• General

  • Launch an Operator-Free Cooler Loan Clearinghouse

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

    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

      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?

        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.

            • 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

            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.

            • Jem likes this.

              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.

                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.

                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.

                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.

                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.

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

                1.

                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.

                2.

                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.

                3.

                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.

                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!

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