Olympus DAO - Part 2
Estimating Those Phat Yields
If we check out Olympus DAO’s website, we discover a clean-looking dashboard with several charts and financial metrics.
One of the first things I noticed while researching Olympus DAO was the chart depicting the APY over time.
With APY as high as 180,724% on June 17th of this year and then quickly declining afterward, it seemed like reality hit, and those spectacular yields just couldn’t be maintained after launch.
Although it may initially appear concerning, this was expected primarily due to the influx of capital that entered the Olympus DAO protocol after inception. (Refer to the OHM Supply Chart in Part 1).
However, what was more interesting to me was how the yield did appear to persist for a while after it bottomed out in July until it was met again with a swift move lower in late August of 2021. To explain how that second decline came about, we must first discuss the community behind Olympus DAO.
We Are Frens, But Are We Ohmies?
Not your usual brand of degenerate investors, “Ohmies” are a math-savvy yield-hungry group with a long-term outlook.
One of the things I look to measure in crypto projects is how the communities behind them operate.
While making my way through the metaverse, specifically Non-Fungible Tokens (NFTs), I got a feel for what a smart community looked like and what a band of degenerates looked like. A lot of the time, that line was blurred. A lot of the time, it was straight-up criminal - more on that another time.
My experience of the Olympus community was reassuring with what seemed like a friendly group of people with an emphasis on providing others with analytics, spreadsheets, and video guides focused on math and logic. They also appeared to make sound decisions, some of which will be discussed within this article.
Vote Damnit!
Because Olympus is governed by the holders of its native token. Policymakers and stakeholders of the community make proposals and vote on them. If a proposal garners enough votes, its suggestions are actioned transparently.
On August 17th, the Olympus DAO policy team proposed a framework (OIP-18) where the reward rate would be adjusted based on the total supply of OHM. The proposal also included a reduction of the APY from 17,827.77% to 7,814.35%, allowing for a more steady and healthy growth rate.
The policymakers provided three voting options to the community.
Option (1): Adopt framework and reduce reward rate to 0.2975%
Option (2): Don’t adopt the framework, but reduce the reward rate to 0.2975%
Option (3): Don’t adopt the framework and don’t reduce the reward rate to 0.2975%
93.63% of the community voted in favor of option 1. To read more about this proposal and the reasons behind it, click here and here.
So Why Reduce Yields So Heavily?
Sustainability!
By voting in favor of OIP-18, the community voted to extend the period of time that they will continue to receive consistent yield (Runway). The chart below shows stakeholders how long they can reasonably expect to receive the advertised yield at its present rate of return.
At present, that APY is still above 8,000%.
For a more detailed explanation of how the OIP-18 vote affected the runway, click here.
To see a list of other proposals made by the community click here.
Stay tuned for Part 3, where we discuss the Bond structure of Olympus, how it works, and finish with our final thoughts on the project.