[ARC] Add Support for OHM

Summary

This proposal aims to re-introduce Olympus to the Aave community and add OHM to the Aave v3 lending markets on mainnet upon launch.

Background on OHM

OHM is a floating currency managed by transparent, algorithmic, and market-driven monetary policy, powered by the Olympus treasury, and governed by OHM holders. The Olympus protocol is a decentralized autonomous monetary authority serving the needs of stakeholders by ensuring liquid markets, fostering stability, and promoting velocity.

Olympus DAO launched in March 2021. Through its early growth phase, Olympus bootstrapped a treasury composed of protocol-owned liquidity and protocol reserves. Together, these assets represent a budget for algorithmic open market operations implemented as the Range-Bound Stability (“RBS”) module, fostering the stability of OHM around a floating target price. In short, RBS codifies the protocol’s “bond” policy, expanding supply by selling OHM (growing reserves) during periods of high demand and contracting supply by acquiring OHM (drawing down reserves) during periods of lower demand. In the past several months, as the protocol transitioned into a more stable phase, this process was done manually through bond policy frameworks. Going forward, as part of Olympus v3, this aspect of monetary policy has been automated. For more information on RBS, please visit the following link.

As part of Olympus v3 and the maturation of the protocol, the high staking rates that defined the protocol’s past have been significantly reduced, further buttressing stability and removing a major hurdle for the use of OHM throughout DeFi. Through the introduction of internal bonds the staking-centric model is being replaced with a bonding-centric model, where incentives lie in holding future-dated OHM bonds.

Finally, it is worth highlighting OHM’s performance and moment in the limelight during Q4 2021. During this period, the protocol experienced a massive surge of interest and an increase in market cap from roughly $500m to >$4b in just a few months time. At the same time, this growth - fueled to a large extent with leverage - led to an unsustainable premium of OHM vs. backing, and towards the end of Q4 2021, the protocol experienced a major unwinding of this built-up debt. During this time, the protocol’s mechanics and protocol-owned liquidity functioned as intended, and we were able to deleverage hundreds of millions of liquidations in an orderly manner with no bad debt. While the optics surrounding this debt-fueled boom and bust were unfortunate, it showcased the system’s resilience and OHM’s strength as a collateral asset.

Motivation

Integrating OHM into Aave is a key milestone in the vision for OHM to become a crypto-native currency. Stablecoins are useful in their utility and for users’ familiarity with the US dollar but will lead to a loss of purchasing power for users in the long term - OHM offers an alternative to users seeking relatively low volatility without being pegged to existing fiat currencies. At the same time, the last year has shown ample demand for borrowing/hedging against OHM.

Benefits to Aave Community

  • Increased TVL - current Market Cap of OHM is $233M
  • Increased diversity of borrowing options
  • Increased revenues - historically, there has been significant demand for borrowing against OHM
  • Synergies with the Olympus community

TL;DR

Add OHM as collateral on Aave v3 lending markets

Specifications

  1. What is the link between the author of the ARC and the Asset?

Stefano is a member of the OlympusDAO Partnerships Team.

  1. Provide a brief high-level overview of the project and the token

OHM is a floating currency managed by transparent, algorithmic, and market-driven monetary policy, powered by the Olympus treasury, and governed by OHM holders. The Olympus protocol is a decentralized autonomous monetary authority serving the needs of stakeholders by ensuring liquid markets, fostering stability, and promoting velocity.

  1. Explain the positioning of the token in the AAVE ecosystem. Why would it be a good borrow or collateral asset?

OHM provides an alternative to stable assets denominated in USD and would thus serve well as both a collateral and a borrowable asset. OHM has deep on-chain liquidity and has demonstrated relative stability for a sustained period on an inflation-adjusted basis (given lower staking rewards, this can now be seen in the OHM price itself rather than gOHM). Supported by permanent, protocol-owned liquidity, OHM has also supported hundreds of millions of dollars of leverage in the past with no bad debts.

Treasury direct deposits can ensure low borrowing costs while demand for leverage and market making (especially in the context of RBS) will drive demand for borrowing.

  1. Provide a brief history of the project and the different components: DAO (is it live?), and products (are they live?). How did it overcome some of the challenges it faced?

Olympus launched OHM in March 2021 and has since accumulated more than $270M of treasury assets, including over $180M of stablecoins (DAI/FRAX) and $70M of liquidity (majority of which is on Balancer). Olympus has a DAO governance model with one of the larger active communities in DeFi and is moving towards on-chain governance.

For further details, please see the background section above.

  1. How is the asset currently used?

Through the protocol itself, OHM can be used to stake and/or used for bonds. Staking provides participants with additional OHM created through network growth. Bonding operations either consist of selling reserve bonds at a discount for assets (growing the treasury), or inverse bonds, buying back OHM below backing with treasury assets. The beta rollout of OHM internal bonds, described earlier, has also recently started.

At the same time, Olympus is actively launching community projects and exploring integrations with other protocols to expand OHM’s utility within DeFi. For example, OHM/gOHM deposits are available on lending protocols such as Vesta Finance, Silo Finance, and Fraxlend. OHM/gOHM can also be used in options markets like Dopex or in automated vaults in JonesDAO. Users can find OHM/gOHM perpetual markets and tokenized yield strategies, and an upcoming NFT marketplace, Odyssey, using OHM as the currency. Finally, users can also participate in the OHM liquidity layer, LPing not just against stablecoins and/or ETH but also OHM pools created by protocols such as Redacted and BarnBridge.

  1. Emission schedule

There is no capped emission schedule for OHM. Instead, OHM supply is controlled through the RBS module and market driven rates for OHM bonds (capacity of which is determined by the Olympus policy team but will be transitioned to a controller).

  1. Token & protocol permissions and upgradeability

Currently, the core Vault contract that manages assets that back OHM in circulation is non-upgradeable. Staking, Treasury, and Allocator contracts are controlled by a multi-sig wallet (4/7). The Distributor and Bond contracts, which manage the protocol’s policy, are under a separate multi-sig (3/5).

  1. Market data (Market Cap, 24h Volume, Volatility, Exchanges, Maturity)

Market Cap: $233M

24h Volume: $5M (Balancer) 0.3M (Curve)

Exchanges:

Protocol Owned Liquidity (primary pools)

  • SushiSwap Arbitrum (gOHM-wETH)
  • Balancer Mainnet (OHM-DAI-wETH - this is the primary pool)
  • Curve Mainnet (OHM-wETH)

Volatility (30D/90D volatility based on log-adjusted daily returns):

  • 0.42/0.99 - OHM
  • 0.27/0.52- gOHM
  1. Social channels data (Size of communities, activity on Github)

Twitter: 151k followers

Discord: 18k members

  1. Contracts date of deployments, number of transactions, number of holders for tokens

Contract date: Deployed on March 17th, 2021

Token Contracts - Tokens - Olympus

Number of txns for OHM: 1,390,927

Number of txns for sOHM: 757,660

Number of txns for gOHM: 657,122

Holders of OHM & sOHM & gOHM: 82537

Risk Assessment

image

image1025Ă—103 5.15 KB

References

Olympus Website - https://www.olympusdao.finance/

App Interface - https://app.olympusdao.finance/

Documentation - https://docs.olympusdao.finance/

Github - OlympusDAO · GitHub

Audits - 1st Audit 2 (Peckshield), 2nd Audit 4 (Omniscia)

Governance - Snapshot

Community Discord - Olympus 1

Twitter - https://twitter.com/OlympusDAO 4

2 Likes