OIP-18: Reward rate framework and reduction
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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"
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.
- rebrand this project away from decentralized reserve currency as this puts a target on it.
- 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.
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To much too soon, DONT PUSH this through right now, it's absurd. Take more time to discuss this clearly within the community.
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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.
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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.
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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.
I agree with other who have commented above. We can all see the charts and data, the sell pressure is coming from the same wallets / whales taking passive income every day / few days / week. Wallets generating e.g. over 1OHM per day need to be managed closely to avoid this constant sell pressure versus the newcomers who have seen the attractive APY and been told to 3,3 and then sit watching the whales push the price down week on week. Reward rate relative to OHM staked would be a step in the right direction and i believe would better encourage 3,3 at all wallet sizes.
Let's go with Option 1 now and shake out the rest of the lettuce hands.
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Your comment could easily be construed as "Please lower the price so I can buy more despite the goal of the protocol for widespread adoption and use."
The party ends without continued acquisition of new OHMies.
The issue of inflation, compounded by top heavy distribution, is not caused by weak hands. In fact, the small Ohmies holding strong are the ones most punished by heavy selling.
According to the staking contract: https://etherscan.io/token/0x04f2694c8fcee23e8fd0dfea1d4f5bb8c352111f#balances
As of this writing, and removing the top 3 addresses as they are contracts, there are 9,750 sOHM holders that are currently staking 575,271 OHM
The top 500 addresses (top 5%) hold 413,661 sOHM or 71.9% which averages to 827 sOHM per staker
The remaining 95% of OHMies, the bottom 9,250 addresses, hold the remaining 29.1% (161,610) which averages to 17 sOHM per staker.
What's your guess on whether the majority of sell pressure is from the 5% of holders that control over 70% of sOHM or the 95% that are trying to believe in (3,3)?
Another lens - at the current rebase yield of 0.4793% - anyone in the top 5% that holds on average 827 sOHM gets 3.96 OHM per rebase or approximately 11.89 OHM/day or 70% of the average 17 OHM held by the other 95% of holders.
In other demographic news, the top 100 addresses (the 1%) hold 258,649 sOHM or 45% of the staked supply.
Billygoat, exactly the point! If the purpose of this proposal is to solve inflation, "then lets solve the inflation - not just extend the runway for the top earners. This isnt rich vs poor, this is survival of the protocol. This proposal does absolutely nothing to address inflation, it just extends the runway a little bit - but eventually it will catch up to us again because we are using over the counter meds on the symptom vs treating the condition. If your hungry and I offer you a banana yet you want an apple and an orange… your still going to be hungry unless you accept my banana! This proposal 'does not solve inflation'. For those who say the duplicate wallet issue will affect the S-OHM curving idea, I would say "ok then, lets work on a plan and a proposal that solves both inflation and duplicate wallets - but lets not pass a proposal right now that does nothing based on the intent of the proposal as written.
If whales are reading this and not liking what is written, does it really matter they are selling everyday anyway to chase gains elsewhere after a few rebases in our protocol. And that should not be a problem it isn't for me anyway. Its their money to do as they please and that should not be faulted or discouraged - therefore we should not quantify that as a concern. But for those that remain, we need a healthy protocol that fulfills the long term mission statement. Growth and decentralized treasury is the mission statement. And this proposal isn't sufficient enough to achieve BOTH of those goals. We don't grow if we are putting out more then we intake - The inflation is in the S-OHM higher quantity curve not the narrow end.
We can truly solve inflation, then we can work on world hunger.
I'm very aware that we need new Ohmies. My simple statement had nothing to do with that. I'm fully invested in OHM and I have no funds to buy more as we incur this dip so I'm relying on the lower price to bring in more users.
Let me expound on my point. Based on what I read and the sentiment we have in the community it would seem that going through with the new framework and rate reduction there is a good chance even more will sell in the short term. At some point we will hit a bottom and recover stronger than ever bc we have implemented these new changes. I'm voting yes to both as the smarter people have pointed out that it is better for this project in the long run. Right now for some reason people are already selling and bailing on this project. I'm suggesting we rip the band aid and implement the changes so that when we recover it'll be a healthy long term growth.
I'm also annoyed at the fact that this whole project is perfect for anyone that has the HODL mentality and incentivizes it better than anything I've seen before. My comment was short and terse because of this emotion. I've have been in many other projects that are pure garbage and people manage to (3,3) better and it just doesn't make sense to me.
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In socialism the rich stay rich, the poor stay poor…. Im just saying. My comment was a bit obnoxious so im editing this with purpose so not to sound condescending. Im not trying to make this a rich or poor argument, trying to debate on that premise balkanizes the message. Im trying to assist in solving a problem that if you do the math using the community tools you will see for yourself this proposal does not solve. This proposal only extends the runway…. Until we come to this problem again and we will because the Sohm on the broader end of the reward spectrum hyperinflates unless curved. Not even this proposal stops this. Now i mentioned earlier that the framework would essentially at some point naturally curve the broader end of the sohm spectrum - but thats your real socialism because the new ohmies growth is slowed dramatically by the framework. As the inflation rate of supply increases by adoption and rewards distribution, the broader end Sohm accumulation absorbs roughly 71 percent of the newly minted reward supply due to quantity advantage (not a crime, not a problem - unless your trying to solve inflation). And the real comparison isnt socialism its more like plutocracy at that point. I apologize if my initial comment lost the point and sounded like a jab