O
O
Olympus
Search…
FAQ

# Why do we need OlympusDAO in the first place?

Dollar-pegged stablecoins have become an essential part of crypto due to their lack of volatility as compared to tokens such as Bitcoin and Ether. Users are comfortable with transacting using stablecoins knowing that they hold the same amount of purchasing power today vs. tomorrow. But this is a fallacy. The dollar is controlled by the US government and the Federal Reserve. This means a depreciation of dollar also means a depreciation of these stablecoins.
OlympusDAO aims to solve this by creating a free-floating reserve currency, OHM, that is backed by a basket of assets. By focusing on supply growth rather than price appreciation, OlympusDAO hopes that OHM can function as a currency that is able to hold its purchasing power regardless of market volatility.

# Is OHM a stable coin?

No, OHM is not a stable coin. Rather, OHM aspires to become an algorithmic reserve currency backed by other decentralized assets. Similar to the idea of the gold standard, OHM provides free floating value its users can always fall back on, simply because of the fractional treasury reserves OHM draws its intrinsic value from.

# OHM is backed, not pegged.

Each OHM is backed by 1 DAI, not pegged to it. Because the treasury backs every OHM with at least 1 DAI, the protocol would buy back and burn OHM when it trades below 1 DAI. This has the effect of pushing OHM price back up to 1 DAI. OHM could always trade above 1 DAI because there is no upper limit imposed by the protocol. Think pegged == 1, while backed >= 1.
You might say that the OHM floor price or intrinsic value is 1 DAI. We believe that the actual price will always be 1 DAI + premium, but in the end that is up to the market to decide.

# How does it work?

At a high level, OlympusDAO consists of its protocol managed treasury, protocol owned liquidity (POL), bond mechanism, and staking rewards that are designed to control supply expansion.
Bond sales generate profit for the protocol, and the treasury uses the profit to mint OHM and distribute them to stakers. With liquidity bonds, the protocol is able to accumulate its own liquidity. Check out the entry below on the importance of POL.

# What is the deal with (3,3) and (1,1)?

(3,3) is the idea that, if everyone cooperated in Olympus, it would generate the greatest gain for everyone (from a game theory standpoint). Currently, there are three actions a user can take:
• Staking (+2)
• Bonding (+1)
• Selling (-2)
Staking and bonding are considered beneficial to the protocol, while selling is considered detrimental. Staking and selling will also cause a price move, while bonding does not (we consider buying OHM from the market as a prerequisite of staking, thus causing a price move). If both actions are beneficial, the actor who moves price also gets half of the benefit (+1). If both actions are contradictory, the bad actor who moves price gets half of the benefit (+1), while the good actor who moves price gets half of the downside (-1). If both actions are detrimental, which implies both actors are selling, they both get half of the downside (-1).
Thus, given two actors, all scenarios of what they could do and the effect on the protocol are shown here:
• If we both stake (3, 3), it is the best thing for both of us and the protocol (3 + 3 = 6).
• If one of us stakes and the other one bonds, it is also great because staking takes OHM off the market and put it into the protocol, while bonding provides liquidity and DAI for the treasury (3 + 1 = 4).
• When one of us sells, it diminishes effort of the other one who stakes or bonds (1 - 1 = 0).
• When we both sell, it creates the worst outcome for both of us and the protocol (-3 - 3 = -6).

# Why is PCV important?

As the protocol controls the funds in its treasury, OHM can only be minted or burned by the protocol. This also guarantees that the protocol can always back 1 OHM with 1 DAI. You can easily define the risk of your investment because you can be confident that the protocol will indefinitely buy OHM below 1 DAI with the treasury assets until no one is left to sell. You can't trust the FED but you can trust the code.
As the protocol accumulates more PCV, more runway is guaranteed for the stakers. This means the stakers can be confident that the current staking APY can be sustained for a longer term because more funds are available in the treasury.

# Why is POL important?

Olympus owns most of its liquidity thanks to its bond mechanism. This has several benefits:
• Olympus does not have to pay out high farming rewards to incentivize liquidity
providers a.k.a renting liquidity.
• Olympus guarantees the market that the liquidity is always there to facilitate
sell or buy transaction.
• By being the largest LP (liquidity provider), it earns most of the LP fees which
represents another source of income to the treasury.
• All POL can be used to back OHM. The LP tokens are marked down to their risk-free
value for this purpose. You can read more about the rationale behind this in this

# What will happen if there is a bank run on Olympus?

Fractional reserve banking works because depositors don’t withdraw their funds all at once. A depositor’s faith in the banking system rests on regulations and agencies like Federal Deposit Insurance Corporation (FDIC).
OHM does not have FDIC insurance but it has an incentive structure that protects stakers. Let’s take a look at how it performs during a hypothetical bank run. In this scenario, we assume the majority of stakers would panic and unstake their tokens from Olympus - the staking percentage which stands at 92% now quickly collapses to 3.3%, leaving only 55,000 OHM staked.
Next, we assume the Risk-Free Value (RFV) inflows to the treasury completely dry up. For context, RFV is currently growing at about $1 million every 2 days. However, during a bank run this growth will likely stop. Finally, we assume that those last standing stakers bought in at a price of$500 per OHM. The initial investment of these stakers would be:
$\500/OHM * 55,000\ OHM = \27.5\ million$

# Do I have to unstake and stake OHM on every epoch to get my rebase rewards?

No. Once you have staked OHM with OlympusDAO, your staked OHM balance will auto-compound on every epoch. That increase in balance represents your rebase rewards.

# How do I track my rebase rewards?

You can track your rebase rewards by calculating the increase in your staked OHM balance.
1. 1.
Record down the Current Index value on the staking page when you first stake your OHM. Let's call this the Start Index.
1. 1.
After staking for some time, if you want to determine by how much your balance has increased, check the Current Index value again. Let's call this the End Index.
1. 1.
By dividing the End Index by Start Index, you would get the ratio by which your staked OHM balance has increased.
$ratio = endIndex / startIndex$
1. 1.
In this example, the OHM balance has grown by 1.5 times.
$ratio = 13.2\ /\ 8.8\newline = 1.5$