Climbing the Summit of Olympus
Olympus DAO for DOHMmies
Recently I’ve talked to a lot of people who have seen the iconic (3, 3) meme being paraded around by the Ohmies on Discord and Twitter. Most don’t know much more than the name. Other times I hear they checked it out but didn’t understand or thought the high APY was a lure for a rug-pull or that it was a ponzi.
I can assure you, Olympus DAO is as legit as they come.
Don’t feel bad, you’re not a smooth-brain if you don’t get Olympus. It’s pretty complex and there are some gigabrains building it. It took me about two weeks of lurking the Discord and annoying them to finally wrap my head around it.
I’m not going to pretend I’m an expert or know as much as them but I want to try to distill the essence of Olympus into something accessible for anyone who is a beginner or a bit lost.
What is Olympus DAO?
Olympus DAO is essentially a decentralized “central” bank that seeks to create a free-floating reserve currency through fractional reserve, OHM. OHM is backed, not pegged. The difference being pegged is 1:1; backed is >=1.
For example, USDC always tries to maintain $1. OHM is allowed to trade above $1 dollar at whatever the market is willing to pay, more on that later.
In this way it functions more like fiat in the sense that the value of the currency is allowed to fluctuate based on market conditions. Traditional stable-coins try to maintain the peg to the dollar but OHM will fluctuate like currencies in a FOREX market. OHM seeks to be the reserve currency of crypto, holding a similar relationship to other cryptos as the US dollar holds in FOREX, it’s the one that everyone has reserves of and it has deep liquidity.
Utility
Whenever I invest in a project I ask myself, “What is the utility and what problem does this solve?”
So what is the utility of OHM? Why do we need a decentralized reserve currency?
The top 3 stable-coins Tether, USDC, and BUSD are all backed by securities or fiat. This leads to a few problems:
- They have collateralization risk
- They are centralized
- They easily fall under regulatory scrutiny
This means that the crypto market has an Achilles Heel. A government or any regulatory entities, which are increasingly powerful and undemocratic, don’t need to control all of crypto, they just need to control it’s liquidity; i.e. stable-coins. Since most liquidity is centralized in three stable-coins and the State controls the assets used to back them they could grab the market’s throat and choke it’s liquidity.
Crypto is not truly free or decentralized if our liquidity isn’t.
OHM seeks to solve these problems by making an algorithmic decentralized reserve cryptocurrency. There are no dollars or securities to be regulated. OHM’s backing is through decentralized assets, much harder or even impossible to regulate. It cannot be stopped or controlled by any outside entity.
How does it work?
First we need to understand how OHM is minted. OHM is fractionally backed by different cryptocurrency assets, for example, DAI. For every one DAI that enters the treasury, one OHM is minted giving OHM a 1:1 backing.
I know what you’re thinking, “Why is 1 OHM’s price so much higher than $1 if it’s backed 1:1?”
I’ll remind you, OHM is backed not pegged. The main reason the price is so much higher is because of human psychology and demand for OHM. This demand is created by people wanting an early share of the market cap and by insane, degen level returns.
So, if Olympus is legit how are these yields sustainable? What do I mean by “share of the market cap”?
Game Theory and (3, 3)
OHM is inflationary.
I just said the dirtiest word in crypto, I know, slow down fren.
Inflation is often overly simplified; it can serve very important functions and is sometimes necessary for proper monetary policy. The largest economic recession in US history was largely caused by unchecked deflation, but that’s a different story.
The creation of new money is inherently inflationary but every OHM is directly backed to control this effect and give people faith that OHM has value. Olympus uses supply expansion as a tool for monetary policy
They also do something I haven’t seen anywhere else; nearly all new OHM is given to stakers.
This is where (3, 3) comes in.
(3, 3) refers to a simplified Game Theory model of Olympus. There are three actions:
- Stake (Buy) — stake your OHM for rewards
- Bond — Purchase OHM directly from the treasury at a discount.
- Sell — Stab your fellow Ohmies in the back (lel) but really.
The dominant strategies are all cooperative, the most dominant, (3, 3), results from two actors in the system staking OHM. This is the best for OHM’s price and for protocol sustainability and health, it is a mutually beneficial action. It’s lucrative because a portion of new OHM minted goes to you, the Ohmie (3, 3)er. You earn a variable percentage on your current OHM that automatically compounds every 8 hours and you are incentivized to hodl and stake through volatility because the yield increases as others get scared and unstake/sell.
When playing the game of Olympus, assuming someone doesn’t come in and flip the table over, if you (3, 3), you win.
It’s not about price
For OHM we need to invert how we usually think about cryptocurrency and investing.
Normally, we research and determine if the price of a particular coin or token will increase or not. Is the risk worth the potential reward?
For OHM, price does not matter.
Again, price does not matter.
In fact, it is likely that OHM will be worth less than it is now after the project runs it’s initial course. The point of OHM is accumulation.
This is why (3, 3) is such a powerful and important strategy. If you (3, 3) the amount of OHM you hold will grow exponentially. Really proving the adage, “it’s not timing the market, it’s time in the market.”
Let’s see a simple example to get an estimate:
We will use the new target APY and current OHM price of $357. We recently voted to reduce the reward rate in favor of long term growth and sustainability. The new target is 8000% APY, so let’s assume that for our average. If you bought 1 OHM and staked it today you would have 80 OHM a year from now.
Now we multiply this by Risk Free Value per OHM. RFV represents the real value of the treasury assets that are used to back OHM, there is currently a surplus. Right now RFV per OHM is $27 and expected to grow as new assets are added. We can assume, for our example, this would be the floor of OHM if worse came to worst.
As an extreme scenario, let’s assume OHM crashes to $27 dollars. 80 OHM x $27= $2160 that’s almost a 6x profit.
We can assume the reward rate will drop, if you cut the average APY in half you still 3x your investment in this scenario. At an average of 2500% APY you still make profit.
Again, this is almost the worst case.
Above we can see an Ohmie who staked OHM in March has nearly their entire investment backed. This investment will be fully backed by the end of September.
Again, the price is irrelevant long term if you hodl and stake OHM. The only way you lose is through a black swan event or an exploit but this is a problem for any crypto project.
Should I invest?
Olympus is not for everyone. If you can’t stand to see “number go down” and will sell, you shouldn’t invest. OHM is a long term investment and you should plan to hodl for at least a year.
A lot of people think it’s too late to invest in OHM, they see how much the reward rate has fallen and assume all the opportunities are gone. As you saw above it is easy to win if you (3, 3). OHM is still in it’s very early stages.
This is a ballpark estimate but it is estimated that OHM price will not stabilize until around a 20% APY and 5 billion in assets. At our current reward rate we have about 300 days of yields, which has been increasing, when I became an Ohmie there was about 200 days of yield runway. The team is constantly thinking of new ways to extend the yield runway and bring more utility to OHM. We have a lot of time left.
You’re early.
So you want to be an Ohmie?
First you need OHM.
There are two ways to do this. The first is to use either Sushiswap or Uniswap, conveniently linked on Olympus. If you’re new to Sushi or Uni keep in mind there will be more than one transaction the first time you use the tokens, the contract interaction must be approved first, only once, then they can be swapped. I’ve seen many newbies approve the token and think they did the swap.
Next, head over to the “Stake” tab and stake your OHM. If it’s your first time, again, two transactions, you must also approve interaction with this smart contract. I know. I know. ETH gas is too much.
Second you can bond or (1, 1). When you bond and stake we call this (4, 4). What you should do is look at the current 5 day ROI on the staking tab. If it is LESS than the discount of the bond you want to purchase you should buy the bond. This is because bonds vest over 5 days, so if the 5 day ROI for staking is MORE than the bond discount it would not be as profitable as just buying out right and staking. Don’t forget to figure in gas fees, especially if your bags are small. Bonding 1 OHM, especially an LP bond, is not worth it when gas is figured at current rates.
Check out Brian’s Bond Calculator to compare which options are best for you.
There are a few different bonds right now: OHM-FRAX LP, OHM-DAI LP, wETH, DAI, and FRAX. For the single token bonds you need that token, so for a DAI bond you need DAI. For LP bonds you need the LP token from that pool.
I’m not going to explain Liquidity Pools here, if you’re new you should learn this first, check out Sushiswap’s GitBook.
LP bonds will be the most gas intensive so I don’t recommend this if your bags are small. Head to the “Bond” tab, select your bond and approve. If your bags are big it is beneficial to claim and stake before each rebase but you should calculate gas fees and see that it is worth it. Otherwise, wait 5 days for your OHM to vest, then “Redeem”, “Claim and Autostake”.
That’s it, you’re a legend. No. Even better, you’re an Ohmie.
What now?
Make that cheddar.
But really, come hang out with us on Discord. I know every community says they have the best one but ours is really the best. Never have I seen a more engaged, pleasant, and helpful community. Come see for yourself.
Feel free to ask questions on the questions channel. You can also type “?threads” to see a list of helpful threads by some of the gigabrains at Olympus. “?calc” will show you some cool calculators made by other Ohmies that you can play with if you don’t like my dangerously over simplified example above.
An Ohmie, shadow, has created a Dune dashboard with a lot of metrics. If all of that is going way over your head like it did for me check out this ELI5, complete with “ape terms”.
As always, nothing here is financial advice, you do you. Olympus is experimental and there is risk. Don’t invest what you can’t lose.
I remember feeling pretty overwhelmed when I first found Olympus. I almost gave up and then almost sold at a loss because I was frustrated and didn’t get it. I’m glad I stuck around.
Hope this helps you, Ohmie.
See you on top of Mt. Olympus.
