DeFi 2.0: Rebasing Treasury-Backed DAOs VS Protocol

Rebasing DAOs: What’s The Problem?

As soon as you visit their landing page, OHM’s tagline is: a decentralized reserve currency to provide stability and transparency. However, the OlympusDAO model has not quite accomplished its goal with the recent events. With a backing of only 1 DAI per $OHM and a heavily inflationary token model, how could it? At its peak, OHM traded at above $1400, way above its original backing of 1 DAI and RFV (Risk-Free Value).

OlympusDAO’s market cap has fallen from a high of almost $4 billion ($3.95b) to just under $600 million ($592m)

Treasury Backed Assets From Rebasing DAOs

Although Olympus may call itself a reserve-backed currency — it’s probably more appropriately termed a treasury-backed currency. The basket of treasury assets’ market value provides the backing for the price of $OHM.

Market Value of Backing per Circulating OHM (Without LP + Other Treasury Assets)
  • Stablecoin deposits in other protocols for yield
  • Owned liquidity (from their LP tokens such as OHM/DAI & OHM/FRAX), and other treasury assets.

Treasury Backed Assets: Pros

  • Owning the token means owning a piece of the treasury. Investing in vetted projects such as OlympusDAO and Wonderland can provide high-growth opportunities that normal investors are not typically able to pursue. For example, Wonderland’s VC allocations into Betswap.
  • Sets a “floor” price for the protocol to buy back tokens. Since most crypto assets and tokens don’t have any backing (even Bitcoin and Ethereum), it’s better to have something rather than nothing.

Treasury Backed Assets: Cons

  • Anonymous teams (most notable in the forks) have a high risk of rug pull or not knowing how to proceed after the initial funding.
  • Treasury growth does not always translate to an increase of the token’s price, only its supposed “backing price.” Thus, without a proper strategy for treasury funds, it only benefits the protocol and not its users.
  • Buybacks using treasury are usually manually done and not through code or an automatic system. Thus, when the price actually dips below backing, and no one around can do the buyback, users are then forced to endure the price action until the buybacks occur. This is especially concerning for those in a leveraged position. As a result, even liquidation prices under the backing price are not safe.
  • Although the treasury provides some sort of backing for the tokens in circulation, without continual growth of the treasury, the backing price will still decrease over time due to the massive inflation inherent in most rebasing DAOs.
  • Most rebasing DAO’s native tokens have free-floating prices. This means that they are not price pegged or bound to the assets underlying them. As a result, investing in the token becomes less appealing when they start to trade at a premium or above the treasury backing price. At the peak of OlympusDAO, $OHM had a price of $1400 while its backing price was only around $200. Therefore, despite trading at such a high premium, $OHM only had about 14% backing at the time.
  • Because of the manual nature of token buybacks, buybacks can be arbitraged. Whales can scoop up tokens during liquidation/capitulation type events that bring the token’s price under backing and dump when the buybacks occur. Thus, creates a cycle that not only keeps the token from recovering but also drains the treasury of its funds.

Treasury Backed Assets: Key Takeaways

The treasury-backed assets provide many benefits for the protocols (and the users participating in the protocol) that can differentiate and utilize their treasury to their fullest potential. Backed By Code & Algorithms

Comparing OlympusDAO to, at first glance, can seem quite similar to each other. aims to provide a stable-like coin with actual reserve backing. However, the differences are how in how’s native token, $BRC, is backed and how much it’s backed.

Conclusion & Final Thoughts

Although unable to live up to the promise of offering stability and inherent value to a volatile market, OlympusDAO and other rebasing DAOs have still introduced innovations and ideas in the DeFi space. However, there is more to build and solve to increase adoption and trust in decentralized finance.

  1. The growth of the treasury doesn’t offer many benefits to token holders (in terms of token price).
  2. Token price movement is free-floating and subject to market demand. Therefore, is subject to large bubbles & crashes.



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