change boosts transparency and security, addressing concerns around unnecessary complexity. In fact, it's less about imitating other models and more about learning from their successes and tailoring them to our needs.

Touching on the loan terms and the use of OHM as collateral, I view this as a strategic move, not a special privilege for Cooler. It simplifies the system, making our offerings more accessible and thereby benefiting Olympus as a whole.

Interest rates and utilization concerns have been addressed proactively by Cooler. In sum, this proposal, when viewed holistically, signifies a leap forward for Olympus. Instead of getting lost in the details, let's embrace the possibilities this proposal brings! Strongly in favour of this!

« Previous Page