Olympus DAO for Passive Income

Stablecoins have made massive waves in the cryptocurrency space. They offer low volatility and stable purchasing power with the convenience and speed that blockchain technology offers.

Most of the largest stablecoins by market capitalization are pegged to the US dollar. I find this to be pretty ironic…

The US dollar is far from decentralized — it’s controlled by the US government and federal reserve. It is subject to jaw-dropping inflation (to the tune of ~7% in 2021) and nonstop money printing.

Depreciating US dollars means depreciating stablecoins that are pegged to the dollar.

Olympus DAO came along with the goal of creating a free-floating reserve currency (OHM tokens). The Olympus protocol was deployed on the Ethereum blockchain with an algorithmic reserve currency.

Olympus aims for OHM to function as a currency able to hold its purchasing power independent of centralized assets.

What is Olympus DAO?

Olympus is a decentralized reserve currency protocol. The protocol functions with the use of OHM tokens.

OHM tokens are backed by a basket of decentralized assets. This is different from a stablecoin, which is typically pegged to a “trusted” asset like the US dollar. OHM tokens are not pegged to an asset. They are backed by a number of treasury assets and given an intrinsic value that they cannot fall below.

Olympus is building a policy-controlled currency system. The project introduced the DeFi space to a concept that has gained immense popularity — protocol-owned liquidity. This allows the protocol to control their own liquidity, rather than relying on “liquidity renters” participating in yield farming.

The OHM protocol is controlled by its decentralized autonomous organization (DAO). This allows protocol supporters and investors to participate in community governance. Contrast this against the traditional approach of a few finance executives making corporate decisions that impact the masses. DAOs are growing in popularity for good reason.

The long-term aim of Olympus is to build stability and function as a global unit-of-account and medium-of-exchange currency.

How Does It Work?

The protocol functions through a combination of its bond mechanism, treasury, staking rewards, and protocol-owned liquidity. Let’s break these down.

• Bond mechanism — Bonders can mint OHM tokens at a discounted price by providing liquidity and reserve assets to the protocol. Olympus is able to sell OHM tokens at a discount to its current market price. Since OHM is technically only backed by 1 DAI, the treasury accumulates the difference.

• Protocol Treasury — The treasury holds all funds collected by the protocol.

• Staking Rewards — Staking is the primary value accrual strategy of Olympus. OHM tokens are staked on the Olympus website to earn rebase rewards, which currently compound to a >5,000% APY.

• Protocol-Owned Liquidity — Bonding allows the protocol to accumulate its own liquidity. Olympus is able to become its own market. This ensures locked exit liquidity in trading pools to facilitate market operations and protect investors.

Passive Income Opportunity

Staking OHM tokens on the Olympus DAO website is the recommended long-term approach to passive income.

Every 8 hours, rebase rewards are provided based on your staked balance. These rewards are immediately compounded. This allows for the jaw-dropping 5,000% APY.

I’d classify this opportunity as high-risk, high-reward. The OHM token price and APY fluctuate regularly. This is caused by algorithms that govern the protocol reacting to supply/demand changes.

I am bullish on this protocol. The risk-reward is skewed in the investor's favor. The Olympus organization is also scaling its infrastructure to provide this service to other protocols. This is through Olympus Pro.

Olympus Pro

Olympus Pro helps other protocols acquire their own liquidity. This scales the liquidity solution that Olympus DAO tackled. Other protocols no longer need to rely on renting liquidity from yield farmers.

We’ve seen this play out in a “pump and dump” manner several times. More about this and the basics of DeFi 2.0 here.

Olympus Pro is essentially a liquidity-as-a-service provider. They provide a custom treasury and bonds tailored to protocol’s needs.

This service benefits Olympus DAO stakers in a couple of ways:

• Fees. The Olympus Treasury takes a fee on all volume. The more success a new protocol using Olympus Pro has, the more Olympus DAO will benefit.

• Utility. Olympus Pro services promote OHM as a treasury asset and liquidity pair (LP) token for other protocols. Offering incentives to protocols accumulating OHM helps strengthen Olympus DAO.

Olympus DAO was the first protocol to declare itself a decentralized reserve currency through protocol-owned liquidity. Many forks have been created since. They say imitation is the sincerest form of flattery. I’m excited to see how Olympus will continue to innovate in the DeFi 2.0 landscape.