So I think this solves a good bit of problems and am mostly for it. I do wonder how loan facility things will work. I guess they would have be lent out in Eth instead of stables. I think most would prefer to receive stables when they borrow. If a stablecoin called ohmUSD was made and backed by like 10x value in Eth then we could have some stables available but there could potentially be not enough available to fill the demand and people will be forced to borrow Eth instead.
Deez I think it would be interesting to watch a fresh "stable" OHM with a low marketcap, tight range RBS and initial liquidity created via a BLV with the rebranded coin. Debt-backed RBS anyone? Top of RBS range rewards backers and a stability pool? Just thoughts
Interesting idea! Another one which a DAO contributor mentioned is a stable OHM value with all yield + RBS returns flowing to another token which could be airdropped to current holders
thomasscovell If this proposal does nothing other than give OHMies time to reflect together on that vision then it has done a very useful thing.
This is indeed the main goal: Kickstart thinking about the future and building this vision together
Mark11 you need to think BIGGER! There seems to be no reason we can't launch this in addition to continuing having OHM
I'm all for bigger, bolder and more innovation. Reason we didn't go for a completely different approach is that this proposal can be used as a basis to ideate upon, happy to hear some crazy ideas!
4848 So I think this solves a good bit of problems and am mostly for it. I do wonder how loan facility things will work. I guess they would have be lent out in Eth instead of stables. I think most would prefer to receive stables when they borrow. If a stablecoin called ohmUSD was made and backed by like 10x value in Eth then we could have some stables available but there could potentially be not enough available to fill the demand and people will be forced to borrow Eth instead.
There are some interesting ways for lending and borrowing which could be used. I don't think a Cooler setup would work well together with this proposal, but am happy to be proven wrong if someone has some creative ways.
Iâm in favor of this.
Having been involved with Olympus marketing, it has become clear to me that, for Olympus to take significant âmindshareâ again, a new bold vision has to be followed. I believe that leaning into ETH will do exactly that.
I see two visions at play here:
The Cooler proposals argue (as I interpret them) for rapid decentralization and autonomy, regardless of the impact on product positioning.
This RFC creates (in my opinion) strong product positioning but lacks a path to rapid decentralization and autonomy.
Here's my idea of an ETH-backed OHM that has decentralization and autonomy as core values:
A way to do this is by for example using the $12M in annual staking rewards, and allocating a % of that to DAOs who want to implement OHM / built OHM products. Allow OHM holders to vote for which DAO should receive what.
Instead of Olympus building out more products, adding more complexity to the protocol, and thereby making it harder to eventually become autonomous, the DAO should have autonomy and decentralization as its main focus. A strict roadmap to autonomy is necessary.
--
Some other thoughts & feedback points:
Product Positioning: I don't think we have to completely deviate from positioning ourselves as a flat coin. It should just play a bit more of a background role. As I see it, when OHM Mkt cap starts to grow significantly against ETH's, and RBS capacities increase, both ETH and OHM would get consistently less volatile. The end goal can still be a blockchain-native currency, it just has a different roadmap. Although it will be very difficult to position that in a clear and effective way.
Rebranding: Not a fan of this one. I think we should embrace our imperfections, Olympus has a remarkable story. Even with a rebrand, I struggle to see how you would get rid of the bad brand image. I think our actions will speak louder than words. i.e. if you're anti-OHM, but OHM continues to gain market cap, mindshare, and adoption, then at one point, you'll have to let go of your ego and truly seek to understand its product. Being able to mint ohmies that way, creates a community with extremely strong convictions.
I think this conversation is a great conversation starter.
This vision creates a future we can all be excited about.
Departure into the unknown - with 200m at stake.
The recent activity in the forum and discord servers clearly shows that individual parties have different perceptions of the current state of OHM. We all should take a step back and look at the big picture. Olympus is in the unique position of owning one of the biggest treasuries in the entire crypto space. Unlike others, our treasury is not full of the protocol native token but hard US-Dollars and Ethereum. The odds of any other project ever owning such a big treasury again are very very unlikely, therefore we should treat it that way. With caution and principle protection as the number one concern. A treasury should NOT be treated as one's own personal portfolio, and any allocation to volatile assets above 25% with 200m at stake is absurd in my opinion.
Whatever will cause the next bull run does not require $200m in initial funding. I love all the innovative ideas that people bring up on the forum, including Cooler Loans, and this one. A DeFi native currency fully backed by ETH is a super exciting experiment but in my opinion that should be run like a startup. We don't know if there is an actual product market fit why risk 200m when we could create a spin-out, raise 5m dollars, or use $5m from the treasury to run this experiment? I think that would be a much more reasonable approach to any major shift that people wish would happen to OHM. Risking this once-in-a-lifetime size of a treasury would be detrimental to the long-term future and the possibilities that might come up, which we don't know about yet.
yieldohmie Departure into the unknown - with 200m at stake.
This might as well be the title of Cooler loans as well, don't think that is a valid argument.
yieldohmie our treasury is not full of the protocol native token but hard US-Dollars
The fact it is hard US-dollars makes the entire point of having a decentralized reserve currency invalid.
yieldohmie A treasury should NOT be treated as one's own personal portfolio, and any allocation to volatile assets above 25% with 200m at stake is absurd in my opinion
Which is why making a very clear choice, 100% ETH, always, makes much more sense than an arbitrary choice for strategic assets, certain stables over others and a plethora of weird investments into protocols which have nothing to do with Olympus or which do not even get support from this very community.
yieldohmie does not require $200m in initial funding.
It is not funding, it is backing which is an entirely different thing. The 200m will fully be used to back the new token, not 4.5 million in salaries as currently is the case.
yieldohmie We don't know if there is an actual product market fit why risk 200m
If one thing is certain after 2.5 years is that there is no product market fit for the current direction.
yieldohmie Risking this once-in-a-lifetime size of a treasury would be detrimental to the long-term future and the possibilities that might come up, which we don't know about yet.
Risk is inherent about crypto and the current state of this industry. People want volatility and a chance to have upside. The current design of the protocol does not allow this, resulting in historically low volumes and buy pressure.
On first read⌠I'm actually inclined to vote for this proposal. But I won't just yet, I love that it's carefully written, lays out a realistic and long timeline for discussion and execution, so it deserves careful consideration.
yieldohmie We don't know if there is an actual product market fit why risk 200m when we could create a spin-out, raise 5m dollars, or use $5m from the treasury to run this experiment? I think that would be a much more reasonable approach to any major shift that people wish would happen to OHM
I do like this idea too. Time for another Olympus subDAO?
I'm still soaking up the proposal and thinking through what has been laid out but wanted to drop a quick comment to say that I do appreciate the way this proposal was formatted and that there are clear next steps with iteration and consensus built in, instead of a push to rush implementation. It is helpful reading through how this proposal either supports or changes the Olympus roadmap and why these changes are proposed.
I do agree about the overall exposure to USD being a risk. My line of thinking there has been that Olympus could survive the collapse of DAI if the treasury and rbs were to adopt an ETH system, but if ETH collapsed I don't see the protocol surviving long term even with a fully DAI backing. Obviously there will be more volatility in USD terms with ETH backing than with stables, but perhaps stability against the USD is a limited way of framing things.
Internally there's been discussion about what an ETH based RBS system looks like for a while now, so I am in favor of exploring this option. I appreciate your willingness to accept feedback and open minded discussion points.
z_33 I feel way more inclined to say that ETH-backed OHM should be the main DAO and this DAI-backed Cooler-focused one is a subDAO.
Like, which of the two is more aligned with the original vision of the protocol?
i.e. ship $69M to Cooler, and use the rest for an ETH-backed OHM.
Although all of this should go under careful consideration first of course
I am so bricked up by this.
Thank you for everyone who has left a comment! I would like to do an open call-out to the DAO and Council to respond to this RFC as well, since I want this to be a collaborative process. Since at this moment, 80% of the people would like to explore this idea further, I think it's opportune to ideate about the possible implications of this RFC.
First of all thanks for the effort and the comprehensive proposal @Quilters.
I think this idea has crossed the mind of many ohmies, and sharing a proposal like this should kickstart a healthy debate around its pros and cons. Personally, I think such debates can be beneficial when facing "uncertain" times like the ones we have ahead of us.
With that being said, these are the things that I like about the proposal and which excite me to some extent:
Tese are the things which I am not excited about or which I'm doubtful of:
Overall a great proposal. Looking forward to hearing other people's feedback!
0xRusowsky Unless you are extremely bearish USD like Balaji, this proposal loses the reserve currency narrative (means of exchange and unit of account are lost because of ETH's volatility in USD terms). Olympus was trying to fulfill this missing piece in crypto, and this proposal would mean that we accept our failure in that regard and move on to pursue a new vision.
I think we should measure it in terms of buying power / goods & services. In the end, that's what everyone cares about. I wouldn't be surprised if, compared to those metrics, it actually makes a lot more sense.
I also don't think Olympus failed that mission if it would be ETH-backed, it feels like that vision is strengthened. As OHM's market share grows compared to ETH, I believe it would create a positive feedback loop where both assets become increasingly less volatile.
To me, an ETH-backed OHM will:
Thanks for putting this together. Iâm still thinking through this and paths forward but wanted to share my thoughts sooner to drive discussion forward. Perfect is the enemy of good; some of these thoughts arenât fully formed, I appreciate it if you point out any weakness in my logic.
The biggest unknown to me is why would a DeFi user want to hold such an asset? Competing on incrementally better features against incumbents is an uphill battle for attention. Is newOHM just an incrementally better product or is it a zero-to-one innovation? If we can answer this question with conviction, then demand (and thereby pmf) for this asset should be much clearer.
For this reason, Iâd like to first explore why a DeFi user would choose newOHM over other options.
The setup: Assume, for the sake of simplicity, a new asset called newOHM that is fully ETH-backed. This asset uses RBS mechanics to dampen ETHâs volatility and it reduces ETHâs volatility by 75%, in USD terms. This means that, in USD terms, when ETH drops 10%, newOHM drops 2.5%. When ETH goes up 10%, newOHM goes up 2.5%.
I see 3 competitive offerings that a DeFi user must evaluate before selecting this new asset: USDC, index tokens and Liquid Staking Token (LST). Letâs explore why newOHM is superior to each.
1. Why newOHM is superior to USDC
USDC is probably the easiest. The target customer is a DeFi user who feels uneasy holding USDC for either regulatory risk or financial risk related to USDCâs parent company, Circle. Alternatives such as USDT, DAI & FRAX are no better. While this user is long-term bullish ETH, they still want a stable-ish asset to keep their onchain net worth in.
newOHM addresses this key pain point: a floating asset that is independent of sovereign monetary policy and free from de-peg risks. Its volatility is less than ETH so itâs âstable-ishâ to the user. The yield generated from LST preserves purchasing power in ways the USD cannot.
An important consideration arises: what is a Maximum Acceptable Volatility that makes this product appealing to the target customer? If newOHM inherits 90% of ETHâs volatility, I doubt users will accept the increased smart contract risk to rotate into newOHM. Is 50% sufficient? 25%? 10%? On the flipside, how feasible are RBS mechanics under these conditions; tighten the range too much and the resulting system may have no equilibrium (drains treasury to 0).
2. Why newOHM is superior to an index token
An index token is a token that targets a specific volatility of ETH. For instance, if you want to achieve 25% of ETHâs volatility, you could create an index vault that consists of 25% ETH and 75% USDC. Why is newOHM superior?
While this index token has a similar target volatility as newOHM, it lacks the value accrual that comes with RBS mechanics. In particular, newOHM stabilizes against OHM using RBS which effectively is a series of price auctions that grow/deplete treasury. So while the average volatility is equivalent to that of an index token, RBS mechanism yields higher returns (in ETH terms) that an index token cannot compete with.
newOHM, therefore, outcompetes index tokens on yield, which is a major demand driver. Consider that TVL of both frxETH and swETH has grown tremendously because of marginally better yields (5% versus 3.8% for stETH).
3. Why newOHM is superior to an LST
Perhaps the most challenging counter-argument is why I would hold newOHM instead of [enter your favorite LST]. There are two reasons as I see it: 1. RBS yield and 2. Good collateral.
RBS yield - because newOHM will have a monetary premium/discount, RBS mechanics capture this discrepancy into newOHMâs backing. If newOHM is then backed by LSTs, the additional backing increase coupled with LST yield creates the highest yielding asset while remaining less volatile than ETH. As I mentioned above, ETH staking yield is a major demand driver for DeFi users, even if itâs a few bps higher.
An important consideration here: RBS simulations will need to run to confirm this. In addition, the liquidity profile between OHM-ETH and OHM-stables needs to be balanced to minimize toxic flow while allowing for efficient arbitrage.
Good collateral - given that newOHM is less volatile, it becomes a much better collateral to borrow against. As DeFi users seek to maximize capital efficiency, newOHM offers same capital efficiency as ETH but with lower liquidation risk.
An important consideration here: crvUSD recently launched with a novel liquidation mechanism referred to as âsoft liquidationsâ. Does this reduce the value proposition that newOHM is a better collateral?
RBS yield as main differentiation
Philosophical and regulatory reasons aside, I see additional yield derived from RBS mechanics as the main demand driver for newOHM. The amount of yield generated from RBS to the extent that RBS functions sustainably is still an open question, however. If we agree with this conclusion, then features like good collateral, LSD diversification and BLV further strengthen newOHMâs appeal as an asset worth holding (but still believe that RBS yield remains the core differentiating feature).
Below Iâd like to explore additional ideas that may strengthen newOHMâs appeal.
Idea: newOHM as a basket of LSTs
Your proposal mentions a basket of LSTs yet such products have seen limited adoption. Case in point: Index Coopâs dsETH is an LST aggregator; it only has $1.5M in TVL.
Why would we succeed where they failed? If the answer is that RBS provides a yield boost, I can see the case for that. Just want to make sure Iâm not missing any other compounding effects. I would also ask whether being a basket of LSTs is better than becoming our own LST (see below).
Idea: newOHM as its own LST
Iâve already laid out why newOHM is superior to LSTs above. Becoming our own LST allows us to squeeze more yield and, potentially, redirecting extra fees toward future emissions. Infrastructure for becoming a staker already exists (https://www.geode.fi/ - kudos to indigo for pointing this out).
Idea: OHM as liquidity rails for all LSTs
Most LSTs today are solving the dual problem of validation AND liquidity where liquidity is incentivized through governance tokens. Case in point: LDOâs price hasnât changed since Jul 2021 yet its market cap has grown 38x (due to emissions to subsidize liquidity). Every LST provider has the same playbook; this includes frxETH (benefits from CVX power) and swETH (currently running an incentive program).
Itâs worth asking whether there should exist liquidity infrastructure that LSTs can plug into with little to no incentives. This would enable LSTs to truly focus on what theyâre best at: validator security, decentralization and scale. Token emissions could be redirected from liquidity incentives to creating a healthy validator base.
In their place, newOHM becomes the liquidity rails with deep liquidity and efficient routing to all LSTs. A cool consequence is that the Impermanent Loss profile will be similar to that of stETH-ETH (kudos to Oighty for pointing this out), allowing newOHM holders to earn additional yield on top of the RBS+staking yield.
Whether this is an extension of BLV or a completely new product is TBD.
Idea: Asset with native leverage and shorting
Cooler Loans makes more sense to me with a fully ETH-backed treasury. When youâre bullish ETH, you borrow ETH against backing and leverage into more ETH. When youâre bearish ETH, you borrow ETH and short it. This is a native lending facility baked into the asset, requiring no oracles or other dependencies. Iâm not sure what the value add here is but I havenât seen any asset do this. Worth exploring imo.
Iâll leave by saying that aligning Olympus deeper with the ETH ecosystem is a net benefit as it opens new avenues for monetization & utility of newOHM. While the current focus is on LST, itâs worth exploring how Olympus mechanics can work to make various components of the consensus layer more efficient. This can include MEV, Proposer space, Builder space, L2 settlement and integrations such as Eigenlayer. Olympusâ increased presence and engagement on Arbitrum (110K OHM bridged!) should not be ignored, either.
A comment on token design
Given where Cooler Loans proposal is at, I donât see how an ETH-backed future can co-exist with a fully consolidated treasury in DAI (at least this is my current thinking; curious to hear other takes). One way forward would be to create a new protocol with newOHM (need new name) and allow users to participate by exchanging their OHM for newOHM. Innovative bootstrapping mechanisms (e.g. reserve bonds) can be explored. Implicit in this is that those who take out a Cooler Loans must repay to participate in this new future.
unbanksy33
"OHM as liquidity rails for all LSTs" 100% for this. With leveraged LST products beginning to proliferate (collateral for loans and LST-backed stables), it will be even more important that there is adequate liquidity for liquidations. newOHM could fill that market demand quite nicely. (Current OHM can too with BLV)
Have decided to reject this proposal:
a) this isn't the right time for this. Cooler loans situation needs to be resolved first.
b) this needs to be a significantly scaled back experiment. May be a sub-DAO with seed funding from Olympus.
Hello everyone,
Very busy week on my side but I'm happy that there has been some discussions on this topic!
Let me try to respond as best as I can.
0xRusowsky Such a system offers cheap leverage for those who want to lever up when they are bullish ETH (buy OHM, borrow ETH backing, and repeat), and it would also be great for those who are bearish ETH and want to short (buy OHM, borrow ETH backing, swap to stables, wait for price dump in USD terms).
One challenge which people have relayed to me privately is that you again add some contract/organisational risk on top of it. (Much like why people still want to hold stables instead of OHM despite its great on-paper features.
0xRusowsky this proposal loses the reserve currency narrative
I sadly indeed think we should part with this ambition. The landscape has significantly changed and the world is simply not ready for this at the moment.
0xRusowsky Why would ETH maxis sell their ETH for ETH-backed OHM?
Mainly to let OHM be the vessel which brings more ETH exposure over time as opposed to just holding ETH or Staked ETH. The DAO should try to create products which make this possible (as it has done with RBS already)
unbanksy33 This asset uses RBS mechanics to dampen ETHâs volatility and it reduces ETHâs volatility by 75%, in USD terms. This means that, in USD terms, when ETH drops 10%, newOHM drops 2.5%. When ETH goes up 10%, newOHM goes up 2.5%.
With a true 1 to 1 backing the 'dampening volatility' part is not very true (at least compared to ETH). Imagine RBS pegging OHM to 1 ETH, for the sake of simplicity. OHM would very likely lag behind most major ETH movements, yet it also can add volatility since it's not super closely pegged. So therefor there will be situations where ETH drops 10% and OHM can drop even more (10% ETH drop + RBS cushion). This will become especially the case when OHM and ETH are seen as equal.
unbanksy33 1. Why newOHM is superior to USDC
To me personally this is a faulty comparison since USDC is a currency and newOHM (I like the ring of this ticker) is an asset. I strongly feel we should step away from any currency ambition since this already has been done many times (DAI can be created w stETH, LUSD is a superior decentralised currency with v minimal opex, Dinero brings an extra twist to the currency game etc).
unbanksy33 While this index token has a similar target volatility as newOHM, it lacks the value accrual that comes with RBS mechanics. In particular, newOHM stabilizes against OHM using RBS which effectively is a series of price auctions that grow/deplete treasury. So while the average volatility is equivalent to that of an index token, RBS mechanism yields higher returns (in ETH terms) that an index token cannot compete with.
This I agree with. In my discussions over the past week some have pointed me to the fact that if you hold a basket of LSD's, it is a double edged sword where the risk of ruin might be lower (if 1 LSD protocol get's exploited, we will never hold 100% of it), but you increase the chance you'll be hit by a potential exploit by exposing yourself to multiple protocols. The yield from those options + RBS + newproject should offset this imo.
unbanksy33 RBS simulations will need to run to confirm this.
Super hard, especially since we don't know the liquidity that will be out there. For RBS to work, you can't have an newOHM/ETH pool on-chain for example. If you have this + a stablecoin pool, your delta between OHM and ETH (on which RBS operates) will be arbed away by MEV bots, negating any effect RBS will have. By monopolising that redemption against ETH you can extract that value from the inefficient market.
unbanksy33 Your proposal mentions a basket of LSTs yet such products have seen limited adoption
There is also UnshETH (https://unsheth.xyz/) with 31m in assets. I agree that just being a basket is too light, but this would also allow for potentially a gov token to have some utility. I can foresee a situation where an LSD protocol would want to bribe to include their asset in the index to boost adoption, much like stables have been doing for years with Curve/Convex.
unbanksy33 Idea: newOHM as its own LST
I have to think more about this but think it adds some extra risk. Could be interesting as a v2 + diversification option.
unbanksy33 Idea: OHM as liquidity rails for all LSTs
My initial proposal (which was way too long) went way deeper on this front. I think there could be an interesting avenue to pursue here that makes things way more robust for all LSD's (much like frax's LSD pool attempt). BLV's could bring additional yield opportunities to current LSD holders who want to earn extra yield while providing liquidity. When I find the time I will go deeper into this.
unbanksy33 A comment on token design
Given where Cooler Loans proposal is at, I donât see how an ETH-backed future can co-exist with a fully consolidated treasury in DAI (at least this is my current thinking; curious to hear other takes). One way forward would be to create a new protocol with newOHM (need new name) and allow users to participate by exchanging their OHM for newOHM. Innovative bootstrapping mechanisms (e.g. reserve bonds) can be explored. Implicit in this is that those who take out a Cooler Loans must repay to participate in this new future.
I think a better question is to think about the general organisation of the DAO. With a smaller treasury and less overhead, the OPEX should be something which could be decreased significantly without compromising on innovation. So ideally there would be an opt-in procedure with newOHM and OHM co-existing.
z_33 Have decided to reject this proposal:
a) this isn't the right time for this.
When would be the right time in your view?
