Hey all, seen some discussion in the discord regarding Olympus Pro bonds and if we can make use of them to benefit the protocol. I’ve been following the recent release and roll out closely within the Alchemix community which has been a massive success so far and something we should look at as a community.
What is Olympus Pro:
Olympus Pro is a service provided by Olympus DAO aimed at helping protocols acquire their own liquidity through bonds, over a long time period this means protocols own their own liquidity which has two main benefits:
-Secure liquidity for the long term
-Allows the protocol to pay out less in liquidity mining
LP Bonds:
This is done through LP bonds, a user would take their ETH/POOL UNI v2 LP token and bond it through Olympus Pro. The protocol provides POOL tokens that are sold at a discount to bonders in exchange for LP tokens which go into the PoolTogether treasury.
Process for bonding:
User enters ETH/POOL LP to get LP token
User bonds LP token through Olympus Pro
LP token enters PoolTogether treasury
User receives discounted POOL vested over a week
Current strategy:
Currently we’re paying out 300 POOL per day to liquidity providers in exchange for liquidity on the ETH/POOL pair, over the long term this may not be sustainable. Once the rewards stop or a better opportunity comes up, the liquidity will likely move elsewhere.
If we as a protocol own our own liquidity, we can direct the POOL elsewhere and do not need to pay for liquidity over the long term.
The discounted POOL that is sold also goes towards people who are more likely to hold POOL instead of liquidity providers who have no incentive to hold.
If we look at Alchemix since the roll out of Olympus Pro, 50% of the tokens that were previously being used for liquidity mining are now going towards buying liquidity that is now locked potentially forever within the treasury. Alchemix now own 430k of their liquidity since the launch 2 weeks ago.
Pros:
-Stable long term liquidity on ETH/POOL pair
-Receives fees on LP pair
-Pay out less for liquidity mining
-Strengthen relationship with Olympus community
Cons:
-Liquidity providers will receive less rewards
-Discount can become wide if there’s a lack of demand
-Currently only available on layer 1 of Ethereum
As a current ETH/POOL LP holder, i’d be quite happy with this and would use the bonds. As you state, its a better setup for the long-term health of the treasury, even if it probably hurts me shorter term as an LP.
At the end of the day, POOL LPs are just as much stewards as the POOL governance voters are, as we provide a market for the POOL token in the first place. But I think its in the DAOs interest to get some market liquidity directly from the treasury itself and not rely on the fickleness of LPs.
Wouldn’t it be better if the protocol dripped some POOL from the treasury in order to buy LP tokens themselves. That way instead of paying LP providers, the protocol will own its own liquidity.
The end result is the same as with the bonds, but we don’t have to pay any discounts or any fees to Olympus.
They help us set up the right parameters and also setup a UI for us. This is a pretty huge value as it saves us a ton of time so we can keep focusing on the important stuff (the protocol)
Build a partnership and cross marketing with another large defi community.
I think those two things together make it worth the relatively small cost (3.3%)
I understand what you’re saying Leighton, but IMO it is definitely not worth it. I do not think that any UI is required. I would just make a proposal to try to determine if we should buy liquidity for the protocol to own it’s own liquidity.
Giving people POOL at a discounted prize doesn’t make sense to me at the point we already are (the protocol is already well known). Also knowing that Olympus taking a small cut, definitely is not positive for us either.
And this is just my honest opinion and I hope not to offend anybody with this, Olympus is not actually a Ponzi scheme, but is has really “agressive” tokenonics, and the prize of the token will go down A LOT (as they are minting new tokens at a crazy fast pace). When that happens, people will likely start selling and produce a snowball effect to the prize. Until that happens, I don’t really know if the project will be able to hold or if it will completely crash. But I’d rather avoid PT having an economic relation with them for now.
I am supportive of this approach long-term, but have conflicting thoughts on the short term scenario
I agree with @BRONDER here on some of his thoughts. At a time when we are trying v4, we are intentionally reducing whale farming deposits affecting vanity metrics (such as lower TVL) and likely lower POOL price. Now if we put further pressure by having discounted POOL flood the market - we could cause a temporary downward spiral on POOL price that may be hard to recover from.
On the other hand, Olympus community is deeply entrenched in defi 2.0 narrative, and a partnership with them could give us required visibility to showcase how valuable we are as a protocol. Also i really like value add from Olympus Pro LP bonds. Thanks to work from Spell (and other defi 2.0 tokens), this is definitely an emerging trend and could be future of LM rewards.
So in summary, I like this idea, but we should get our timing right. Let’s see how v4 effects play out over 1-2 months on perception, vanity metrics and POOL token price. And then do something like this…
I think short-term this is an absolutely terrible idea, there’s existing liquidity and we could easily deploy liquidity ourselves.
Long-term I think this is a genius idea. We’ll control a large amount of liquidity, we’ll earn the fees over the long term and that all goes to treasury. We’ll easily be able to migrate liquidity in any way we feel is necessary.
There will be short term pain of emptying the POOL coffers more quickly than we all would like to gain that liquidity to the treasury. But to be able to have and harvest that liquidity in the long-term is a real transformation in terms of treasury operations.
Edit: significantly FOR this because long-term gain trump short-term pain
Right now we are distributing 300 POOL per day already to Uniswap LPs. So this will not increase disbursals by very much at all… it will just use them more effectively.
The proposal is to distribute 500-700 POOL per day via the bond program. As of last week, we were distribution 1,000 POOL per day JUST to the USDC depositors (and most that was being sold). Even today we are still distributing 500 POOL per day to both the USDC and Dai depositors.
Given that, I’m not too worried about this amount of POOL making a big impact on the market. On the net, two weeks form now we will still be distributing a lot LESS than we are today.
Keep in mind, 1-2 months in DeFi is a LONG time, I think there are a lot of costs to delaying. Not to mention in 2 months at 300 POOL per day we would end up distributing more POOL than the proposal is for and we would get nothing in return.
sounds good. I will continue to closely follow conversations on 2 threads and also educate myself better on olympus bonds. No major concerns from my side, if we decide to go ahead