Thread by @Storyselling_fr

You keep hearing about $OHM, but you can't wrap your head around it.
Is it a ponzi?
Is it a scam?
Will it make you rich or poor?
If this sounds like you, then read this 🧵, fren. 0/n

My staked OHM recently grew to 11 OHMs. A cool 3 OHM return. Everyone is super stoked on me. Even if they don't know it yet.

In honor of this momentous occasion, I'm publishing "OHM 4 idjits." A breakdown for the OHM-curious, who feel too dOHM, to invest in $OHM. 1/n

First, let's confirm who this writeup is for.

You're not super smart. Maybe like 'smart adjacent.' You haven't won a single IQ award. You don't even know what IQ stands for.

Let's just say, you're a couple sandwiches short of a picnic.

And that's ok! Am an ijdit too. 2/n

I had to research @OlympusDAO for weeks just to glimpse the outer limits of understanding. And I'm finally at the point where I think I can help frens understand a lil' bit quicker.

So without further adieu, let's get you from dOHM to sOHM. 3/n

This mega 🧵 is going to help you learn:

I. what Olympus and $OHM are
II. what Olympus is tryna do
III. how Olympus works
IV. how Olympus plans to execute
V. will $OHM make u rich
VI. what are the risks
VII. theories on the future
4/n

I. WHAT'S OLYMPUS? WHAT'S $OHM?

$OHM is a currency. That's it. That's the tweet. 5/n

Just kitten. 😽

$OHM is a currency—but more complicated than that. It's meant to be decentralized reserve currency. And "Olympus" is the protocol behind the currency. @OlympusDAO is the DAO behind the protocol.

But wot does "decentralized reserve currency" even mean??? 6/n

🌈 Decentralized: 🌈

$OHM is decentralized because most 'decisions' are baked into the protocol. You might think of Olympus like a Central Bank (CB). CBs have authority to make money and spread it around. They've been doing a lot of that lately. 7/n

Instead of a 'centralized' group making decisions about the money supply behind closed doors, @OlympusDAO allows machines to make ~most~ decisions based on a set of rules and agreements (i.e. a protocol). 8/n

And anyone can inspect the code to see how these decisions are made bc these rules + agreements are "open source."

Olympus is also decentralized bc decisions needing human input are made by the DAO. Contributors in the DAO can put forth proposals, and the DAO votes on them. 9/n

Like, you could join @OlympusDAO and propose the entire treasury be used to buy a party island.

And if you swayed enough #OHMies, then you'd get your wish. Would OHMies go for it?

Only one way to find out, fren. 10/n

🏦 Reserve: 🏦

Similar to USD, $OHM is backed by stuff that is apparently valuable. Olympus chose $DAI—a stablecoin pegged to USD$1—bc it's relatively unrisky.

You're probably thinking: "wot t3h fok?! $OHM is trading for like $1000—how is $1 enough of a 'reserve'?" 11/n

You're right. That's a 1000x multiple. Which is pretty sp00ky.

But $OHM is actually backed by more than $1 at this point. See, the Olympus treasury is programmed to accumulate unrisky assets. It's gobbling em' up and there's no end in sight. 12/n

Currently, the treasury holds ~ $169M in risk free value and ~ $747M in market value.

Risk free value (RFV) is the amount of stablecoins Olympus has control over.

Market value (MV) means the current price Olympus could get if it sold all the assets in it's treasury rn. 13/n

RFV and MV give you an idea of how much 'value' is backing $OHM.

There are currently 3,827,689 $OHM in circulation.

If you put all these numbers together, it means each $OHM is backed by a reserve pool of assets worth at least ~ $44, and up to ~ $121. 14/n

That means $OHM still trades at a phattypuss premium relative to the underlying 'reserve' assets. The current price is ~$900 so it's trading at ~7x MV and ~20x RFV.

This gap between the price and the underlying reserve value is called a "monetary premium." 15/n

Monetary premium is a made up 'value' that the market gives to something bc of a general consensus of expectations. When lots of people believe something—like a company or protocol—will stand the test of time & realize value down the road, then people tend to pile into it. 16/n

Market expectations can stem from pretty much anything: founding team, talent, user base, traction, memes, roadmap, community, etc.

For Olympus, enough people believe in its future to drive up the current price to a 7-20x multiple over reserve value. 17/n

This multiple/premium is also partly bc the mimetic APY drew users in way faster than normal. When the protocol launched, you could earn 200,000%. Which is unheard of. This sped up how quickly the market found out about $OHM, piled in, and assigned monetary premium to it. 18/n

💰 Currency 💰

Remember: Olympus is the entity, $OHM is the token.

$OHM is meant to become a currency. With the traditional features of currency like: fungibility, durability, portability, recognizability, AND stability. 19/n

Stability is actually the most important feature of currency that $OHM is meant to (eventually) possess.

It's stability is based on 2 things:

-reserve backing

-programmed decision-making 20/n

We've touched on reserve backing a bit, but we haven't touched on the 'why.'

Think about crypto today. Why is $BTC valuable? Why are NFTs valuable?

They're valuable because a minimum threshold of humans came to the understanding they are valuable (at least for now). 21/n

That's it. Basically just trust, consensus, and subjectivity. There's nothing hard backing Bitcoin. And maybe there doesn't need to be. But Olympus was founded on the idea that cryptocurrency could/should be based on some underlying asset to maintain value legitimacy. 22/n

The 2nd aspect of $OHM's stability is decisions are mostly made by the protocol (based on pre-existing agreements). Algorithms are running the show. But the DAO does need to step in to make the odd policy decision, but at least it's open and transparent unlike CBs. 23/n

Because the day2day decisions are made by algorithms, it invites predictability into the currency. If the price goes up or down, you know what's going to happen because the protocol is programmed to step in. 24/n

This predictability is what makes $OHM so attractive. And, combined with the reserve backing element, it's why $OHM may ultimately become the go-to currency of the #Metaverse. 25/n

II. WHAT OLYMPUS TRYNA DO?

As I said earlier: Olympus is trying their darndest to create a stable, crypto-native currency. 26/n

Basically, there are some pretty big flaws with existing currencies, and the founders of Olympus think $OHM might be better.

Stablecoins arent actually 'stable'.

They're vulnerable to inflation, just like regular $USD. Because they're pegged to $USD. 27/n

Stables are crucial to the inner workings of the decentralized financial system (DeFi). So that means most of DeFi relies on a currency that won't necessarily hold its value. 28/n

Olympus thinks there's a better way.

Note: $OHM isn't meant to be a "stablecoin." 29/n

III. HOW OLYMPUS WORK?

This is the fun part. Now you get to learn how the machine works. Let's pop open the lid and see inside, shall we? 30/n

Olympus is like a 3 legged stool. And once you go down the rabbit hole fren, you'll look at most protocols like 2 legged stools. The three legs that Olympus sits atop are:

-staking

-bonding

-protocol owned liquidity

31/n

🥩 Leg 1: Staking 🥩

If you've been in DeFi for more than a week then you're familiar with staking.

You're incentivized to stake with some DAO-determined APY. At the outset for @OlympusDAO, this APY was heccin hyooge. And I'll get into why a little later. 32/n

But suffice to say people have been pretty eager to stake their $OHM because the promised APY is bigly. Like, too bigly to ignore.

This incentive is powerful, and it means lots of people stake. Which helps Olympus attract value and become more valuable. 33/n

When you stake $OHM, you 'lock it up.' But you can actually unstake whenevs. Once you lock it up, you get an equal amount of $sOHM (staked OHM). Which earns rebase rewards every 8ish hours. When you unstake, the sOHM is "burned" and you get an equal amount of $OHM back. 34/n

🤗 Leg 2: Bonding 🤗

The way Olympus does bonds is v clever. And it's truly the sekrēt sauce behind the protocol's growth.

This bonding mechanism effectively allows Olympus to sell $OHM for way more than it costs. Like selling a $1 for $10. 35/n

Sidebar: you may hear the word 'seignorage' thrown around. Seignorage is usually revenue earned by guvmnts where the $$ they make is worth more than the actual cost to make the money. Olympus' bonding revenue is essentially seignorage. Which is a lucrative af business model. 36/n

So how does the bonding mechanism work?

You can buy bonds from Olympus in exchange for stablecoins or other approved assets.

Olympus sells bonds that allow you to get $OHM for a significant discount. You buy the bond, and then discounted $OHM vests over 5 days. 37/n

This arrangement works as long as the discount is joocy enough to incentivize bonders.

It costs Olympus very little to sell a bond. It only costs them 1 DAI to mint 1 $OHM. So, as you might imagine, the profit margins are fkn yuge (more on this later). 38/n

And everytime someone buys a bond, the revenue goes straight to the treasury.

How are bond prices determined though?

Bond price = 1 + BCV * Debt Ratio

39/n

BCV = bond controlled variable = DAO controlled scaling factor.

High BCV means lower bond discount (less incentive to bond). Low BCV means higher discount (more incentive to bond). 📈

BCV is determined by the DAO policy team. And is tweaked based on protocol objectives. 📉40/n

Imagine the protocol wanted more liquidity in the treasury (recall: the treasury gains liquidity when Olympus sells bonds).

The BCV would be lowered, which would increase the bond discount, and incentivize bonding. The opposite could also be done. 41/n

It's worth mentioning that Olympus sells 2 types of bonds: Reserve Bonds and Liquidity Bonds.

Reserve bonds are their main bread and butter. And their main source of revenue. These are bonds for a single asset. In exchange for $DAI, you get $OHM. 42/n

Imagine you're buying a bond from Olympus. You scope out what's available on the Olympus Dapp, and notice a bond worth $450 with a market price of $500.

Score.

5% discount on $OHM.

You buy the bond for $450 and your $500 worth of $OHM vests over the next 5 days. 43/n

You're happy because you got $OHM for a discount.

And the protocol is extremely super mega happy because it now has the ability to mint 450 $OHM if it wants. Because 1 $OHM is backed by 1 $DAI. 44/n

The second type of bond Olympus offers is a liquidity bond.

These bonds are purchased with pairs of assets. Like OHM-DAI or OHM-FRAX. To buy one of these bonds, you'll need to provide liquidity on @sushiswap or @uniswap. 45/n

When you provide liquidity on one of these Decentralized Exchanges (DEX), you get SLP tokens. You can use these SLP tokens to buy liquidity bonds on the Olympus Dapp.

Bc of this incentive structure, users are attracted to sell SLPs to Olympus in exchange for discounted $OHM 46/n

Which means Olympus owns almost all of its own liquidity.

This is huge. I cannot impress upon you enough how much of a game changer this is.

Protocol liquidity is key to maintaining stability and the long term viability of the protocol. It is the 'third leg.' 47/n

🍆 Leg 3: Protocol Owned Liquidity 🍆

1 of the biggest problems facing DeFi protocols is liquidity. I won't get into it, but suffice to say liquidity is 1 of the most important components of any protocol. And until @OlympusDAO, no one 'owned' their own liquidity. 48/n

If you don't know what liquidity means, here's an oversimplication:

Liquidity gives users an easy and consistent experience when trading for a project's token. When there is sufficient liquidity, it means individual trades don't move the token price. 49/n

If there isn't enough liquidity, then single trades will move the token price, which = volatility. In DeFi, liquidity is rented.

A project's liquidity is maintained using a DEX, the project token, a joocy incentive, and 1 other token the project wants users to trade with. 50/n

Users pool token pairs in exchange for LP tokens bc the project generally offers a significant APY. But that means Users end up holding onto LP tokens themselves. This is a 2 edged sword bc it allows new projects to spin up liquidity for their protocol relatively quickly- 51/n

But it also means the fate of the protocol's liquidity is in the hands of a bunch of random people. People who might only be sticking around for initially attractive rewards.

Once the project dials back the liquidity incentives (which has to happen eventually) then 52/n

all of the liquidity mercenaries tend to jump ship. This tends to cripple projects. And that's why POL is the holy third leg. Olympus found a way to buy their own SLP tokens for a massive discount. 53/n

This means $OHM holds almost all of its own liquidity, which means users will always be able to buy and sell $OHM at consistent, predictable amounts. Which keeps users happy. 54/n

IV. HOW OLYMPUS GET GOALS?

Recall how Olympus is trying to become a stable reserve currency?

Ok, so...it's not actually trying to do that.

"????"

55/n

Olympus has 1 big goal. But to get there, it needs to accomplish something first.

Goal 1: exponential growth and wealth accumulation

Goal 2: stable reserve currency.

You: "Aren't those 2 diametrically opposed goals?"

@ohmzeus: "Yes."
56/n

Sorry fren, not tryna do you a bamboozle here.

There's a good raisin for the seemingly opposite objectives. Think of them as phases.

In phase 1, Olympus is essentially a blackhole for liquidity and reserve assets. They come in, and they don't go out. (pic cc @incoooom)
57/n

So how does Olympus engineer a high growth, wealth accumulation environment?

Through BCV and APY.

You already learned about the BCV and how it can be adjusted to suck in liquidity. So what about APY? 58/n

What's the first thing you notice when you visit OHM?

The sleek branding?

The colorful dashboard?

The somehow negative bond yields?

It's probably none of the above. It's probably that thicc. joocy. unbelievable APY. 59/n

I know right? How can an APY even be that big. It's just like...wow.

The high APY is almost comically large. And it actually has the opposite effect on many users because they think it must be fake. A scam. 60/n

The APY has two primary roles.

First, it's a massive beacon signal to users all over the metaverse.

Second, like the BCV, it can be adjusted up or down in order to incentivize staking. 61/n

For obvious reasons, a 6 figure APY is hard to miss. And it's going to garner attention for the issuing project.

Financial incentives are like 91% of the reason why most of us are in web3 at the moment, so 100,000% is too big to pass on. 62/n

**this is unsatisfying. but I have to cut it here. Sadly I don't have time to finish today. But if this thread gets 50 likes I'll finish it this week.

ty 4 reading!

Wud love 2 see some true OHMie takes on this breakdown:
@ishaheen10
@unbanksyETH
@d0mPablo
@sayinshallah

@WartuII
@ohmzeus
@OlympusGrowth
@OlympusIntern
@OdysseyOlympus
@OlympusAgora