Thread by @0xrvjyn

I'm late to the party with #OHM and @OlympusDAO (although I know, we're all early and WAGMI), so I was trying to explain it to a TradFi friend last night.

Here's where I've gotten so far - my first attempt at a CT 🧵 /1

Let's start with what @OlympusDAO is trying to solve for - a truly decentralized stablecoin that ISN'T pegged to the USD, but that IS backed by other crypto assets when issued.

With the looming crackdown in the US on stablecoins, this is more relevant than ever /2

We're talking about applying the principles of the Gold Standard to crypto, but using $DAI, $FRAX, $wETH and $LUSD, as well as LP tokens containing them to produce $OHM instead of gold to issue pounds/dollars/marks.

So far, so good. Asset-backed bonds make sense right? /3

Think of OHM like a perpetual bond, but the discount they give to face value is closer to 97% for the LP tokens (the "risk-free value") you deposit permanently with them. You, the, depositor, gets that value back in the form of the market premium between $OHM and its treasury /4

Effectively it's not 1:1 between the total $OHM value issued and total @OlympusDAO treasury assets. As of current writing, post-Sept market puking, it's a 4:1 ratio between the OHM treasury market value and the risk-free value it was market at upon minting /5

Everyone who owns $OHM has 4x the value of assets working for them to generate yield. And the assets generating yield for OHM aren't just in stablecoins such as $DAI, but also in LP trading fees and incentives, including $SUSHI, which ALSO earns yield when staked on @SushiSwap /6

With 4x the value of assets working for you and giving ~7000% APY, you have an incredibly strong economic incentive to stake your $OHM.

That leads to the incredible stat that ~92% of all OHM is staked. My other favorite, $SUSHI, only has 1/3 staked for xSUSHI /7

The massive amount of $OHM staked leads to an incredible supply crunch that also creates a market premium for OHM.

And this is where I really fell in love with the model as an econ student - the game theory explanation that leads to the (3,3) you see all over CT /8

The design of @OlympusDAO is guaranteed to produce a cooperative outcome as the most rational course of action:

1. We all value the juicy returns OHM provides
2. We stake our OHM to get those returns
3. Staking removes supply, increasing price

/9

olympusdao.medium.com/the-game-theor…

The other real innovation of @OlympusDAO which I think is underappreciated is the idea of permanent capital.

Many TradFi PE funds like Blackstone and Apollo have discovered the joys of acquiring permanent capital by issuing equity via IPO (or buying insurance companies) /10

This is the other core of the $OHM model. Instead of renting capital by providing liquidity incentives, which attracts the most mercenary and short-term degen yield-seekers, once you bond your DAI, FRAX, LUSD or wETH, you've locked it into the OHM treasury /11

That gives me reassurance, as a hodler of $OHM, that the 4:1 capital asset ratio that is giving me my very fat yields isn't going away, because the capital in that treasury can't be redeemed.

Absorbing permanent capital >>> renting temporary capital /12

Need to give a h/t to @BenGiove for his great @BanklessHQ article back in July that gave me a mental model to understanding @OlympusDAO and dig in /13

olympusdao.medium.com/compounding-an…

The @OlympusDAO Medium blog also has a couple of great explanatory posts if you want to dig deeper into the concepts, the math, or the model /14

olympusdao.medium.com/introducing-ol…

olympusdao.medium.com/dai-bonds-a-mo…

olympusdao.medium.com/compounding-an…

Made the wrong copypasta on the @BenGiove @BanklessHQ article on @OlympusDAO - here it goes for folks who want to read it! /15
newsletter.banklesshq.com/p/wtf-is-olymp…