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DForce MinDao: Olympus(OHM) is not a Stablecoin

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Stabilizing this grand track could end up being a hybrid mode

Author: MinDao, founder of dForce

On October 28, the DeFi protocol platform dForce Founder MinDao published a long article on personal social media, analyzing the current market hot algorithm Stablecoin project Olympus. nowWill MinDao The viewpoints are summarized as follows:

Talk about Olympus (OHM) today. First of all, I have used or owned almost all algorithm Stablecoins, but only if they are interested in protocol research and are helpful to the project I am working on. It is not recommended for ordinary people to play with stable assets. Most of them are in hot water, especially those that are already hot. OHM is a stable variant of bonds such as ESD. Two major minimally invasive procedures were performed:

No anchor. It's not actually a Stablecoin, it's a non-sovereign currency.

Change the traditional incentive selling of the second pool into incentive buying to lock liquidity. First, giving up anchoring solves the negative feedback problem of "failing" and being in the water in the past. Most of them are stable, because the unsecured type or part of the mortgage are faced with the negative feedback problem after the token price falls more than $1. OHM is very direct and has eliminated this goal. It's kind of like the teacher suddenly announcing, class, from now on, no passing marks.

Since then, little friends no longer have the psychological burden of loser, and the new entrants do not have to worry about falling into the loser prison, because the prison has not existed. It was radish and stick, but now there are radish every day, and the stick is gone. But without anchoring, you lose the main application scenario for payment media and Stablecoin, and we'll talk about that later.

In essence, the pass line is the rigid asset (non-platform token) in the Treasury of the agreement itself. Now the Treasury/market value of OHM is about 17.5%. In fact, there is 200 million DOLLARS of OHM included in LP, which is deducted. The actual "rigid" Treasury is roughly equal to 10% of market capitalization, which is what many people think of as OHM's "pass line," which is that for $10 OHM only has $1 of rigid assets.

The second point is the bond design mechanism of OHM. In the past, the platform token incentive was to provide liquidity and reduce fickle loss, but now it has become an incentive lock-up to realize the realization of the platform token Treasury.100DAI + $100 OHM LP, like 210 OHM. However, people who get OHM have a certain lock-up period. Instead of turning around and selling them, it is highly likely to pledge or directly re-match LP currency pairs, such as 210 DAI: 210 OHM, and then sell them to earn discounts.

Pledge and bond sale both encourage lock-in and encourage lock-in through high returns. However, different from the second pool incentive lock-in, the arbitrage of the second pool is simple, and it is easy to dig and sell. Token prices fall and enter negative feedback. However, those who are willing to sell LP token to the agreement and get back more platform tokens are most likely not to dig and buy, because LP exchange platform token increases market risk, and they are most likely to: 1. The pledge; 2. Rematch LP (add leverage) and sell again, which reduces selling.

Basic improvements. Let's talk about injuries. The first major injury, of course, is not anchored in the US dollar, not anchored in the us dollar is stable, basic finally have no way out, or die or transform into asset management agreements. Centralised Libra is already 10m tall because it does not anchor the dollar as a non-sovereign currency; The decentralized track, which is where bitcoin and ethereum and the like are, is notoriously difficult to compete on.

The essence of stabilizing assets is to realize monetary policy by adjusting supply and market expectation by algorithm. If we do not rely on external sustainable income, it is often difficult to achieve a positive cycle, and the market falls and it is easy to enter a death spiral. This is why MIM fork TIME, OHM community feels it is a great threat, because MIM is a dollar overmortgaged Stablecoin, can land, easy to have external income, and now wants OHM's "cult" support.

The third is about "liquidity control by agreement".To put it simply, the tokens are sold in exchange for half of the tokens and half of the rigid assets, and then the agreement earns fees on this part of the assets, so that users do not have to bear the volatile loss, and the agreement has income. But volatility doesn't just go away, and this risk must turn into a system liability that OHM's currency holders assume (there is no sense of Synthetix's system liability).

There is no problem with this design, as long as the holders of OHM are still confident to be night watchmen, if they fail to keep, they will still sell OHM, so that the LP token value in the Treasury drops, the Treasury keeps shrinking, and enters a negative feedback. Therefore, they engage in Pro, turn this into a service, and can earn fees outside the system. External income is really the only way for an algorithmic asset to break the death spiral spell, and if there is external income (like DeFi for lending and trading, for example), it will fall to the ground.

Olympus Pro hopes to provide services to other projects and earn commissions. Pro has just started and only 8 million US dollars has been locked up. Personally, I doubt it can be truly scaled up. After all, the threshold is very low and the project side seems to have little motivation for cooperation.

And the biggest obstacle to the scalability of this business, or because of the first hard (not anchoring the dollar). So it looks like OHM is actually a liquidity management tool for To Protocol. The final ideal model requires trial and error, and may end up being a hybrid model, partly supported by practical applications and partly tweaked by algorithms.