• General
  • Launch an Operator-Free Cooler Loan Clearinghouse

nicnombre Thanks for the clarification. I do believe something like cooler loans is needed to create a rate arb and bring down the cost to collateralized OHM, but by going as far south as 0.5% we will nonetheless release animal spirits and undercut ourselves as a cost. That doesn't make a lot of sense to me. An interest rate of 3.3% seems more appropriate IMO.

It would be beneficial for you to talk with the team/community so we can be aligned on more conservative subscription terms before this is moved to an OIP. As things stand it is a bit of an overreach. My suggestion would be for you to bring 3 subscription terms to Discord and we can discuss and vote on what makes the most sense.

    Shpadoinkal Short answer - no. Long answer - this likely drives us back to a premium. Because users with a higher risk profile than the treasury will see this as a very attractive way to have exposure to OHM and participate in other defi opportunities. It is essentially a call option on the success of OHM. Plus, I expect some to loop this by depositing OHM, borrowing DAI, and then purchasing OHM. This could provide the demand and exit velocity needed to restart the flywheel. Which ultimately is what is needed to recommence bonding and help OHM achieve its goal

      ruby33 yup had a good chat in discord with hOHMwardbound and @nicnombre and this proposal now makes way more sense to me..I think parameters as is makes a lot of sense too. I'm all for this now that I've gone a little deeper.

        Shpadoinkal great to hear as this is a very logical path for me and one of the few things I’ve felt strongly about in a while

        0xFelix it is already used and listed in defi. Think of this proposal as liquity recognising that ETH is a reserve asset and setting the floor on borrowing against it at 0.5%. It makes ETH more useful not less, even if it boxes out other protocol's business cases.

        If competitors can compete with the interest rate they will, if they can't they won't

        We don't need to live under an inefficient market system that says a backed token needs a 6% interest rate - as a community we can use the treasury to set the market rate and others can build a network of products and services around that.

        We have an advantage over other protocols wanting to be the reserve currency, we have a treasury! and we should use it to box out the competition!! The best way to do that is to ensure it is regarded as a prisitine collateral with best in class rates and this proposal provides a vehicle for doing that

        Finally LFG! Seems to me objections are about other protocols but this is something for holders. That’s where the focus needs to be. How to put ohmies first.

        notSHAFT don't we want these spirit animals of there are no liquidations? Why would we not want as much looping to drive to a premium as possible?

        Devil's advocate (on perhaps a bigger issue): Wouldn't this give out essentially a free hedge to short the Endgame uncertainty? (1,2,3,4) Does Olympus really want to lock in an oracle-less exposure to DAI at this time? If DAI goes to peanuts, that's 175m trapped with no way to escape, no?

        just concerned of psuedo RFV mechanic if LTV is 95 or more while were below back…

        Also don't necessarily want to see the treasurey reduce its ETH composition

        Can see the upside. if implimented as is would drive me to shift stables to ohm and actually borrow againts it which i've been hesistant to do in generall

        nicnombre I believe you might be a little confused because of our recent update. Let me clear few thing out for you:

        Vendor does not need oracle to operate and does not lend a "certail % LTV" based on oracle price. Vendor allows to lend a constant amount per unit of collateral. This was a thing way before Cooler loans were announced.
        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. To save remaining lender funds. I do not believe that this is supported on Cooler.

        Vendor V2 charges 0.3% of borrowed funds from borrowers and that is it. We will update the docs.

        Vendor loans did operate for gOHM quite well and this is a live example: https://v1.vendor.finance/?chain=ethereum

        We find this shift from a protocol that served this purpose for OlympusDAO quite successfully, that being Vendor, to Cooler loans to be quite odd. I would be happy to hop on the call and walk you over Vendor Finance as we believe a clarity on what Olympus DAO already does on this front is required before going through with this proposal.

          This proposal essentially enables everyone to access the treasury backing for 0.5% interest per year. (Basically for free, given the risk free rate in DeFi is now at 3.3%)

          Depending on the loan to value ratio this could create a protocol wide level leverage which would be very unhealthy as you:

          Take out a loan from the treasury against OHM which is backed by the treasury, so essentially you could be treasury swapping (with 5.05% slippage @95% LTV) your OHM back to DAI. (in case you dont pay back the loan)

          From a macro risk management perspective this does make a lot of sense as this the only way to be truly decentralized and uncensorable.

          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 would rather see us apply a similar strategy as with RBS, where we provide a certain runway of available liquidity which we will continuously stock up as more people take out their loans. For example, provide an initial 75m DAI and see how the demand is.

          To be recognized as an uncensorable & decentralized reserve currency it is necessary to have low interest rates but 0.5% feels too low, even 1$ - 2% interest would be very attractive. Additionally, i would keep the LTV rather conservative at 85%.

          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. That being said, we obviously do not require multiple hundred million dollars to take advantage of it.

          Even if we "only" keep an active treasury of 15m - 50m it can still bring significant value to the overall protocol for example with the ongoing expansion of OHM integrations into various exchanges on various chains (ramses, chronos, aura..) and the bribing activity that comes along with that or liquidity providing activities into protocols like Morpho.

            Gm and thanks for putting this together @nicnombre

            I generally agree with expanding lending capacity but disagree to the extent being proposed. I think we can achieve the same goals with less capital but before I go into this, I want to align on the benefits of Cooler Loans.

            Benefits

            First, this solves a real pain point for users. There’s about $10M in debt against gOHM with some markets charging up to 10.5% APR. Most markets are maxxed out in capacity which demonstrates demand for leverage amongst ohmies. Expanding capacity at competitive interest rates will allow these borrowers to refinance. You don’t need full consolidation to achieve this, however. 

            Second, this should bring us back to Liquid Backing (LB) simply by opening an arbitrage between current market price (2832 DAI) and target price (3000 DAI). Moving away from lower cushion is beneficial as it reduces RBS expenditures and *may* trigger upper ranges of RBS. Again, I don’t think full consolidation to achieve this.

            Third, this strengthens OHM’s narrative as “good collateral”. Today, market makers incur slippage via xy=k liquidity which reduces ROI and eliminates some arb strategies. This introduces a novel form of liquidity with only a fixed 0.5% slippage. New opportunities open up but only if traders and market makers hold OHM (thereby driving demand for OHM).

            Finally, on a philosophical level, this makes explicit that backing is a utility *for* shareholders. This aligns with crypto’s ethos of building resilient systems by removing single points of failure.

            Shortcomings

            So what’s not to like? I see this proposal as pushing OHM deeper into a Store-of-Value narrative at expense of Medium-of-Exchange narrative. Why? Consider that today's stablecoin supply sits at $125B and OHM makes up only 0.16%. To be a common pair for DeFi requires expanding supply to match demand. Furthermore, full treasury consolidation will eliminate BLV as it may dilute backing and requires non-DAI assets to incentivize third-party liquidity.

            Naturally, I’ve seen a form of the following counter-argument: the current liquidity strategy has not led to price appreciation. Therefore, we must abandon and try something else. This is short-term thinking; a balanced approach achieves both. Let’s establish facts about the current liquidity strategy.

            First, I want to point out that in the past year, we’ve seen OHM liquidity reduce from 100% POL to 80% POL (https://dune.com/spoysp/top-ohm-pools). BLV and bribes will continue bringing that ratio down. This is actually beneficial for Cooler Loans as capital locked in POL can be re-hypotheticated toward supporting larger lending market capacity.

            Second, there is clearly demand for OHM liquidity. stETH BLV vault sits at $3.2M and is the largest stable-stETH pool in DeFi (https://defillama.com/yields?token=STETH). OHM-FRAX is the 7th largest stable-FRAX pool in DeFi (https://defillama.com/yields?token=FRAX). This is not counting a pipeline of 9 LSD+stablecoin partners interested in BLV (which would result in +9 counter-pairs).

            Third, cross-chain liquidity achieves a dual purpose: unlock opportunities for ohmies that are priced and capitalize on Arbitrum momentum. On the former, 92% of holders (34,138) hold less than 1 gOHM; high gas fees prevent participation in most trading strategies. On the latter, there’s significant demand for OHM liquidity on Arbitrum. Case in point, within 1 month of launching we’ve already integrated 2 partners. 

            This is by no means product-market fit (yet) but this is progress toward making OHM a common trading pair. The path forward should be to scale these initiatives rather than killing them right when things are getting good. What does this path look like?

            The path forward

            I see a balanced path that achieves the goals of Cooler Loans AND makes OHM a common trading pair. What does this balance look like? 

            First, I want to expand on what we’re trying to achieve here: 

            1. Refinance borrowing into lower interest rates by tapping into backing

            2. Bring OHM back to liquid backing

            3. Introduce enough volatility to activate RBS

            I believe these goals can be achieved (or at least validated/invalidated) on a smaller deployment of Cooler Loans. How?

            On the point of refinancing, there is about ~$10M outstanding debt against gOHM. The minimum capacity should accommodate those borrowers.

            On the point of bringing us back to backing, the deep POL sitting in AMM (presently, ~$60M) works against this proposal by requiring large directional pressure to push price (~$2M to get to upper cushion). Reducing liquidity and implementing Cooler Loans on a smaller scale will bring us to liquid backing but does so with less capital. 

            The added benefit of reduced liquidity is more volatility. This coupled with supply locked in Cooler Loans *should* activate upper ranges of RBS.

            Conclusion

            To summarize: I generally agree with expanding lending capacity but disagree to the extent being proposed. I think we can achieve the same goals with less capital. This proposal should not be taken lightly and I suggest the community consider both short-term and long-term implications of the proposal as it’s currently written. 

              So I've re-read the proposal a few times now and have put together a few thoughts for discussion.

              Treasury is seen as a Honeypot making much of the risk Protocol Owned.  This system seeks to distribute that risk (privatize it) to discrete holders without bias.  The need for Treasury Management is largely minimized, and the protocol will just programmatically lend DAI on fixed terms to any holder.  It clearly cites in the post note that it’s authored with a bearish outlook on the macro and hopes to derisk itself allowing every user to take on (or not take on) whatever risk they deem fit.

              Objectively, this is a perfectly reasonable, albeit bearish stance but subjectively, I find myself trying to sort what number between $0 - $175m is right.  The Protocol has already exchanged $46mm DAI for OHM via Lower Cushion IB and, to date, that’s been acceptable.  This just iterates on that, making a low-cost loan available to everybody vs. a situational burn mechanic.

              Ultimately, I see a place for this to exist (Especially given the predatory lending rates that have emerged) and for those who agree, I just think we need to debate how much and what the scaling strategy is.  The argument is made if it’s too small then you essentially exclude Ohmie X not getting to recognize their backed value, but Ohmie Y does purely because of timing.  That said, making it fully available fundamentally changes protocol structure and it’s largely a one-way trip.

              My current outstanding questions are:

              1. Can this scale if we opt to start small vs. splashing the pot with cheap money? Pro and Con this out.
              2. How much POL and of what type is needed in this system. How does it scale with adoption?

              Foot Note:
              Brand Consideration - OHM has seen a lot of monetary conditions. Hyperinflation, Hyperdeflation, Token Migration, Soft Pegs Below Backing, Etc. I genuinely believe the iterations made are ultimately for the greater good but, it's a lot for market to take. Can we be gentle? Consumer trust is important and we suffer there at times.

              Looking foreword to the discussions and next chapter.

                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.

                  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.

                  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.

                  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:

                  1. 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.

                  2. 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).

                  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