• Proposal
  • OIP-18: Reward rate framework and reduction

shhpoodlet5-25-2

Thank you for sharing. You’ve made some compelling points here. I’m going to read them again in the AM and reflect more on what you said.

Reducing rewards resulting in reduced bond demand is plausible. Previously I’ve seen reward reductions improve overall protocol health KPIs which is why I shared my perspective.

That said, I see your point and can see how the matter can be argued both ways.

Keep engaging ser. These discussions will make us stronger.

As being new to this awesome project and appreciating the goals of it, I looked at it for a long while.

After making the decision to jump in with a moderate position of my portfolio, I thought to myself watch the rate get cut as soon as Im in….Here we are, as I plan to be fully allocated in a few weeks. Like everyone I understand why the proposal, but… also like most when doing due diligence from an outside view and finding these rate cuts so close together, pretty fast and seeing the blue sky APY, I would have passed.

Red flags are drawn: infant project, dreamy APY, first rate cut (understand), second rate cut about 1 month later. These may outweigh the clear vision of the project for most.

I know I haven't expressed anything new, but my thoughts as Im in it now, and a bit less excited

BTW, Whats Mark Cubans take?

    I just want to highlight one thing in the forum here that relates to some of the comments I've been reading in Discord and some of the earlier replies here as well. And that is: you cannot take this informal poll on the forum as any quantification of how the community feels about this OIP. For one, there were reports yesterday from the mods that people were creating multiple accounts from the same IP address (that could have been used to vote obviously). This is pure voting manipulation. On top of that only a tiny, vocal minority of OHMies are actually active in the forum and on the Discord server. For the vast majority of them we simply have no way to quantify their responses until we do the snapshot itself.

    So arguing that we should not proceed with a snapshot vote because this OIP feels too contentious is absolutely not valid. The informal poll is too easy to manipulate, and if we feel that this OIP is split between yeas and nays then it's all the more reason to actually do the snapshot and get a clear, objective overview on that.

    From my side I fully support the policy team and I will vote option 1 when the snapshot goes live.

    for the many new Ohmies this must be repelling. even if this a good proposal for the future, it should be set out to take effect only in about 3,3 months.

    so the majority of Ohmies (who came in just recently) can be included to understand the bare necessities on the way and still earn some rewards they were attracted by in the first place. anything earlier will drive away loads of disappointed willing participants = the exact opposite community effect that any currency wants.

    with the amount of holders having grown fast: this is the point where financial psychology kicks in harder than economic 'facts'. no currency will survive which disappoints the majority of its supposed users.

      OM0811

      There are only Ohmies - I been around a while and this took me by suprise too - but if it has to happen better it be sooner than later, so we don't have a fud event on the horizon

      Yannis his feels like giving up freedom for safety and it freaks me out because I see this will divide community.

      I have to say I don't share the view of 'giving up freedom'. For me, the core idea in this proposal is behind this rationale in the OP:

      shadow Each OHM is backed by at least 1 unit of RFV, we can’t mint without that. The backing comes from our revenue generating activities, mainly bonds at the moment. When we sell bonds, we mint OHM against 1 unit of RFV and sell it at a discount compared to the market price. This indicates that our revenue depends on the market price.

      So, if we were to just expand supply without taking this into consideration, we’d tank our market price, and thus our revenue. No revenue - no supply expansion and no reserve currency.

      Here’s a simple example showing this.

      Case A: OHM is trading at $500. We sell 20 OHM and earn $10,000.
      Case B: OHM is trading at $250. We sell 20 OHM and earn $5,000.

      To clarify: the sustainability of the protocol depends on maintaining a premium. The protocol inflation is exponential, but the number of bonders isn't. Over time, the protocol needs to adjust the reward rate as the number of bonders who show up decreases proportional to the inflationary pressure of supply.

      The last time the reward rate was reduced, the price of OHM increased in multiples and the number of Ohmies grew twofold while the Treasury experienced surprising levels of growth. We can hope to sustain the growth curve linearly, but sustaining exponential growth is impossible even in the short/medium term.

      Yannis I propose a different idea.

      Leave 60% - 80% rewards as they are for now.

      Take 5% - 10% of the rewards and market sell into liquidity for ETH.

      Take 5% - 10% of the rewards and market sell into liquidity for DAI.

      Now you got 10% - 20% more in DAI and ETH reserves every single 8h.

      I can't say I really understand this, but maybe it'll help to clarify that the Treasury does not directly earn from 3,3, instead, the Ohmies do, and the Treasury belongs to all Ohmies proportional to their ownership of the supply. The people who are able to sell are Ohmies. The DAO earns OHM from bond sales, though those funds remain largely untouched. As to what might happen to that OHM, you can check out OIP-19.

      Yannis Take another 10% or 20% of the rewards and market buy 10 projects (each 1% or 2%) which are voted by the sOHM community by signaling their staking to a certain erc20 contract on ethereum. Have it so that every contract is maximum taken once every 9 times.

      Interesting idea, but this once again goes back to OIP-19 🙂. The community may vote on a new bond type, just like ETH bonds were passed just a few weeks ago

      Yannis All I am saying is this: there are better ways to make OHM attractive and run for a long time than to "let's half apy by 50% and pump price so it's easier for -3,-3 to be dumping on 3,3"

      APY has always been a faulty metric to express the compounding nature of sOHM.
      At 15000% APY, 1 OHM -> 150 OHM in 1 year,
      At 8000% APY, 1 OHM -> 150 OHM in 1 year, 1 month, 22 days;
      so, visually, -50% APY seems like a lot but it's easy to forget what the staking sOHM curve actually looks like: starts off linear and turns exponential after a prolonged period of time which is exactly the nature of (3,3) 😀

      All in all, I'm very much in favor of this proposal: the health of the protocol means that all Ohmies than (3,3) for longer. It opens more doors as far as partnerships go and that means more implied utility behind OHM, and ultimately a wider adoption of OHM.

        Mark11

        The question should be "how does it not benefit whales".

          specbid

          Doesn't it effect everyone the same? I don't understand how it is better or worse for whales

            AaronG

            If Mark Cuban sells for whatever reason, then the dominos will start to fall and it'll stop new OHMies from joining in.

            edit: I changed my mind and I am FOR OIP-18 framework + rewards cut, see post here: https://forum.olympusdao.finance/d/77-oip-18-reward-rate-framework-and-reduction/55 

            and watch here: https://forum.olympusdao.finance/d/78-oip-19-approve-dao-to-pursue-strategic-swaps-with-holdings/24 for "decentralized ohmie-signaled erc20 buys"

            vira

            Ye I revised my views:

            https://forum.olympusdao.finance/d/77-oip-18-reward-rate-framework-and-reduction/55

            I think people are not understanding the other idea I got because they either don't think far enough or see I am making some wording mistakes and then discount the rest without further thought to it.

            So let me clarify:

            Now:

            • APY is 18 000%
            • What I propose does not exist as I propose it. I know about bonds, this is different, please stop telling me about treasury, bonds and so on.

            After what I proposed:

            • APY is 9 000% or even less, doesn't really matter that much.

            • Put the difference of total OHM rewards between today's 18 000 % and e.g. 9 000 % APY into a variable diffRew

            • Take 33% of diffRew and buy up ETH, DAI, WBTC, tBTC, renBTC, basically established crypto + 'stable hyperinflating fiat' coins

            • Take 33% of diffRew and hold 18% of the 33% for 207 rebases and 15% for 324 rebases - these are incentives for long-term OHMIES explained later on. Sell them into WETH.

            • Take 33% of diffRew and split it up into 10x 3,3% Signal pool 1 to 10, each 3,3%

            • Let OHMIES choose from a LARGE drop down of erc20 when they individually stake their OHM.

            • The top 10 signaled erc20 gets bought by OHM. Every erc20 can only be chosen once every day (3 rebases) or every 3 days if chosen 2 days in sequence (9 rebases).

            • After 207 rebases, those OHM who signaled the top 3 erc20 that performed best - these OHMIES get 3%, 6% and 9% rewards if they still staking.

            • After 324 rebases, everyone who is still staking OHM can buy any of the erc20 baskets for a discount.

              How is that erc20 discount financed for the long-term holders? Remember the 33%? Well we took 18% for those staking unto 207 rebases. The other 15% of those 33% are used to finance erc20 discounts accross the 10 different erc20 tokens that were signaled by OHMIES.

            This would:

            a) Create a massive marketing frenzy because every single erc20 token community has an incentive to get OHM in order to signal into their erc20 tokens.

            b) Put selling pressure on OHM as well.

            c) Divest OHM supply into various erc20 tokens curated by OHMIES - it would be wild and that's crypto, it's wild.

            d) Provide huge incentives for long-term OHMIES.

            e) …?

            Now of course this would need some rough consideration and perhaps it is a staged deployment to test it all out.

            One of the main issues when buying and staking OHM is that I cannot use those funds for other projects I love.

              Yannis One of the main issues when buying and staking OHM is that I cannot use those funds for other projects I love.

              fuse pool on rari. also, by having a framework for apy, our protocol is more approachable for the exact partnerships that would allow you to use those sohm funds elsewhere.

              OM0811 for the many new Ohmies this must be repelling. even if this a good proposal for the future, it should be set out to take effect only in about 3,3 months.

              it's day 16 for me with olympus, fren. i can see why newer people might feel like they were misled by numbers, but when you dig into the numbers and look at the effect this will have (and did have) when implemented it really is a boon to all. our user growth has been exponential and our revenue growth has been linear. I totally agree on your point about the psychology- it's critical we educate and reach the same page if we want to see this grow to the size we aspire for.

              At this stage in the protocol, the most important thing is the increasing number of Ohmies. Like many here, I was first attracted to (3,3) because of the the meme-like APY. A such, I place a huge importance on the APY for attracting other Ohmies. So, when I first read this proposal I was skeptical that it was the best thing for the protocol at this stage of development. However, I argue that the stability, sustainability and legitimacy that having a plan will on balance, attract more ohmies. Additionally, the increase in competitiveness of bonds and strategic partnerships will be good for business and good for APY. Thank you to Policy for working hard on this one and taking all our shit.

                A lot of great discussions on here however no one has mentioned the most important thing for longevity of this project which is regulation, see #coinbureau. Will the technology of this project and defi will still be around 300 days from now yes however if US holders are labeled criminals and tax cheats and by default EU and G20 holders then the net for possible holders will be much smaller. The only thing we can do is control those things that we can so I suggest the following.

                1. rebrand this project away from decentralized reserve currency as this puts a target on it.
                2. wait 45 days until congress returns to see what happens with legislation before lowering APY

                The more holders and larger the treasury grows in the near term the better.

                Can this project or other defi projects make it if the backers and holders have to KYC and could the project handle tax reporting for all holders for up to 180 countries?

                Implement APY reduction when things are clearer and the waters aren't mudded as we may not be here 300 days from now.

                While I was initially against the proposal, per my earlier comment, I've since changed my mind and am now for #1. The flip-flop is primarily driven by two things which I did not completely appreciate:

                1) as APY comes down, bonding becomes much more attractive given a lower required rate of return for bonders (key concept here is that it's only attractive to bond when 5-day bonding APY is larger than 5-day APY from simply holding sOHM); thus, the protocol can continue to generate strong revenues while also minting less OHM and

                2) as we continue to methodically reduce APY, partnerships/integrations with other protocols become significantly easier. Why? As it stands today, protocols that do not allow for collateralization and borrowing against sOHM (i.e. Fuse), must incentivize sOHM holders some other way. But competing with 15-20k% APY is far too costly, so partnerships at this point in time make no sense. However, when APY is reduced to more reasonable levels, incentivizing sOHM holders becomes significantly more cost effective given a lower required rate of return. Further, and this was what flipped the switch for me, imagine the scenario where use cases for OHM (not sOHM) are created allowing you to generate similar yield as you would if you staked your OHM (i.e. sOHM). This helps the protocol avoid exponential increases in supply, in turn bolstering RFV and lengthening runway, which are to key fundamentals that many of us obsess over.

                Big-brains please chime in if anything I've typed above is wrong, but I wanted to put this out there as I was unclear on it and I'm sure others were/are as well. Also for the people talking about the negative impacts to newer investors - the policy team is thinking about the long-term. While we don't know what the short-term effects to price may be, it's a higher probability than not that this proposal will improve the projects fundamentals, improving OHM's value over a longer time horizon. The project is just months old - with goals as ambitious as OHM's we must be thinking over longer term time horizons and not concern ourselves with price fluctuations over days, weeks, or even months.

                To much too soon, DONT PUSH this through right now, it's absurd. Take more time to discuss this clearly within the community.

                Mark11

                An issue, not unique to OHM, is whales/earlies having accumulated so much OHM that their daily selling of rewards outstrips current onboarding/buying of OHM.

                Does this proposal offer any guidance on how a lower APY will be a greater acquisition tactic or increase buying demand to offset massive selling pressure by early adopters trying to realize free profit?

                In a way, this race down to RFV/OHM value creates ever longer time hand-cuffs on new OHMies to 3,3 to just break-even. Please see @dns math below that better illustrates the issue at the top vs. bottom of the OHM community.

                There is absolutely a world as @DefiCryptoBorg points out where this protocol doesn't survive long enough for a late entrant to break-even.

                I think there does not to be a framework put in place, but this doesn't seem well hashed out and therefore I'm voting against at this time. Will now dive into the Discord discussions to see if that sways my opinion.

                shadow

                I cannot get behind the proposal because it is only a short term lengthening of the runway until the framework does the real deed - it does not cure the problem. We have exponential growth at the extreme of the S-OHM reward rate. After 6 months in the staked OHM protocol the reward rate begins a steep escalation process, which "this is what we all came for "the greed aspect" however the S-OHM reward rate starts to get unstable.

                As an example using the Olympus DAO Calculator I used the following variables: OHM staked 60, OHM price $283 Rebase rate .3058% (the proposal framework new high rate)
                - At the 5 month period the OHM is approx = 177.07
                - Month 6 it is = 252.04
                - month 7 = 350.73
                - month 8 = 480.64.

                I can keep going but you can do this yourself with the calculator. As the growth rate of the production of reward S-OHM continues to accelerate so to will inflation (the problem this proposal is suppose to solve). Anyone can pull up the Brian Calc and do the math. As I mentioned earlier we are solving the wrong problem. The issue isnt at the narrow end of OHM, (the small OHMIES) The inflation is at the broader end (higher end).

                We cannot quantify this to a rich vs poor ohmie argument because that wont solve the problem. We need to propose lower rates of reward inflation based on the individual quantity of "S-OHM" because using the very rates proposed in this proposal you see the acceleration of award rates is not solved. It takes the lower OHMies longer to get to 2x however the OHMies already sitting over 177 ohm will simply elongate the problem until the framework makes even more drastic cuts that again will only affect the smaller ohmies. Eventually it wont make any sense at all for a new ohmie to join the protocol.

                Will price increase? Perhaps but whats the floor? If the floor is the RFV of $26 and an OMHIE invests today and the more drastic framework cuts come into affect then when will that OHMie be whole again? How long will it take that Ohmie to grow his ohm to get whole? We need to adopt a curving of the S-OHM reward rate after an OHMie reaches a certain staking quantity and we can do so on all bands:

                Band 1: 0 - 30 (S)OHM reward rate .45%
                Band 2: 31 - 60 (S)OHM reward rate .35%
                Band 3 : 61 - 90 (S)OHM reward rate .29%
                Band 4: 91 - 120 (S)OHM reward rate .20%
                Band 5: 121 and above reward rate .15%

                Just an example not finite ranges, but this will decrease the inflation at the mid/higher end of the spectrum "where the inflation ACTUALLY happens. And yes I have read the arguments that this wont prevent people from using multiple addresses. And I say "that's not the problem this proposal is being asked to solve, we are trying to solve inflation at the moment, so lets solve inflation and then solve the duplicate wallet problem. But, this proposal "does not" solve inflation it only extends the runway for the OHMies with over 100+ OHM, the smaller ohmies will never reach their goal because the framework rates will have kicked in before they have an opportunity to 3 or 4X.

                  dns

                  Several people have mentioned that what you are suggesting is easily gamed by the whale simply splitting their holdings into multiple wallets. Do you have a reasonable way to solve that? If yes, then we can explore. If not, then I think that we should probably move on from the idea for now.

                  dns And yes I have read the arguments that this wont prevent people from using multiple addresses. And I say "that's not the problem this proposal is being asked to solve, we are trying to solve inflation at the moment, so lets solve inflation and then solve the duplicate wallet problem.