The story starts with 100.000% "APY". Catchy right? Now that I have your attention let's face it. Incentivization programs are temporary. While the bootstrapping of the OlympusDAO protocol was a huge success, we got to tune the engine so we can expand further.
Sustainability is key, b/c we want to go big. The problem the protocol has right now is that it bleeds rewards too quickly. We got to stop the bleeding and reduce "APY". I will also stop talking about "APY" now because what you get after a year will only be known after a year.
From a protocol point of view the reward rate in the distributor contract as time of writing is 0.535% of circulating supply.
OIP-9 got mega engagement. As described we anticipate the reward rate to be reduced to 0.25% of circulating supply. Big brain alert pepe. Let's assume a conservative rebase rate of 0.25% now. Everyone please call out my bullshit if I am off here.
OIP-9 suggests locked staking. Though how did we go from reward reduction to locked staking anon? Fear you not. Here is the deal. Locked staking is a mechanism to reward our (3, 3) gang member shit like we used to. Nothing changes for the die hard ohmies. Link Marine vibes.
If you have the best interest of the protocol in mind you win and nothing changes much. And while we can tune the incentive structure we can also make the protocol way more sustainable because mercenary capital gets diluted more than the faithful "few". Win win.
OIP-9 suggests 12 locking terms you can choose from. Chose from 1 month locking to 12 months locking. Fun fact, the 0.25% reward rate can be sustained for over a year already because treasury RFV is up only. So locking for a year should not pose much more risk for you anon.
Going through the numbers it might very well be you earn more on the longest lock than you do now. This is what we want to incentivize. We want to reward (3, 3) more than mercenary capital, but we can only do that on a scale. All we ask for is commitment. (3, 3) and we gucci.
And well, if we have a holy bond and you break the contract, you are free to leave with your principle any time. Though you shall not be rewarded at all. Don't lock for 12 months if there is the slightest chance that you need your funds earlier. Now it gets interesting.
Why is this mechanic good? Well anon, it makes you think twice. We want an as even as possible distribution of locked rewards. Markets are most balanced if the optimal strategy is most hard to find. This is #game #theory.
To get the boost that OIP-9 proposes, you lock your principle in vesting terms. You get a higher boost the longer you lock. Easy. Designing this staking mechanism is actually not that simple. #behavioural #economics and game theory have a big impact here after all. Hard.
If the optimal strategy is well known there is no information asymmetry and everyone will go for the same solution, breaking the system again. This is why the 12 months terms are better for the protocol than let's say 12 weeks. 12 weeks is not hard enough of a problem to solve.
So, where the rebase rate was 0.6ish before, we will get 0.25ish. The annualized multiplier is 15. So you having 1 $OHM turns it into 15 $OHM. But there is more anon. OIP-9 suggests boosts so that you earn on a bigger bag. If you have 1 $OHM you can actually earn on 5 $OHM anon.
And now to you, market. You wouldn't see alpha if I showed it to you. Let's say I buy 1 $OHM for 400 $DAI. Here is the leak: 1 $OHM trades at 200 $DAI. There is your 100% upside. But anyway, let's say I buy 1 $OHM for 400 $DAI and lock it for 12 months.
I actually earn on 5 $OHM and get my 15x over a year, guaranteed anon. Code is law. How would I do with my investment in one of the hottest communities out there? $OHM could trade around 5 $DAI and I would still break even.
And then $OHM trading at 5 $DAI in one year's time would mean everyone had to sell except me. Now how likely is that, your gracious degen heart?
Based on locked staking the market trades $OHM at a 50% discount below intrinsic value while the investment upside is easily up to 10x in a realistic scenario. It's all rough napkin math and few details need to be hashed out still.
And so, why is this bet hard to get? Because humans are future blind. Because 12 months in #DeFi are hard to play. Because anon sees all kinds of oPoRtUnItiEs. And so sitting on your hands and having a good time is hard. And so we make game theory work for you and me anon.
Making a case based on $MATIC of which only 20% of supply are staked. Wonder how the $MATIC pump came to be? Reduced sell pressure was caused by the unbonding delay, because paperhands got to go over temporary market escapades. You just keep sitting in the train. This is (3, 3).
Down the road it will become more and more attractive for external capital to get into an ever safer haven because capital is locked away and vested more evenly over time. Locked staking is a sponge absorbing circulating reply.
And since OlympusDAO owns its own liquidity we come more and more interesting for partners like Frax Finance. We want your LP and we will never sell it as long as $OHM trades above asset backing, which is currently 1 $DAI, but will likely be higher in the future.
It's not a 20 IQ shitpost but here we see information asymmetry and how anon's own future blindness will keep them poor. Anon will rather want to get rekt on BSC again for the pure thrill of chasing the next 100x only gem, within 2 weeks. We can't all be The Chad Benji.
Ohmies staking riding towards the sun. The reserve currency legend has just begun. Credit: @xh3b4sd