OIP-18: Reward rate framework and reduction

111-altrektcrew

shadow can u provide some clarity on wen the 1000% would be the effective rate based on framework i.e what parameters are we looking at to decrease to that rate over what time frame and why, should be fleshed out a bit... as we saw, when we decreased to the purported 20K from 40K it actually went to 15K, now 17K so some sort of rate gauge would be helpful running in the UI/X, so many levers and layers of complexity...it's all math ikr

and again what are the TIME values on your framework?

abipup

111-altrektcrew We didn't put specific time values on the framework for the same reason that we were debating putting APY numbers on it:
We can't control time or APY, and adding them to an official framework leads to more questions than answers.

The specific time scale on the graph is not very important. Instead, the shape of the graph is the most important thing to know: the framework is set up such that each successive milestone takes a much longer time than the last one to reach.

That being said, and for reference only because it's not guaranteed: the vertical lines on the graph are in years.

abipup

I encourage everyone to review OIP-11 forum discussion. Some common concerns people shared back then:

"People will unstake and sell" -> we actually saw an increase in % OHM staked after that previous change went into effect. We also did not see downward price movement afterwards. And the reward rate decrease last time was larger than the one currently proposed.
"Not fair to new ohmies, delay the changes for 2-3 months" -> what about the new ohmies that come in 2-3 months? They will also say the same thing when the time would come to decrease reward rate. The fact of the matter is that we have to be proactive to protect the health of the protocol.
"We need more advance notice" -> we've discussed for a long time now how reward rate is not meant to be static; this should not come as a surprise in the first place. Further, the policy group put up this proposal as soon as we were prepared to. If we keep the forum discussion for 1 week, add 1 week for a snapshot vote, and then 2 weeks for linear decay from current reward rate to the new rate, that's 1 month between now and the new APY. That's a lot of notice.

I'll address some specific comments in a few, but knowing our past history with reward rate reductions is important.
https://forum.olympusdao.finance/d/37-oip-11-reducing-reward-rate

melondrone

abipup

what about the new ohmies that come in 2-3 months? They will also say the same thing when the time would come to decrease reward rate.

Well, those new ohmies would hopefully have done their due diligence and would be aware of the upcoming policy change before making an investment decision.

Here, new ohmies who joined last week have already done their due diligence and are all of a sudden thrown a curve ball.

111-altrektcrew

abipup

thank you, i'm over it and ready to snap shot YES!

Jaiel

I see a lot of comments worrying about new OHMies. Well, I am one of them. (I staked my first bag of OHMs 6 days ago. So I am still qualified as "new", right?) As you might have guessed, I am very disappointed to see this kind of proposal as a new OHMie.

I knew that this unbelievable APY would never last forever because increasing the supply of OHMs exponentially would also, obviously, drive down the price of OHMs exponentially. However, I thought this was the plan! I really believed printing huge amount of OHMs and growing in size was the strategy of this project at this stage.

My reasoning was,

“OHM wants to be a global reserve currency. Then, it is competing against Federal Reserve’s USD, the current champion, and Ripple’s XRP, a strong contender. Then, this strategy makes sense to me because in order to replace USD and also compete against XRP, it needs to create a vast amount of OHMs first! Fed also keeps on printing USD. No one will ever know the total supply of USD. So Olympus is doing exactly the same thing! Genius! Then, even if the price of OHM goes all the way down to $1, which is not even possible because of the amount of value accumulated in the OHM treasury, 1 OHM that I bought at $400 will still be $28,900($400 -> $1 x 170 x 170) within 2 years!”

That was why I staked OHM. Someone on this discussion asked, “Do you want 10 OHMs @ $1000 or 1000 OHMs @ $10?” or something like that. My answer is, "I want 1000 OHMs that is worth $10". I believe that is the way to become a global reserve currency. Being a global reserve currency means to become the standard of value. Would you value a can of beer as 1 OHM or 0.001 OHM? It is too complicated to see numbers like that. Don’t we all already feel the same way when we see 0.0000000000024 BTC in our balances?

If my understanding was not completely wrong, I wish this project would keep on growing in size for a while as it has been doing so far. This project is nowhere near being a global currency both in the value and the size. So why worry so much about the price of each OHM now? I know this euphoric APY has to go down some day to wherever it is supposed to be, but NOT at this rate of speed.

I also have some thoughts about mass adoption too. When this project accumulates huge amount of value in the treasury, I believe the mass adoption will come. People won't just let it sit there in the corner when it has an enormous value. People will eventually develop all kinds of things upon this project beyond our imaginations!

So far, it seemed like this project was growing so well. So why stop now? Just like a lot of people worry about it, no one will trust this project anymore if you keep on slashing APY so fast like that.

I also have a suggestion. If you are really going to do it, take down APY indicator on the staking board first. If it doesn’t last for a year, it is not “Annual” Percentage Yield. Therefore, it is very misleading. Instead, “Rate of Decrease of APY”, “RD-APY”, would be a more helpful information to put it up there. This is not a joke. I think this is absolutely necessary so that I can at least try to calculate the return of my investment. Current APY doesn't help me calculate that at all.

I apologize if I said something totally absurd or offensive to anyone. As I said, I am only 6-day-old OHMie so… I was just shocked to see the proposal and had to say something about it.

abipup

Jaiel Welcome, new Ohmie 🙂

When this project accumulates huge amount of value in the treasury, I believe the mass adoption will come.
How will we gain mass adoption if the only good strategy is to stake OHM and do nothing with it? The answer imo is that we wouldn't. We have to create use cases for OHM through partnerships and protocol-to-protocol relationships. These are much more achievable when APY goes down - ohmies using OHM with our partners becomes more attractive.

Furthermore, how will we quickly increase our treasury, if we don't make much profit from selling 1 OHM? We make more profit from selling OHM when price and utilization are up.

SpacemanJeff

Jaiel The idea is to be proactive to prevent bad situations instead of reacting when problems are starting to emerge.

If you look at the runway graph, it's leveling off. At current rates it will start to decrease before long. You might say to yourself "Well we still have 300 days, what's the issue?"

A few things:
1) You say you want a real APY, but that can't be given without 365 days of runway. At minimum you should want to reduce the APY to reach that point for what you personally want. A rough roadmap for future reductions is laid out, so you can calculate what you get from there. A note on the main page indicating that is the APY expected for _X days would be a good idea maybe.
2) I would feel much better about investing in a protocol whose APY runway was up or sometimes flat rather than one that is fluctuating constantly
3) If we wait until runway is decreasing, we'd need to make a larger decrease to APY later to account for all the additional OHM outstanding that will still be accruing interest. We also might see a draw down in price as people react to a shortening runway, which has a feedback cycle of less efficient bonds that decrease runway further.
3a) if we act proactively, we can make smaller adjustments that have larger impacts on protocol health overall.
3b) this point is also the most important if you truly care about helping future ohmies, you're keeping more rewards for yourself.
4) 300 days is still peanuts in the bigger picture. Think on the timeline of 5 years.

Those are just a few of the points of reducing APY, but probably the most important to understand for the average ohmie.

And to the point some others have of whales dumping, that's always a concern for all projects and I don't think it has anything to do with APY (at these levels, bare minimum). Also, why wouldn't they dump more at a higher APY anyways?

Trying to punish whales won't end well. Best case scenario they sell and go somewhere else in a self-fulfilling prophesy.

Mark11

Jaiel You should have been here when we went from 150,000% apy to 15,000% apy - the current target is 15,000% - it wouldn't be very smart for us to endanger the protocol future for a measly reduction of ~5,000%-8,000% apy

abipup

Ossieshan Is it clearer to say "in order for the protocol to gain the same RFV as in case A, we'd have to sell 40 OHM in case B?"
The point is to say that we can grow our RFV per OHM much faster in case A than in case B.

asincuka

The reward rate reduction is required for a strong healthy protocol, the supply expansion is going exponential after the first million tokens and it will go up really fast. My main concern is for attracting the new OHMies, our main attractiveness for early time is always on the APY (like it said on the OHMies card made for marketing). We need to change our marketing stance for attracting new OHMies.

The positive side is lower APY makes OHM easier to integrate into other protocols that are first hesitant to partner with us due to the massive APY. I think the DAO already made a discussion with Scupy related to alOHM and it will be interesting if can be implemented. Tokemak protocol also seems like leaking some partnerships alpha (i hope its true) and it can be helping as ramp up some liquidity to OHM pairs.

abipup

Irv86 From a philosophical perspective:
The objective of Olympus is equal share per OHM given, for all Ohmies, big or small. That's how everyone can keep their % of market cap long term. Taxing the "rich" defeats this entirely.

From a practical perspective:
We can't beat Sybil attacks. Unless some radical technology comes out to protect against it, even if we wanted to give small wallets more rebase than bigger, it's not possible to effectively police.

abipup

pottedmeat Can you expand on this a little? Not sure I follow.

bouttreetreefiddy

I'm in disagreement with the overall framework for a few reasons.

Last time this discussion popped up it was rushed and there was a mini-exodus. That's bad for OHM. The high APY is the main draw to the protocol. We don't have much else to offer right now aside from cOHMmunity and incOHMMMMMe. The protocol needs to offer more before we kill our star attraction. TLDR: Bad PR.
Last time the overall market was in re-accumulation, while OHM had already tanked 80%. We are currently (arguably) back in a crypto bull-market. Lowering APY now could cause a larger exodus as folks seek larger gains - OHMies still gotta feed their familia. TLDR: Bad timing.
Now for useful input - I first and foremost agree with a reduction in APY -slowly- like a Sarlac. However, I think it's worth more deeply discussing other ways to manage supply, for the reasons stated above, such as finding use cases for burning OHM, or permanently locking it up, like in the LPs. Maybe we could incentivize permanent staking of OHM somehow. TLDR: Burn it to the ground. Or something.

I know this is a lot of "do this kind of thing somehow," but my main point is : What draws folks to OHM right now is high APY and flexible staking. To gut the main draw of the protocol at a time when folks might already be attracted elsewhere is risky. I propose we hold off from any further reduction in APY in the near-term (e.g. until EOY) and thoroughly discuss other ways to permanently remove OHM from circulation.

rgscg

bouttreetreefiddy

Agreed. OHM has shown some signs of becoming inversely related to ETH performance. With the amount of activity in the ecosystem and the upcoming merge, I don't think it's unreasonable for people to see this as the next 2017 style bull market. There will be a lot of competition to attract investment.

bubbidubb

What matters:

market cap (the PRODUCT of price and supply)
my/your share (%) of that market cap (owned quantity / total supply)

What does NOT matter:

Token price
Quantity in my wallet
Total supply

Illustration:
Start conditions:
Total supply: 100 => OHM Price: 10 USD => market cap = 1000 USD
Held by me: 1 unit (1%) => my investment = 10 USD.

If price doubles, without any supply increase:
Total supply: 100 => OHM Price: 20 USD => market cap = 2000 USD
Held by me: 1 unit (1%) => my investment = 20 USD Nice.

If supply doubles, without any price increase: (and I am staking to keep up with inflation):
Total supply: 200 => OHM Price: 10 USD => market cap = 2000 USD
Held by me: 1.9 units (0.95%) => my investment = 19 USD Nice, but less nice than 20 USD.

For new and old ohmies, rich or poor. The best way for each and all is to focus on market cap and each our share, as illustrated. Which is why the proposal description is EXCELLENT.

The fundamental that power Olympus is revenue. Revenue comes from bonds and trading fees. This proposal increases incentive to bond (essentially the same as locked staking). This ought to be a net positive for Olympus and likely reflected in market cap. As for marketing headlines, an 1000-10000% APY is still an eye-popper.

Win-win for all.

Vote about framework as such = YES.
Vote about initial rate reduction = YES.

garb123

shadow

Please don't

allornone

I feel like this proposal is coming too fast. We just got finishing implementing the last rate reduction and haven't even had time to see how this truly impacts the ecosystem. I'd prefer a longer waiting period (3-6 months) before any thing is changed again. This will allow us to study the impacts on the protocol and provide the proper time to gain consensus on a way forward. By all measurements to date we are healthy and thriving. Why fix something that isn't broken?

Additionally, we are in the expansion phase and want to get as many OHM out into the public as possible, Reducing this effort is counterproductive to everything we have preached. In the grand scheme of things 10,000 wallets is nothing. Perhaps we look at a rate reduction when we hit a milestone such as 100,000 wallets or 1,000,000 wallets. That way people have a mark in the sand they can plan to and supports the growth narrative.

Vote No on both for now……..need more time to evaluate

BlairZaye

Bearded_Wotanist

i quite like that idea.. 'tax the rich' 🙂 but yeah people could have multiple wallets, and it deincentives whales to stay…

BlairZaye

im thinking dropping the apy is a bit too soon? obvs because ive just got into it.. but also it seems a bit sudden.. no warning, unless i wasnt in the loop.. but may scare people off.. or deincentivise new stakers, the price would defo drop then.....

doca

cabanaboy1977

great idea

BlairZaye

cabanaboy1977

this makes sense 🙂 incentivising for longer stakes.. but maybe be hard to get new people.. maybe if the intial was higher than what youve stated here? but. im just jiving.. the numbers have to make sense

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