Summary
- introduce a new reward rate framework to guide Policy decisions and align expectations for the community
- as part of the framework, the Policy team proposes a reward rate reduction to 0.2975%, from a current 0.35% of total supply
Motivation
When we proposed a reward reduction a month ago, Olympus was sitting at a ~$80m market cap. Below is an image showing our performance since then. This is not supposed to be indicative of future performance, but is meant to show what has been achieved so far.
Unlike last time, this time our runway is looking healthy, and at the current reward rate, we have 300 days of runway. However, there are reasons to adjust the reward rate other than the runway.
Our goal is to increase OHM’s supply over the long run, and through integrations and mass adoption become a decentralized reserve currency. However, we can’t just pump out supply and be done with it that way. Why?
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.
Said differently, in order to achieve the same revenue as in case A, we’d have to sell 40 OHM in case B, so we'd receive less revenue per OHM sold in case B, or have more emissions for the same revenue.
Because of this dynamic, the Policy team carefully balances two types of emissions - emissions from bonding and emissions from staking rewards. Staking reward emissions form the majority of our supply growth. Bonding emissions depend on the total supply, demand, and BCV values set by the Policy team.
Since staking reward emissions scale directly off of total supply, it would make sense to base the reward rate itself off of total supply thresholds.
Proposal
The Policy team proposes a framework, where the reward rate is adjusted based on the total supply.
As you can see, these are ranges, and not hard values for two reasons. First, APY is dynamic and based on the number of OHM staked, in this table we use 90% of circulating supply. Second, because the Policy team needs to have the reward rate available to it as a tool.
This proposal has 2 action items that are being voted on:
- Reward rate framework
- Reward rate reduction to 0.2975% of total supply over a period of 2 weeks
This framework does not give the Policy team the power to change the reward rates without a community vote, it is meant to guide our decisions and align expectations.
Effect of the reward proposed reward rate reduction
As you can see, the time to double your holdings only increases by 9 days with the proposed change, because this is a 15% reward rate reduction, while in APY terms the difference is magnified due to compounding.
Vote
Option (1): Adopt framework and reduce reward rate to 0.2975%
Option (2): Don’t adopt framework and reduce reward rate to 0.2975%
Option (3): Don’t adopt framework and don’t reduce reward rate to 0.2975%
If option (1) and (2) combined have more than 50% of total votes, the reward rate reduction will go into effect, but the framework requires option (1) to have more than 50% of the votes.
The proposal will be on the forum for at least 5 days, pending feedback, before being put up for a Scattershot vote.