Summary
This Request for Comment (RFC) introduces the Olympus Engage initiative – an incentive program that distributes convertible OHM tokens (convOHM) to users who participate in Convertible Deposits (CD) and other protocol activities. The program is designed to accelerate adoption and incentivize the capital that drives protocol growth.
The incentive pool is funded by CD revenue that would otherwise flow to YRF buybacks, so no additional inflation is created. Participants who exercise convOHM pay a conversion price above backing, making every exercise value-accretive to the treasury.
Context
We're publishing this RFC during a period of broad market weakness, with OHM trading below recent levels and the Convertible Deposit facility currently paused as a result. We want to address this head-on:
Why now, with CDs paused?
Engage is the incentive layer that sits on top of CDs initially. Governance has recently passed several OIPs (OIP-194, OIP-195) that strengthen the protocol's position and set the stage for CDs to resume once conditions normalize. Rather than wait and scramble, we'd like the incentive framework to be discussed, audited, and ready to activate the moment CDs are live again.
Why propose a discounted mint mechanic in a down market?
It is important to note that convOHM is not a giveaway: every exercise requires capital outlay that backs a newly minted OHM and provides a buffer on top. Thus, the protocol receives more than intrinsic value on every mint regardless of the market conditions.
Motivation
Justification
CD deposits generate protocol revenue through sUSDS (4% APY) and offering loans to CD depositors (5.5% APY). Under normal operations, this revenue flows to the YRF for OHM buybacks and burns. This program redirects a portion of that revenue into an incentive pool – sized in OHM buyback-equivalent terms – and distributes it to CD participants as convOHM, incentivizing growth while maintaining the inflation-neutral properties central to Olympus's monetary design.
Why Options Tokens
The dominant approaches to incentivizing protocol participation today (inflationary emissions, points programs, and free token airdrops) share a common failure mode: they distribute value to participants with no further commitment required. The result is predictable: recipients who never intended to stay sell immediately, creating downward pressure and diluting the holders who do.
convOHM is structurally different. It is a call option on OHM with defined terms via a conversion price, a lock period, and an exercise window. To receive OHM, the holder must pay the conversion price in USDS. This design has three consequences:
- Only aligned participants benefit. Exercising convOHM requires capital outlay. Someone who does not want to hold OHM has no incentive to exercise, and walks away. The program self-selects for genuine demand.
- Every exercise is accretive to the treasury. The conversion price is set above backing, so every exercise generates a premium that flows to the protocol. The treasury grows with every exercise.
- No added inflation. The incentive pool is funded by the yield that would otherwise go to YRF buybacks. The OHM minted through convOHM exercise is offset by the buybacks that the same yield would have funded. Net supply impact is neutral.
Objective
- Accelerate CD facility adoption.
- Establish a modular incentive framework that can incorporate different yield sources (Cooler interest, sUSDe yield, etc.) and additional incentivized actions via future governance proposals.
Specification
Mechanism
Each incentive cycle (epoch) runs for 7 days. During the epoch, user activity is tracked daily and translated into off-chain points called Drachmas based on the activity rates and incentivized actions. At the end of each epoch, the total Drachmas accumulated by all participants determine each user's pro-rata share of the epoch's incentive pool. The incentive pool is sized based on the CD facility value generated that week.
Once allocations are calculated, the incentive_manager calls createEpoch on IncentiveDistributorConvertible, which deploys a new convOHM token for the epoch (via the convertible_distributor role it holds on ConvertibleOHMTeller) and publishes the corresponding Merkle tree on-chain. Users can claim their convOHM, which grants the right to purchase OHM at the conversion price after a lock period with a limited time window for exercising. Unexercised convOHM expires worthless.
Pool Sizing
The pool scales naturally with CD TVL – more deposits fund a larger incentive pool, which attracts more deposits. As TVL grows, the pool scales proportionally. Governance can adjust the multiplier, set caps, or add new revenue generation sources to expand the program.
Conversion Price & Exercise Terms
convOHM converts to OHM at a conversion price set below market — a deliberate discount that incentivizes users who actively support the protocol through active participation. The discount directs value specifically to aligned participants who strengthen Olympus by locking capital, voting, and increasing OHM's holder base.
To ensure the protocol is still capturing value from the conversion, the conversion price is determined by a dual-floor formula:
Conversion price = max(Backing × (1 + Buffer), TWAP × (1 - Discount))
Where:
- Backing – liquid backing value per OHM.
- Buffer – multiplier that ensures every exercise is accretive to the Treasury.
- TWAP – 1-day time-weighted average OHM price at epoch end.
- Discount – percentage below market that incentivizes aligned users.
Example (Backing = $11.59, Buffer = 20%, Discount = 15%, TWAP = $18.00):
Conversion Price = max($11.59 × 1.20, $18.00 × 0.85)
= max($13.91, $15.30)
= $15.30
The 15% market discount approximates fair conversion value for a 3-month maturity, ensuring that the incentive is meaningful without being excessive. The 20% backing buffer guarantees the protocol always receives more than intrinsic value per OHM minted.
Proposed exercise terms:
| Parameter | Value |
|---|
| Conversion Price | A minimum between the market value at discount and buffer-protected backing value. |
| Lock Period | 3 months from end of epoch convOHM was issued for |
| Exercise Window | 1 month after unlock |
| Expired convOHM | Not exercisable |
Activity Rates
The suggested Drachma rates and the initial set of incentivized actions are the following:
| Activity | Rate | Eligibility | Description |
|---|
| CD Deposit | 0.01 Dp / $ / day | 0.5 gOHM or OHM holdings or voting power | Deposit into CDs and hold receipt tokens |
| CD Borrow Bonus | 0.0025 Dp / $ / day applied to collateral amount | >80% LTV; 0.5 gOHM or OHM holdings or voting power | Deposit into CDs and borrow against the receipt tokens |
| CD Conversion | (convertedAmount × cd_deposit_rate × daysHeld) / 3 | 0.5 gOHM or OHM holdings or voting power | Convert CD position |
Premium Handling
When convOHM is exercised, the protocol captures the spread between conversion price and backing. Initially, 100% routes to the Treasury where it autocompounds at sUSDS rate.
Roles & Permissions
The program introduces two new roles, both managed via multisig:
| Role | Responsibility |
|---|
convertible_admin | Sets and adjusts the OHM minting cap alongside governance (DAO MS) |
incentive_manager | Creates each epoch on IncentiveDistributorConvertible and publishes the epoch Merkle root |
convertible_distributor | Authorized on ConvertibleOHMTeller to deploy each epoch's convOHM token and mint user allocation |
The OHM minting cap acts as a hard ceiling on total OHM mintable through the program, providing a governance-controlled safeguard independent of the yield-based pool sizing.
Rationale
- A dynamic incentive pool linked to CD activity makes the program self-regulating: incentives scale with the deposits that fund them, and the cost is yield the protocol otherwise spends on buybacks, ensuring no added inflation.
- Deferred minting structure gives users upside and ensures non-dilution for existing OHM holders.
- The conversion premium funds treasury growth.
- CD yield is a conservative starting point. As the program proves itself, governance can vote to add more revenue streams to expand the incentive pool without changing the core mechanism.
Risks
| Risk | Mitigation |
|---|
| Low size of the initial incentive pool | Program scales naturally with adoption |
| Oracle manipulation | TWAP price; multi-source validation through the PRICEv2 module |
| Smart contract vulnerability | Audit before launch |
| Launching during market weakness | Parameters tunable by governance at activation; backing buffer floor ensures accretive mints; activation gated on CD facility resuming |
Next Steps
- Community Discussion: Continued discussion regarding implementation.
- Audit: convOHM token contract, deployer, and IncentiveDistributor to get audited.
- OIP: Formalize into an OIP for execution once the audit is complete.
- Activation: Once CDs are resumed, deployment and activation, program rollout.
