A DAO is a decentralized autonomous organization that uses blockchain technology to enforce rules, coordinate behavior and manage funds. The Olympus DAO is the governing body of the Olympus protocol, responsible for setting fundamental policy parameters such as inflation rates, transaction fees, and asset allocations in the treasury.
The goal of Olympus is to build a policy-controlled currency system, in which the behavior of its OHM token is controlled at a high level by the Olympus DAO. This system optimizes for stability and consistency so that OHM can function as a global unit-of-account and medium-of-exchange currency.
How Does it Work?
At the core of the Olympus DAO is a multi-sig wallet containing the treasury assets in the system. This wallet is managed by a group of elected guardians who are responsible for overseeing the treasury and executing decisions made by the DAO. The Olympus DAO has a set of rules enforced by smart contracts to prevent any malicious activity or bad actors from manipulating the system.
In order to ensure maximum decentralization, every member of the Olympus DAO can create proposals and vote on them through an off-chain voting system. All proposals must pass a minimum threshold before they can be implemented into the protocol.
The goal of Olympus is to create an open and transparent policy-driven platform that optimizes stability while providing users with control over their funds. The team behind it believes this will enable OHM to become a stable and widely-used medium of exchange.
Role of reserve currencies
Reserve currencies were designed to achieve deep liquidity, serve as a unit of account and preserve purchasing power.
Reserve currencies provide a low-volatility asset that can be exchanged for other assets, products, and services easily. This stability of the reserve currency helps to ensure other assets are denominated in the same currency and that the purchasing power is maintained over the medium-to-long term.
With this in mind, initiatives such as Olympus DAO’s Treasury management and development of on-chain governance structures have been put in place to help strengthen OHM’s stability further. Ultimately, these efforts strive to facilitate the growth of the Olympus network economy.
Stablecoins have become an increasingly integral part of web3 due to their remarkable ability to remain relatively consistent in value, even in the midst of volatile markets.
For users familiar with transacting using tokens such as Bitcoin and Ethereum, a lack of volatility is often seen as a perceived guarantee since one is assured their purchasing power will remain the same today versus tomorrow.
The assumption is, however, largely unfounded – since a currency pegged to the US dollar remains at the whims of the US government and Federal Reserve. In order to address this issue, Olympus introduces OHM: a non-pegged reserve currency aimed at eradicating Web3’s reliance on centralized financial assets.
Aiming to maximize stability and growth in the ecosystem, OHM takes advantage of its Treasury reserves for counterbalancing market functions and expanding its scope economically across industries.
While OHM is not a stablecoin, it does aim to accomplish many of the same goals. Olympus seeks to design an asset with built-in purchasing power preservation, maintain deep liquidity across the ecosystem, and become a reliable unit of account. It also aims to serve as a trusted backing for other decentralized digital assets on Web3.
OHM is an innovative protocol that is backed, rather than pegged. Every OHM held in the treasury is backed by at least $1 worth of assets, removing the upper limit imposed by a peg. To ensure that the value of each OHM remains linked to its backing, the protocol will buy back and burn OHM tokens when they are trading below their backing values of $1. This has the effect of driving up the price to just above $1 in order to incentivize users to hold onto their tokens. This contrasts with a pegged currency, which would remain fixed at $1 regardless of demand. OHM provides investors with flexible purchasing options and dynamic prices, allowing them to determine when it is favorable to enter or exit their investments.
Olympus monetary policy
The Olympus DAO is responsible for controlling the supply of OHM tokens with the goal of maintaining their value over time. The DAO will implement a set of financial policies such as inflation and deflation targets, reserve requirements, and capital controls to ensure that the currency remains stable and reliable.
This approach allows users to trust that their purchasing power will remain constant regardless of market conditions.
In addition to managing the money supply, the Olympus DAO also sets parameters for transaction fees. These are charged for processing transactions on-chain and are used to fund projects in the protocol’s ecosystem. By accounting for usage costs, Olympus ensures that there are enough funds available to cover network operations while simultaneously providing incentives for users who actively participate in governance.
The DAO also enforces a minimum threshold of votes required for any proposed policy changes. This ensures that the protocol is secure and prevents malicious actors from influencing the network without the consent of its users.
Olympus seeks to create an open monetary system that allows users to decide how their money is managed and used, while still providing the stability and security needed to ensure its long-term success.
The DAO uses two mechanisms to achieve its monetary policy goals: pledge and bonding.
Pledging is a process that enables holders of OHM tokens to agree to the release of tokens. They lock their individual share of the total token supply and offset potential price decreases due to token fluctuations.
When a pledge is made, those who have done so are rewarded with sOHM and receive ninety percent of all income generated by treasury assets. Furthermore, OHM rewards are distributed every eight hours, and the staker’s sOHM balance is adjusted to take into account new tokens issued.
Bonding is a key process for Olympus, one which allows users to sell their assets in return for discounted OHM tokens. Originally only encompassing OHM-DAI and OHM-FRAX LP token bonds, the agreement has been extended to include all stablecoins. Through bonding, more pledges allow the agreement to increase its treasury, creating more OHM issuance and providing greater yields for pledgers. This five-day vesting period provides an optimal mechanism to motivate more users who, upon realizing they have received higher rewards than pledged, will continually engage with Olympus bonding services.
Olympus Pro is an innovative new way to create sustainable, decentralized economies that allow third-party participants to join in yield farming and other initiatives. The platform offers a variety of services geared toward helping protocols unlock their full potential by providing liquidity as a service with low overhead costs and user-friendly access to investing in the future of the Olympus platform.
Backed by infrastructure, expertise, and exposure, Olympus Pro provides a reliable method for tokenizing bonds as part of the emission model that allows clients to mine for liquidity without needing constant input from users. By utilizing this platform, it will be easier than ever for protocols to create robust and durable systems that attract investment from all sides.
Olympus Pro offers projects a powerful tool to generate their own liquidity and grow value for the platform. This provides a much-needed alternative to costly protocols that demand premium fees for access to liquidity.
Olympus Pro clients enjoy unprecedented flexibility when it comes to tokenomics structures – they can tailor bond structures to the unique requirements of their specific project, meaning they have more time left over to focus on product perfecting and development. With Olympus Pro, projects can effectively build stronger financial propositions and maximize returns for all users.
Olympus is a particularly compelling project due to its innovative governance structure; the monetary policy is decided not by second-level governance tokens holders, such as those controlling DAI, FEI, and RAI, nor those of centralized stablecoins like USDC and USDT, but rather by the holders of the actual currency. This unique feature fosters wider participation in the protocol’s operations and helps mitigate the associated risk of governance token holder change. This attribute can likely explain why some OHM holders are so enthusiastic about Olympus.
Olympus is an ambitious project that seeks to create a decentralized reserve currency protocol using OHM as its base currency. By backing each OHM with a basket of assets, and providing users with the tools to regulate their own monetary policy, Olympus hopes to become a reliable store of value for users across the globe. Furthermore, by employing pledge and bonding mechanisms, Olympus enables users to take advantage of dynamic prices and benefit from higher yields than those offered by traditional stablecoins. As the project continues to grow and develop in its early stages, it will be exciting to see how this innovative idea evolves into a global financial platform.