The mention of OHM in the Senate Hearings has had zero, absolutely zero, impact on the desire of Zeus, shadow and the other sigs/key team members with regard to wanting to lower the APY/reward rate. The reasons behind lowering the reward rate are multiple but do not include fear of government regulation. You think the TradFi titans at GoldmanSachs and JPM who buy and sell our Presidents and Congressmembers would be happy to compete with 1000 APY? Any rate of return over 2% APR is a direct threat to their profits (or as they would say: Mom, apple pie and the American Way).
OIP-63: Reward rate adjustment
Galt great comment! 100% agreed
shadow In general I am for this proposal and will most likely vote for it but I have a concern/question that nags at me a bit in the back of my mind. It feels a little bit disingenuous for the protocol to push the idea of runway length being important and a reason to invest in OHM (I believe these to be true) but then never reach the number of days that the runway shows before reducing emissions. When the last reduction occurred and the runway began to balloon to over a year the thought process for me goes to "awesome, we can have over a year at this rate of emissions…" but that hasn't really been true about the runway. There doesn't seem to be as much of a correlation between runway length and emission reduction as one would assume. So I ask why tout runway when it is misleading to investors because you never actually use the whole runway? This next reduction will extend runway to 700 days but based on history of emissions reductions there is no intention of actually making it to 700 days from today even at the new reduction rate. So in let's say 250 days from now we have another proposal to reduce emissions again and that extends runway to 1500 days, well okay, but what about the rest of those 700 days we thought we had at the previous emissions because of the runway?
Also, is 2m in bond revenue/day not sustainable? If not, what is the sustainable number the team has in their collective minds?
I am all for this adjustment and understand the need but is there an acknowledgement from the team that runway should not be used as an expectation of future rewards at current emissions?
Fully support the reward rate reduction as outlined here.
However I have a couple questions for @shadow @abipup and whoever else wants to chime in regarding some comments surrounding our pivot away from bond revenues: In the long-term, I agree that it's wise to reduce bond capacities, pivoting to a greater focus on other revenue sources, which will help maintain health of the protocol. However, I'm concerned that it's too soon to be reducing bond capacities in a meaningful way given (1) non-bond treasury inflows are peanuts compared to what the treasury makes w/ bonds (Source: Dune Dashboard, Revenue (with LP market Value) - if this statement is inaccurate, then I think it speaks to the broader data issue we've seen recently where Dune Dashboard and Olympus Front Page metrics aren't remotely accurate) and (2) OHM market cap is reflexive - when Treasury inflows increase -> market cap increases -> higher market cap means more bond inflows (assuming no BCV changes) -> Treasury inflows increase further -> and the cycle continues. I have seen people reason that bond inflows are lower given (i) OHM's declining market cap and (ii) cyclicality of bond inflows resulting from broader market volatility, however I disagree with both statements given OHM's market cap (and ETH's) hovered around ATHs in the mid-to-late November period while bond inflows hovered around a 7-day MA of six to eight million $vs.$ 8MM+ for the entire month of October while OHM market cap was much lower. Have also seen people say that the sell pressure from bonds outweighs the positive benefits of increased treasury inflows. Can anyone provide data to back this up? OHM hit ATH's in market cap (and saw more price stability) right around the time bond inflows were near ATHs, so not entirely convinced that statement is true.
In summary, I'm concerned that it's turned into an echo chamber, with many parroting that we need to reduce bond capacities NOW (some have already been reduced recently IIRC), rather than wait until our non-bond revenues are actually meaningful. However the unfortunate fact is that non-bond revenue is tiny today and a further reduction in bond revenues will lead to even lower gross revenues, which, in my view brings into question OHM's valuation.
I want to make clear - this isn't FUD. I've voiced similar concerns in the past and rather than spark reasonable discussion, it gets met with a lot of anger. Genuinely interested in discussing / hearing answers to my questions as I think it's important (and if it's not, then please describe why it isn't) and would love to hear why I'm wrong as I've been an OHM investor since the first week of April and have been in full support of all the policy and protocol moves, until recently.
SateeshK Bonds will go back to what they were at ATHs and hopefully even more, if demand is there. We are just doing active capacity management, which is the Policy team's job. We are not moving away from it at all, just actively managing it. Definitely thanks for the questions and discussion, I wanted to make that clear. Having more non-bond revenue is good as a safety net, our goal wasn't to "replace it", just to diversify the income streams.
The rate has been cute 3-4k with migration. We are still bleeding. Doesn’t seem to support the case that this further rate reduction will improve price
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Thank you for your reply. Here are some follow-up questions.
More efficient bonding - 5 day rate is lower so the minimum discount goes down - How does this affect holders? Is 2M in bond sales hard to attain? Other protocols with much higher APYs maintain their bond sales so why can't OHM?
Better integrations with partners - How does the rewards rate affect our partnerships?
OHM gets scarcer over time vs not decreasing - But it's already getting scarcer as defined by OIP-18 as the circulating supply increases. Unless I am misunderstanding how it works.
Stronger signaling to the market - Please expand on this.
Easier to maintain sustainable growth via non-bond revenue - There's still a lot of runway left though. And my understanding is that the rewards rate automatically changes according to OIP-18?
Putting "OHM is just a Ponzi" nonsense to bed - This isn't important. What people think of the project is less important than whether the project serves a purpose and is economically sustainable. OHM is still my biggest holding and I support the project, but I'm not sure what the harm is in just leaving OIP-18 as it is. Doesn't the reward rate decline automatically as circulation increases as defined by OIP-18 or is that not how it works? Even if it the rewards rate does decline automatically (which does not make sense since there is literally a table in OIP-18 showing declining rates), we have not met the 10M OHM supply as defined by OIP-18 for the reduction.
shhpoodlet5-25-2 yes revenue will grow but not at the expense of bond generation because in time yield will be so low that bond generation will not be given a fair/greater discount as it is receiving now! Therefore revenue generated through fees on cross chain gohm seems to be the only path atm. Sustaining 2mill on bonds a day isn’t possibly in a bear market.
shhpoodlet5-25-2 another scenario is that once yield becomes so low OHM could possibly propose to offer bonds not in the form of discounted ohm prices but 1,2,3 x the supply of the bond that would be generated by repayments and then we move back into how the world of tradfi works. Keeping ohm on the fee revenue path will take OHM a long way but I do see a world where OHM will need to restructure the bond system or start burning once repayments are being made into the treasury. So many things to think about! 
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Can anyone explain how these kind of decisions will affect the overall price of $OHM? I'm looking for a more macro level answer to better understand the foundational cause/effects of OHMs value and fluctuations.
No automatic cut in reward rate was approved--just a roadmap for future debate. This is the future debate.
Technical analysis of a thinly traded asset during V1 to V2 transition is worthless. The prospect of transition was a bearish overhang. Now that we are in the transition period this is certainly not the time to draw any conclusions about the effect of APY on price. I'm not sure how price will react when/if APY drops to 1000. But I know this: we can't compete against the forks on the basis of APY--intermediate to long term, that's a race to the bottom. Plot APY versus price. As APY heads towards infinity, price tends towards zero. Air on the surface of the earth is extremely, widely available. That's why breathing is free.
shhpoodlet5-25-2 So the rate stays static then? I thought the rate adjusts as the APY declines?
davegoldblatt my understanding was that this was intended to begin the discussion as early as possible as it has historically proved to be a contentious suggestion amongst stakers unaware of the wider benefits of rate reductions.
shadow outlined it well on twitter here, highlighting the forum discussion's primary intention is to gauge and align community expectations. The policy team still requires time to assess community sentiment, vote upon, and enact any reward rate changes.
i would imagine the discussion has begun earlier this time around as the number of ohmies has risen from 10k (at the last reward rate change) to over 60k now, even with the recent sell off.
getting ahead of these decisions with a much larger community to consider would allow for more room to ensure any changes occur in a stable manner.
I might be well off track here but just my ( 2 , cents ).
I am not against APY reduction but I would prefer (and that should be also including in the voting options) not to reduce it right now but later on (maybe 3-4 months from now) when we can clearly see how this migration settled down and everything is working as it should be. Also reducing APY right now when the markets are down would put us in worse position to our competitors… Wonderland (TIME) is costantly keeping their 80k% APY no matter what and they never miss the chance to point out how better they are comparing to Olympus (+ being on much faster chain gives them huge advantage as well).
Therefore we should take into consideration to postpone (not remove) the reward rate reduction and to INCLUDE THIS OPTION in the snapshot voting.
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A higher APY does not inherently give a higher ROI for stakers. If investors have questions they can always turn to the docs or sherpas for more information. If instead they'd rather take their bet in another project because numbers are higher, feel free.
Also Olympus is now, in a first basic fashion, on five L1 chains I believe: ETH (+Arbitrum), Fantom, Avax, Polygon and Moonriver. May have missed some as it's going quite fast. So you can interact with gOhm on those cheaper chains as well.
Reducing APY now given the market is already down is always better. Most paper hands will have sold already. So reducing it now limits the volatility we'd have to endure later on. If you feel delaying the reduction is best, just vote no. It's basically the same outcome. A reduction will need to happen at some point so a new proposal would come up anyway.
Just answering two questions and leaving the rest for Abipup. Sorry if it's not the answers you're looking for.
More efficient bonding - 5 day rate is lower so the minimum discount goes down - How does this affect holders? Is 2M in bond sales hard to attain? Other protocols with much higher APYs maintain their bond sales so why can't OHM?
Other projects therefore use higher bond discounts to attract bonding and increase runway. But doing this dilutes stakers a lot more over time. Meaning that if the entire project marketcap would 10x in a year, stakers would not feel a 10x increase as they're slowly getting their cookie taken apart by bonders. So if you skew that mechanic too much 3,3 become sub-optimal and 2,2 becomes the dominant strategy (already the case for certain forks). But if that happens, there's no point in holding the token really, it becomes a game of musical chairs where everyone bonds and the treasury grows but nobody wants to hold the token as they'd lose out on too much money. In efficient markets, this would cause selling pressure on the token which would send it straight to RFV/MV/Book value. Now considering many investors in forks don't quite see this yet, the market is still acting rather inefficient and those projects can still stay alive for a while. But we can't expect that behavior to continue indefinitely.
In short: the entire mechanics of Olympus were never meant to keep running at one certain value. Especially not at degen APY. The math just doesn't work out in the long run. There's no real difference between inflation in FIAT markets and APY inflation in Ohm-like protocols. If you're bootstrapping an economy, it may help in the short term (which is why Olympus did it) but long term it never works out.
Easier to maintain sustainable growth via non-bond revenue - There's still a lot of runway left though. And my understanding is that the rewards rate automatically changes according to OIP-18?
Imagine every Ohm token is a kid with a mouth to feed and all of the protocol revenue is food incoming. If you keep printing more Ohm, you're gonna need more revenue to keep all of them fed over time. So if we reduce the amount of Ohm getting printed, the income from our non-bond revenue will "increase" relative to the amount of Ohm in circulation. This means each Ohm is getting more fed compared to become more starved of nutrients each passing day. As protocol revenue can not increase in both speed and amount into infinity, we need to act in sooner rather than later, else we'd become a ponzi scheme that requires new money coming in every day.
If we run out our runway (the pantry) it may cause more panic as people may feel we don't have enough food left to take care of all the Ohm. They might question and lose trust in Olympus being able to provide for the stakers.
Again a reduction of APY is not about making stakers "lose" revenue by decreasing emissions. It's the complete opposite: ensuring stakers are taken care of and not starved over time.
I still don't fully get if this proposal will start the APY reduction right after the voting ends or the plan to start it at 10M mark still holds and this voting is just preceding it for January… can someone respond to this please? thx
MrMochi If we run out our runway (the pantry) it may cause more panic as people may feel we don't have enough food left to take care of all the Ohm. They might question and lose trust in Olympus being able to provide for the stakers.
This is fair and valid and I don't necessarily disagree. But thus far the team has had good control over the levers that cause runway to increase or decrease and I wonder if the team feels confident enough with those controls to plan out an explicit countdown event for the runway. For instance say we maintain the current rewards emissions until runway is down to 100 days or even 200 days instead of doing so now. Is something like that feasible? If so it could bolster community confidence knowing it was all planned despite having to watch the runway number go down. I personally would feel more confident than I already do (and that's saying something!) knowing that the team thought they had enough control to accomplish something like this.
Then again I guess the framework for emissions reductions is that countdown event but maybe just more abstract than having a hard line number like the runway countdown event I suggested? Just thinking out loud