z_33 post Cooler proposal's resolution.

What prevents ideation while the Cooler proposal is being voted upon? I think my timeline laid out in the initial proposal leaves sufficient time for this and I'm not pushing to get this to vote anytime soon.

Hello everyone,

Very busy week on my side but I'm happy that there has been some discussions on this topic!

Let me try to respond as best as I can.

0xRusowsky Such a system offers cheap leverage for those who want to lever up when they are bullish ETH (buy OHM, borrow ETH backing, and repeat), and it would also be great for those who are bearish ETH and want to short (buy OHM, borrow ETH backing, swap to stables, wait for price dump in USD terms).

One challenge which people have relayed to me privately is that you again add some contract/organisational risk on top of it. (Much like why people still want to hold stables instead of OHM despite its great on-paper features.

0xRusowsky this proposal loses the reserve currency narrative

I sadly indeed think we should part with this ambition. The landscape has significantly changed and the world is simply not ready for this at the moment.

0xRusowsky Why would ETH maxis sell their ETH for ETH-backed OHM?

Mainly to let OHM be the vessel which brings more ETH exposure over time as opposed to just holding ETH or Staked ETH. The DAO should try to create products which make this possible (as it has done with RBS already)

unbanksy33 This asset uses RBS mechanics to dampen ETH’s volatility and it reduces ETH’s volatility by 75%, in USD terms. This means that, in USD terms, when ETH drops 10%, newOHM drops 2.5%. When ETH goes up 10%, newOHM goes up 2.5%.

With a true 1 to 1 backing the 'dampening volatility' part is not very true (at least compared to ETH). Imagine RBS pegging OHM to 1 ETH, for the sake of simplicity. OHM would very likely lag behind most major ETH movements, yet it also can add volatility since it's not super closely pegged. So therefor there will be situations where ETH drops 10% and OHM can drop even more (10% ETH drop + RBS cushion). This will become especially the case when OHM and ETH are seen as equal.

unbanksy33 1. Why newOHM is superior to USDC

To me personally this is a faulty comparison since USDC is a currency and newOHM (I like the ring of this ticker) is an asset. I strongly feel we should step away from any currency ambition since this already has been done many times (DAI can be created w stETH, LUSD is a superior decentralised currency with v minimal opex, Dinero brings an extra twist to the currency game etc).

unbanksy33 While this index token has a similar target volatility as newOHM, it lacks the value accrual that comes with RBS mechanics. In particular, newOHM stabilizes against OHM using RBS which effectively is a series of price auctions that grow/deplete treasury. So while the average volatility is equivalent to that of an index token, RBS mechanism yields higher returns (in ETH terms) that an index token cannot compete with.

This I agree with. In my discussions over the past week some have pointed me to the fact that if you hold a basket of LSD's, it is a double edged sword where the risk of ruin might be lower (if 1 LSD protocol get's exploited, we will never hold 100% of it), but you increase the chance you'll be hit by a potential exploit by exposing yourself to multiple protocols. The yield from those options + RBS + newproject should offset this imo.

unbanksy33 RBS simulations will need to run to confirm this.

Super hard, especially since we don't know the liquidity that will be out there. For RBS to work, you can't have an newOHM/ETH pool on-chain for example. If you have this + a stablecoin pool, your delta between OHM and ETH (on which RBS operates) will be arbed away by MEV bots, negating any effect RBS will have. By monopolising that redemption against ETH you can extract that value from the inefficient market.

unbanksy33 Your proposal mentions a basket of LSTs yet such products have seen limited adoption

There is also UnshETH (https://unsheth.xyz/) with 31m in assets. I agree that just being a basket is too light, but this would also allow for potentially a gov token to have some utility. I can foresee a situation where an LSD protocol would want to bribe to include their asset in the index to boost adoption, much like stables have been doing for years with Curve/Convex.

unbanksy33 Idea: newOHM as its own LST

I have to think more about this but think it adds some extra risk. Could be interesting as a v2 + diversification option.

unbanksy33 Idea: OHM as liquidity rails for all LSTs

My initial proposal (which was way too long) went way deeper on this front. I think there could be an interesting avenue to pursue here that makes things way more robust for all LSD's (much like frax's LSD pool attempt). BLV's could bring additional yield opportunities to current LSD holders who want to earn extra yield while providing liquidity. When I find the time I will go deeper into this.

unbanksy33 A comment on token design

Given where Cooler Loans proposal is at, I don’t see how an ETH-backed future can co-exist with a fully consolidated treasury in DAI (at least this is my current thinking; curious to hear other takes). One way forward would be to create a new protocol with newOHM (need new name) and allow users to participate by exchanging their OHM for newOHM. Innovative bootstrapping mechanisms (e.g. reserve bonds) can be explored. Implicit in this is that those who take out a Cooler Loans must repay to participate in this new future.

I think a better question is to think about the general organisation of the DAO. With a smaller treasury and less overhead, the OPEX should be something which could be decreased significantly without compromising on innovation. So ideally there would be an opt-in procedure with newOHM and OHM co-existing.

z_33 Have decided to reject this proposal:
a) this isn't the right time for this.

When would be the right time in your view?

Thank you for everyone who has left a comment! I would like to do an open call-out to the DAO and Council to respond to this RFC as well, since I want this to be a collaborative process. Since at this moment, 80% of the people would like to explore this idea further, I think it's opportune to ideate about the possible implications of this RFC.

yieldohmie Departure into the unknown - with 200m at stake.

This might as well be the title of Cooler loans as well, don't think that is a valid argument.

yieldohmie our treasury is not full of the protocol native token but hard US-Dollars

The fact it is hard US-dollars makes the entire point of having a decentralized reserve currency invalid.

yieldohmie A treasury should NOT be treated as one's own personal portfolio, and any allocation to volatile assets above 25% with 200m at stake is absurd in my opinion

Which is why making a very clear choice, 100% ETH, always, makes much more sense than an arbitrary choice for strategic assets, certain stables over others and a plethora of weird investments into protocols which have nothing to do with Olympus or which do not even get support from this very community.

yieldohmie does not require $200m in initial funding.

It is not funding, it is backing which is an entirely different thing. The 200m will fully be used to back the new token, not 4.5 million in salaries as currently is the case.

yieldohmie We don't know if there is an actual product market fit why risk 200m

If one thing is certain after 2.5 years is that there is no product market fit for the current direction.

yieldohmie Risking this once-in-a-lifetime size of a treasury would be detrimental to the long-term future and the possibilities that might come up, which we don't know about yet.

Risk is inherent about crypto and the current state of this industry. People want volatility and a chance to have upside. The current design of the protocol does not allow this, resulting in historically low volumes and buy pressure.

Deez I think it would be interesting to watch a fresh "stable" OHM with a low marketcap, tight range RBS and initial liquidity created via a BLV with the rebranded coin. Debt-backed RBS anyone? Top of RBS range rewards backers and a stability pool? Just thoughts

Interesting idea! Another one which a DAO contributor mentioned is a stable OHM value with all yield + RBS returns flowing to another token which could be airdropped to current holders

thomasscovell If this proposal does nothing other than give OHMies time to reflect together on that vision then it has done a very useful thing.

This is indeed the main goal: Kickstart thinking about the future and building this vision together

Mark11 you need to think BIGGER! There seems to be no reason we can't launch this in addition to continuing having OHM

I'm all for bigger, bolder and more innovation. Reason we didn't go for a completely different approach is that this proposal can be used as a basis to ideate upon, happy to hear some crazy ideas!

4848 So I think this solves a good bit of problems and am mostly for it. I do wonder how loan facility things will work. I guess they would have be lent out in Eth instead of stables. I think most would prefer to receive stables when they borrow. If a stablecoin called ohmUSD was made and backed by like 10x value in Eth then we could have some stables available but there could potentially be not enough available to fill the demand and people will be forced to borrow Eth instead.

There are some interesting ways for lending and borrowing which could be used. I don't think a Cooler setup would work well together with this proposal, but am happy to be proven wrong if someone has some creative ways.

Project Phaeton: A new vision for Olympus

Introduction

Olympus DAO once was a titan in Defi. It brought innovation to an industry that had been in a stalemate for a while. Unjustly, it now has a stench of a failed protocol without a future. Yet, people fail to see that it is a sleeping giant. Recent proposals have kindled the flame of the community, and we feel the time is ripe to make use of Olympus’s 3 exceptional qualities: Its 200m dollar treasury, its innovative main product, Ranged Bound Stability, and the contributors who made it possible.

Today, we propose a new future for Olympus by changing the backing entirely to ETH. The vast majority can be staked in a diverse set of staking protocols to earn yield which guarantees working capital for the DAO and increased yield for OHM holders. After doing so, Olympus would denominate Ranged Bound Stability in ETH to harvest volatility from OHM’s relative position against ETH.  This would result in a growing backing per OHM, ultimately increasing OHM holder's exposure to ETH. In essence this would become a superior product compared to stETH, it would have dampened volatility which makes it more attractive to borrow against, and it allows for several creative protocols to be integrated with.

Problem

This industry is not ready for a decentralized floating currency. Many who will read this will disagree with this, but we would implore you to think again. Many attempts have been made to bring this type of product to the market. Initially, they do well, since the need for such a product is extremely clear to crypto-native participants. As we saw with Olympus, it might even create a bit of a hype. But ultimately, whether it is economic circumstances, bubbles or attention fatigue, they all need to face reality: the broad public is not ready to hold and use this on a massive scale. Let’s dive a bit deeper:

1. Holding a decentralized floating currency:

• People either want something extremely stable or want to speculate. Olympus in it’s current form gives neither. This despite Olympus showing extreme stability compared to the market and showing positive returns since introducing RBS. Yet, rarely has the price diverged from the bottom cushion and OHM has been trading under backing for months, showcasing the aversion of people to hold OHM. Furthermore, even after 2 years the majority of the backing is still in USD equivalents, leaving it exposed to US monetary policy and a currency which means very little to 95% of the population. 

2. Using OHM in a decentralized economy:

• Protocols don’t want to integrate with OHM on a large scale or adoption lags severely behind. Despite a large treasury and a perceived large community, OHM has had extremely limited market adoption. None of the major protocols has adopted OHM in its 2.5 year existence. The only adoption we see is in the lending and borrowing market, and even that brings very limited value to the protocol. 

3. Operating a decentralized currency’s treasury is hard: 

• There will always be extremely difficult tradeoffs. As a currency, you would need large liquidity buffers. There are two options, either you use POL (another innovation by Olympus) and you have IL + forego yield, or you buy strategic assets and bribe for rewards. These strategic assets are notoriously down only and require labor-intensive management. Although the treasury team has done excellent work since its inception, due to the current design, it is handicapped by the assets it can hold, the liquidity it needs to provide, the multi-sig setup and the governance framework it has to operate in.

4. There is ever increasing risk:

• As voiced so eloquently by Nicnombre in his recent TAP-25, we are unfortunately facing increased risk. Not only from a regulatory perspective, but also from smart contracts. Again, by design, the treasury needs to integrate with a myriad of protocols and their contracts. There have been precedents in the past where millions were lost in presumed ‘safe’ protocols, even by this very DAO. Furthermore, the largest treasury asset, DAI, is pushing the boundaries of what is considered safe, by buying more and more treasury bonds, opening up significant regulatory risk.

5. Either there is no vision or people don’t get it:

• A common critique is that Olympus doesn’t have a long-term vision. It doesn’t do marketing, it should be out there more. While we (the people writing this) don’t agree with this and realize how hard it is to communicate this properly, we conceive that it is extremely hard to convey the mission of a decentralized floating currency since it attacks many of the foundations whereby people operate in this industry. Add on to this the reputational dent Olympus has, and you almost have a sisyphean task to convince people of your ideals.

• Maybe the largest outcome of this is that it doesn’t excite people anymore. When starting to write this proposal, we reached out to respected community and DAO members and found that while everyone believes in what Olympus is building towards, it lacks excitement. Not only to buy into this vision, but also to build it out. No developer wants to write yet another allocation contract to manage a cumbersome treasury. They want to innovate and expand the possibilities of this new technology. Similarly, community members want to look forward to the next generation of products, a new innovation like bonds, POL, RBS, …  An industry member who captures this well is Frax, who always seems to be one step ahead with new and exciting ideas. Olympus has lost its spark, regardless of the merit of its original vision.

6. OHM has a reputation problem

• As someone who has been active in this industry for a long time who talks on a daily basis to people, it is very clear to me that OHM as a token has a burned reputation. Not only do uninformed people only remember the initial hype, they also somehow think something went horribly wrong and have this belief affirmed while looking at the chart. Countless attempts by community members and myself to point to the rebasing, the warranted APY’s at the start for bootstrapping and matching the exceptional growth,.. fall flat. No serious investor will ever touch OHM again while this persists. I have it on good authority that one of the largest funds cleared OHM of its books because of this very reason, even though they talked to the Olympus core team in person weeks before.

Proposal

Let’s preface this proposal by laying out our intentions. We do not want to rush this through governance. What follows is our proposal for an ETH-centric future. This does not mean it is set in stone, and we have deliberately chosen to leave certain parts open for the community and DAO to help out. The goal is to have a much more detailed OIP, which would leave no stone unturned and would give a complete view of the long-term vision of an ETH centric future. The authors of this proposal have been holding a substantial amount of OHM for the past years and have the best interest of the protocol in mind. We elect not to vote on any resulting snapshot to truly let the voice of the community be reflected.

As indicated in the introduction, we want to tailor this proposal around Olympus’s 3 main advantages, its treasury, great products and contributors. The vision is simple, rather than be a currency, Olympus should aim to create a safe and attractive alternative to LSD’s towards the user and be an asset which has additional benefits for protocols wanting to integrate it. It is important to note that we should step away from OHM as a currency and look at it as an asset. This will help to shape your mental model of this potential future.

Step 1 - Convert ALL asset to ETH, stake the vast majority across multiple LSD protocols.

• The goal is to at all times have 100% exposure to ETH

• Put out an RFQ for all staking protocols to put out an offer for (part) of Olympus’s ETH and to properly inform our community of their benefits and differentiation to other providers.

• After a sufficient period, the community shall vote on the allocation in the staking protocols and the framework upon which this can be changed

• Any other assets should be acquired through other means (Borrowing using (staked) ETH as collateral, BLV, … )

• Especially for stablecoin liquidity, which is vital to harvest volatility, acquiring stablecoins is key. In the short term we see lending markets as a way to keep full ETH exposure, but BLV can be a great avenue long term, further highlighting the usefulness of the current Olympus suite of products.

Step 2 - Reconfigure RBS and BLV to support this new era for Olympus

• RBS should now be denominated in ETH. The dynamics of this are as follows. When ETH drops and OHM lags, we sell OHM to buy more ETH. Similarly, when ETH rises and OHM lags, we buy OHM back with ETH. Ultimately, this means that the ETH backing each OHM will slowly rise over time (much like the RBS system has done for the past months). Due to the dampening effect of RBS, OHM will be an exceptional asset to borrow against compared to most other asset classes.

• BLV can be used to build up stablecoin liquidity, which is key for the operation of RBS. This allows the protocol to keep a strict 100% allocation into ETH and keeps existing parties fully on board (Lido and Liquity). It now will provide even more utility to the protocol, since it will give it access to stablecoins and/or other assets in the future to build out liquidity.

Step 3 - Focus attention on building products.

• In the past year, great products have been built out, such as RBS and BLV’s. However, with this new wind should also come a new look on how to operate within the DAO. Small product teams should create multiple MVP’s of potential implementations using OHM. Experimentation, intellectual curiosity and a deep understanding and knowledge of DeFi has always been at the core of Olympus. Let’s use this to innovate using OHM as the core. This can be done under the wing of the DAO initially, with them spinning out if successful (much like Bond Protocol’s example). This keeps developers engaged, willing to work for Olympus, while giving them potential upside towards the future if and when they create a successful product. We see this as a big win/win for all stakeholders and follows the example of many DeFi giants who have build out a proper portfolio in this same manner.

• In this spirit, the current DAO assets should be safeguarded for this innovation, and we expect some organizational restructuring would benefit the DAO. One example could be subDAO’s or working units, but we leave that up to the more organizationally inclined.

Step 4 - Rebrand.

• Potentially the most controversial step of all, and we are 100% open for community feedback on this. We think the history of OHM is that of a currency. By proposing this pivot, we recognize that it will be extremely difficult to re-educate people about this new direction for Olympus, much like it has been equally hard to convince people to give Olympus a second look after it’s initial hype cooled off. Especially with institutional investors, it will be extremely hard to execute this pivot successfully under the current Olympus banner. 

• The new token will likely create a much larger splash, excitement and genuine interest from industry participants which we can leverage to set this new vision into the spotlight. After all, how often does a new project start with 200 million TVL?

• This doesn’t mean the Olympus brand and OHM should go away. Rather, we propose to repurpose the OHM token for potentially a currency build on top of the new, ETH-denominated token. 

What are the benefits of this proposal?

1. A new, fresh perspective and start for Olympus

2. Less dependency on treasury management

3. A proper alternative to (staked) ETH

4. Much lower Smart Contract and Regulatory risk

5. Olympus’s product suite will be used to their full potential

6. A stable yield generating source in ETH staking which could also fund DAO expenses

7. More experimentation and innovation coming from the DAO

8. Much less treasury management and a clear understanding of the backing of the token

9. More robust backing in ETH as opposed to a USDC wrapper (DAI, Frax,..)

What are we still missing?

1. What additional elements could we add to the offering which would make OHM even better of an asset to have compared to ETH

2. How does this all work with lending markets?

3. Is this grand enough of a vision, or are we too swayed by the recent liquid staking hype?

4. What would the new token design look like?

5. Whatever you can think of, let us know!

As said, this only serves as a rough framework, and we would encourage everyone to think together with us. Let us know if you want to help out crafting the OIP, if you see obvious drawbacks to the outlined strategy, and/or you have an alternative vision for the future of Olympus!

Proposed Timeline

1. Phase 1: Research and Analysis of RFC (Duration: 30 days)

• Engage with the Olympus DAO community

• Quantify the impact on existing projects

• Explore technical feasibility of proposed solution and get developer feedback.

2. Phase 2: OIP creation and voting (Duration: 30 days)

• Taken into account all feedback, come up with a hyper detailed OIP

• Include all impact on existing projects, finances and operations

• Have 1 vote on the entire setup. If failed we bury this vision

3. Phase 3: Execution and Transition If voted for by community (Duration: 120 days)

   - Create a structured roll-out plan

   - Push out RFQ for ETH staking protocols and execute this process

   - Test run ETH RBS and lay out initial product pipeline

Conclusion and Voting Options

We encourage everyone to voice their opinions, and we want this to be a collaborative process. In the case there would come an OIP out of this proposal, it will entail feedback from the community.

1. Approve: I support the exploration of transitioning towards a full ETH backing along with the proposed steps

2. Reject: I do not support the transition and prefer to maintain backing and vision.

The voting period will be open for the outlined 3 weeks.

Thank you to everyone for helping review this text before publication.