• General

  • Request For Feedback (RFF): Partnership Between OlympusDAO And Umami Finance

Summary

Umami Finance is asking for OlympusDAO’s support for a proposed partnership to accelerate OHM’s liquidity on the Arbitrum network and establish OHM as the dominant reserve currency for the network’s growing ecosystem.

Umami Finance is an Arbitrum-native protocol that provides a suite of infrastructure for scaling liquidity on Arbitrum including wholly-owned treasury assets, market-making LP deployments, and affiliated DeFi projects. OlympusDAO is preparing to rapidly increase its liquidity on chains beyond Ethereum Mainnet and has publicly identified the Arbitrum network as a high-priority target for expansion. Umami would like to partner with Olympus in order to lock that liquidity in its treasury and establish gOHM as one of the most liquid tokens on Arbitrum.

What is Umami Finance?

Umami Finance, previously ZeroTwOhm, is an established protocol on Arbitrum with a growing, vibrant community. Umami began by forking Olympus and has since expanded with the end goal of increasing liquidity across Arbitrum.

Umami deploys its protocol-owned treasury assets to establish liquidity for its partners on Arbitrum. It’s strategy, which does not involve establishing UMAMI as a reserve-currency, compliments OlympusDAO’s Proteus initiative by ensuring that “rented liquidity” remains locked on Arbitrum long after emissions have ended.

What Umami Can Offer OlympusDAO

Umami has built up substantial holdings of gOHM on Arbitrum and is preparing to utilize its resources to improve gOHM liquidity across the network. An OlympusDAO partnership would allow Umami to double down on these efforts and extend gOHM’s reach further.

Umami has already independently raised more than $1.3 million in gOHM prior to OlympusDAO’s launch of Proteus incentives on the network and it has more than $9 million in treasury assets overall. It is preparing to issue gOHM paired LP bonds, including upcoming gOHM-ETH bonds, which it will use to build new gOHM-paired LPs on Arbitrum.

With a Proteus-incentivized gOHM-UMAMI trading pool, Umami could accelerate its gOHM LP bonding and more rapidly extend gOHM into new trading pairs. Umami will also commit to swapping its primary ~$3 million LP from UMAMI-MIM to UMAMI-gOHM, which it would execute via a MIM → ETH swap on Arbitrum followed by an OTC ETH → gOHM swap with Olympus DAO. This is part of the larger vision of establishing gOHM as the primary reserve currency of DeFi, ensuring gOHM is the most liquid token on Arbitrum, and integrating gOHM utility across the network.

As part of an OHM partnership, Umami is prepared to quickly onboard gOHM and other complementary assets to Arbitrum. Umami has established a partnership with Synapse Protocol to support cross-chain gOHM liquidity coming to Arbitrum.

Umami’s treasury strategy is highly complementary to OlympusDAO’s. Umami takes a more “risk on” approach to its treasury allocations, and would acquire a broad basket of assets to support gOHM trading liquidity across a wide array of LPs. OlympusDAO will benefit from broader liquidity than it could facilitate with its own, lower-risk asset holdings while avoiding the risks of holding such assets itself.

Umami will leverage its relationship with its affiliated project, Arbi’s Finance, to support uptake and integration of gOHM on Arbitrum. Arbi’s Finance incubates and develops projects that fill gaps in DeFi functionalities on the Arbitrum network. The Umami/Arbi’s team plans to integrate OHM utility into the use cases for Arbi’s projects, such as an upcoming lending protocol.

Why Arbitrum?

Arbitrum is an optimistic rollup built on the security and decentralization of the Ethereum network. It has attracted more than $2.5 billion in TVL in a short few months since launch. The Arbitrum network is poised to see a dramatic uptick in TVL and usage when it rolls out its planned Nitro upgrade, which will lower its gas fees even further and position it as a leader among L2 scaling networks for Ethereum.

Umami Finance has a supportive relationship with Offchain Labs, the organization behind Arbitrum. Offchain is helping Umami build partnerships with other protocols on the network, which can generate additional use cases for its gOHM liquidity on Arbitrum. Despite its popularity among users, Arbitrum has low liquidity compared to other EVM competitors such as Fantom and Avalanche. Umami is poised to lock liquidity on Arbitrum and establish Olympus’ presence on the chain with deep gOHM liquidity. The Umami team foresees a future where the most liquid token on Arbitrum is gOHM, supported by Umami’s treasury.

Umami’s Treasury Strategy and Tokenomics

Umami raises capital for its treasury by issuing bonds at a modest discount to the current trading price of UMAMI. Its current asset mix includes over $1.3 million of gOHM, and ~$600,000 to ~$800,000 each of ETH, BTC, and FRAX. It also owns a $2 million MIM-UMAMI trading pair that is deployed on SushiSwap and generates exchange fees for the Umami treasury, as well as $2 million in MIM that is staked on Abracadabra’s MIM-2CRV pool and earning ~$500,000 annually for the treasury. Additionally, Umami was the first protocol to launch gOHM bonds and is preparing to launch other gOHM-paired LP bonds, including gOHM-ETH, in the coming days.

Umami takes an innovative approach to capital raising that could allow it to become a sort of “sandbox” protocol for OlympusDAO. Umami looks forward to sharing the observations and data it gleans from its deployment of new bonding initiatives with OlympusDAO’s policy team.

Umami is preparing to roll out an innovative staking feature called “Marinate” that pays a portion of Umami bonding fees to stakers who agree to a variable time-lock. Umami will soon begin offering bonds that pay out staked UMAMI that begins to accrue rebase rewards even before the bonds have vested. The Marinate and auto-staking options reduce sell pressure on Umami and encourage long term HODLing, which helps to ensure that the gOHM-UMAMI LP won’t be used as exit liquidity by Umami HODLers.

Umami’s Ownership Structure, Governance And Team

Umami has a diverse and growing investor base of ~2,000 unique wallets and a total supply of ~121,000 UMAMI tokens. The core team and staff hold ~40,000 Umami tokens, all of which are time-locked in 6-month, linear vesting contracts. These team tokens are non-staked.

Umami’s core team currently operates a five-person multi-sig with plans to transition to a DAO structure. Multi-sig owners are @0xPuffin, @0xPickACard, @ExaltedFoks, @luffyowls, and @underethsea. The team-run multi-sig is a useful, but temporary, tool allowing Umami to make quick decisions during its growth phase and rapidly take advantage of new opportunities. Community feedback is considered every step of the way.

Umami’s five core team members have deep experience in blockchain development and business development for DeFi projects. Umami also has half a dozen full-time staff with backgrounds in marketing, investor relations, product management, UX and graphic design.

Umami and Arbi’s Finance

Umami was created by the team behind Arbi’s Finance and launched as a DeFi project within the broader Arbi’s ecosystem. This ecosystem provides a variety of applications on the Arbitrum network and currently supports a gaming project called ArbiCheems, as well as a series of ARBIS and CHEEMS yield protocols.

The Arbi’s treasury accumulates fees from across the ecosystem, which it uses to kickstart additional projects on Arbitrum. Upcoming projects include a lending protocol, other soon-to-be-announced DeFi protocols, and an upcoming venture into GameFi. The Arbi’s treasury has supported most of Umami Finance’s business and operating expenses, but the Umami team is sending 90% of Umami bonding fees back to the Umami treasury to ensure its self-sustainability.

What Umami Needs From OHMies

The faster OlympusDAO can help Umami scale cross-liquidity between UMAMI and gOHM, the faster the Umami team can help establish gOHM liquidity on Arbitrum.

The first step for an OlympusDAO and Umami Finance partnership would involve establishing a large UMAMI-gOHM trading pool on an Arbitrum exchange.

Umami will take $1 million equivalent of UMAMI tokens from its treasury and provide that to the OHM treasury. In turn, OHM would need to devote $1 million equivalent in gOHM to pair with the UMAMI to build an UMAMI-gOHM LP on Arbitrum.

The Umami team also asks that OHM devote 15% of its Proteus Arbitrum incentives to supporting the UMAMI-gOHM trading pair.

Finally, Umami asks that Olympus compensate Umami for any slippage/fees accrued through the swap of MIM to gOHM by providing equivalent gOHM.

Risks to OHM and OHMies

As fellow OHMies, the Umami team wants to be transparent about the potential risks this decision could bring to the Olympus community.

The primary risk the team has identified is that the gOHM in the gOHM-UMAMI pair could be used by UMAMI holders to provide exit liquidity for UMAMI, thereby putting sell pressure on gOHM.

Umami has taken steps to address this risk. The team has worked with those whales who have identified themselves to place 5,700 UMAMI tokens into time-locked vesting contracts. Umami is also rolling out new bonding features, such as the upcoming time-locked “Marinate” offering, to strongly incentivize long term HODLing.

While UMAMI sell pressure remains a risk, the Umami team believes the upside from growing the liquidity of the gOHM and UMAMI tokens will cement the tokens as leaders in the Arbitrum ecosystem and encourage (3, 3) for both tokens.

Summary of Umami’s Value Add

Umami is preparing to offer a variety of gOHM-paired LP bonds that it will utilize to support OHM’s growth on Arbitrum.

  1. Umami will commit to keeping >25% of its treasury composed of gOHM and gOHM pairs. It will build liquidity pairs to support gOHM trading liquidity across multiple assets, including gOHM-ETH.
  2. Umami will provide $1 million in UMAMI tokens to OlympusDAO for it to use to build a gOHM-UMAMI trading pool on SushiSwap. The OlympusDAO treasury will hold the SLP tokens from this pool, giving it upside from exchange fees and UMAMI token appreciation.
  3. Umami will swap its current primary LP (UMAMI-MIM) for UMAMI-gOHM once gOHM-ETH has $20M in liquidity on Arbitrum. The MIM in the UMAMI-MIM LP at the time of writing is worth approximately $1.5M. To assist in reaching that target, Umami will adjust its BCVs to make gOHM-ETH its second highest bonding priority after the UMAMI token LP itself.
    - Practically, Umami will achieve this swap by market buying gOHM using the route MIM → ETH on Arbitrum and then executing an OTC ETH → gOHM swap with OlympusDAO.
    - As an alternative, Umami could execute the ETH → gOHM swap on an Arbitrum exchange. However, this would need to be executed over 2 to 3 days to avoid excessive slippage. During that time, Umami would be at risk of frontrunning and would have greatly diminished trading liquidity.
  4. Through its relationship with Arbi’s Finance, Umami will develop and launch other DeFi protocols on Arbitrum to generate new use cases for gOHM on the network and help attract more liquidity to Arbitrum. When Umami rolls out its collateralized lending protocol by January, it will position gOHM as the protocol’s primary collateral asset.

    A fan of Umami, the team seems to have the drive and commitment to make it work. They've always said up front they're ohmies too. Win win

    Most based team in Arbitrum ecosystem.
    Olympus would benefit greatly from this partnership.

    It doesn't seem to make sense within the goal of proteus to add incentives to a gOHM-UMAMI pool. The goal of proteus is to increase liquidity on alternate chains for people to be able to trade gOHM cheaply and with low friction. A deep gOHM-UMAMI would not achieve this goal because it requires new entrants to first acquire UMAMI, a totally unrelated asset, to exchange it for gOHM, and the same in reverse if they want to sell gOHM. Adding incentives to this pool will only serve to reduce the available incentives for other pools which would provide for low cost, low friction entry and exit from gOHM such as gOHM-ETH.

      Hi Umami, thanks for writing this proposal for us ohmies to consider

      1st question : Would the ohm team own the LP pair? (1 mil umami/ 1 mil ohm)

        The dev team of Umami Finance is really solid and trustworthy. This partnership should be significantly beneficial for both parties!

        Hey team! Just a quick comment: how would ohmies know that the 25% of treasury in gOHM would be enforced across time and space. As a OHM holder, I saw a soft revenue share agreement fall apart in the past. Names aside, it did provide an interesting viewpoint of the complexities of open-sourced, D2D contract law enforceability, and other matters that easier done in the Tradfi space.

        What assurances will you give that this is not just a now thing when the going is good for Olympus, but a forever mandate for Umami Finance to keep 25% at a minimum of its treasury denominated in gOHM? Thanks!

        Otherwise: love the ambition and cross-chain gOHM with ETH security + no expensive ETH fees is a great solution in my book….Looking forward to other comments on the proposal.

          Coud Absolutely! Umami would send 1M in UMAMI tokens to the Olympus treasury where it will be paired with 1M in gOHM tokens in an LP on Arbitrum. That LP would sit in Olympus' treasury earning fees and giving exposure to UMAMI (through the UMAMI-gOHM LP).

            As an OG Ohmie. My feedback is: Hell yeah! .. My frustration with the eth chain has almost hit it’s limit. We want low gas, but also I have been quite bullish on Arbitrum, you may ask me why. NO ARBITRUM TOKEN. A true L2 solution, the only I see as an ethereum purist. L2 is the future, for obvious and multiple reasons.

            I want us to get our feet in L2 now. So we can take advantage of Arbitrum. And glad to see Umami stepping up to the plate . YES YES YES!

            I like what you guys are doing. A partnership might benefit both, but I miss the DAO, which means OHMies would not have any say in what the project does. What good is a D2D swap if there is no DAO in the first place? The UMAMI token is not a governance token. Not sure if this is a major issue, just thought I'll bring it up.

            I'm personally not a big fan of the fact that they're supporting meme projects, but expanding OHM liquidity is still necessary for our growth. I'm in.