OlympusDAO

Decentralized finance (DeFi) is evolving beyond its initial boom-and-bust cycles towards models emphasizing sustainability, stability, and community alignment. Two projects at the forefront of this evolution are OlympusDAO – creator of the OHM token and pioneer of the “decentralized reserve currency” concept – and Berachain – an upcoming blockchain that introduces a novel Proof-of-Liquidity (PoL) consensus mechanism. This thesis provides a comprehensive exploration of both OlympusDAO and Berachain, examining each project’s architecture and economic design, and then analyzing how they strategically and technically complement one another. We will delve into OlympusDAO’s tokenomics and monetary mechanisms (such as Cooler Loans, the Yield Repurchase Facility, and Convertible Deposits), its governance and treasury management, and its long-term vision for OHM as a reserve currency. In parallel, we will dissect Berachain’s architecture, focusing on PoL, reward vaults, validator dynamics, and its multi-token economy. Finally, we explore the synergy between OlympusDAO and Berachain – how Olympus is leveraging Berachain’s framework (and vice versa) to increase OHM’s utility, liquidity, and adoption. This includes technical details around liquidity loops (e.g. leveraging OHM via hOHM and Origami Finance) and the value accrual mechanisms that benefit both ecosystems. From a strategic perspective, the OlympusDAO–Berachain partnership offers insights into new models of sustainable DeFi growth, ecosystem alignment, and community-first token design that are valuable for founders, investors, and community members alike.

Key mechanisms Olympus uses to sustain and grow OHM:

• Protocol-Owned Liquidity (POL):Olympus owns the liquidity for OHM pairs, ensuring stable markets, deep liquidity, and fee accrual.
• Cooler Loans:Olympus allows OHM holders to borrow stablecoins (e.g., DAI) against their OHM at a very low fixed rate (0.5%), eliminating the need to sell OHM and thus protecting its value. If a borrower defaults, collateralized OHM is burned, benefiting other OHM holders by reducing supply.
• Yield Repurchase Facility (YRF):Profits generated from Olympus’s treasury assets (yield) automatically purchase OHM from the market and burn it, increasing scarcity and indirectly stabilizing its market value.
• Convertible Deposits:Investors deposit stablecoins for a fixed period in exchange for an option to convert to OHM at a favorable price, incentivizing capital inflow and providing Olympus temporary treasury growth without immediate dilution.
• Range-Bound Stability (RBS):Olympus dynamically manages supply by issuing bonds when OHM price is high (collecting treasury assets) and buying back OHM when prices dip, maintaining price stability within a controlled range.
• Cross-chain Expansion and Strategic Partnerships (e.g., Berachain):Olympus strategically partners with innovative chains like Berachain, leveraging its Proof-of-Liquidity (PoL) model to enhance OHM’s liquidity, utility, and adoption. Through deployments such as hOHM liquidity loops via Origami Finance, Olympus further boosts OHM’s utility and capital efficiency.
• Fully Autonomous, Decentralized Governance:Olympus is moving towards on-chain governance (the Parthenon initiative), transitioning operational control entirely to its community, empowering holders to manage the reserve currency’s long-term stability autonomously.

The Path to a Decentralized Reserve Currency

Tokenomics and Treasury-Backed Model

OlympusDAO is built around the idea of OHM as a free-floating, asset-backed currency that could serve as a reserve currency in DeFi. Unlike algorithmic stablecoins that peg to an external value, OHM’s value is supported by a treasury of assets rather than a peg. Every OHM is backed by a basket of assets in the Olympus treasury (primarily stablecoins like DAI, but also other assets), which provides an intrinsic floor value for OHM. For example, as of late 2024 Olympus’s treasury held about $240 million in assets (around $181 million of it liquid), giving a “cash backing” to each OHM token . In traditional finance terms, this is akin to a company’s cash per share – a metric that assures OHM holders that each token is supported by real reserves. The protocol publishes a “liquid backing per OHM” (e.g. ~$11–12 at times, depending on treasury and supply) which acts as a benchmark for OHM’s fundamental value.

Importantly, OHM is not pegged to this backing value; it can trade above or below it based on market demand. OlympusDAO instead uses monetary mechanisms to incentivize OHM’s market price toward its intrinsic value range over time. If OHM trades well above its backing, the protocol can mint and sell new OHM (capturing more assets into the treasury); if it trades at or below backing, the protocol can use its assets to buy back and support the price. This forms the basis of Olympus’s Range-Bound Stability (RBS) system introduced in V3, which aims to guide OHM’s price within a corridor around a target (such as a moving backing price or moving average) . In short, OlympusDAO behaves somewhat like a central bank for OHM: expanding supply when demand overheats and contracting supply when demand weakens, all while ensuring that a robust treasury backs the token’s value.

Another pillar of Olympus’s tokenomics is Protocol-Owned Liquidity (POL). Olympus owns a large share of the liquidity for OHM (for instance, controlling its OHM-DAI liquidity pools). This means the protocol itself provides the liquidity for trading OHM, earning fees and reducing reliance on mercenary capital. High protocol-owned liquidity helps stabilize the market for OHM and ensures that when Olympus conducts buybacks or sell operations (via RBS or other mechanisms), it can do so effectively without depending on external liquidity providers . POL, combined with the treasury backing, gives Olympus significant control over OHM’s market dynamics – a necessity for a protocol aspiring to create a reserve-like asset.

Monetary Mechanisms Supporting OHM

OlympusDAO has implemented several innovative monetary mechanisms in its latest iterations, all designed to bolster OHM’s stability, liquidity, and value accrual. The key mechanisms include Cooler Loans, the Yield Repurchase Facility (YRF), and Convertible Deposits. Together with the legacy bonding mechanism and RBS policy, these form a comprehensive monetary toolkit.

• Cooler Loans (Cooler Credits): This is a decentralized lending facility that allows OHM holders to borrow stablecoins against their OHM with extremely borrower-friendly terms. In Olympus’s implementation, holders lock their gOHM (governance-wrapped OHM) as collateral and can borrow up to 95% of OHM’s liquid backing value in DAI, at a fixed rate (initially 0.5% annual interest) . These loans have no set maturity (they are essentially interest-only lines of credit), and due to the high collateralization (OHM backed by the treasury, and loan only 95% of backing), the risk of liquidation is minimal. In fact, as long as OHM’s market price stays at or above its backing, a Cooler Loan should never liquidate a borrower – this gives OHM holders immense flexibility and confidence in accessing liquidity. From the protocol’s perspective, if a borrower fails to repay, the consequence is that the pledged OHM is seized and burned . Burning the OHM reduces circulating supply (which can increase the price of OHM by simple supply-demand), and since the treasury already held the backing for that OHM, the protocol isn’t left with bad debt – effectively, the system self-corrects by contracting supply. Cooler Loans thus provide a safety valve for OHM holders (they can get liquidity without selling their OHM) and an automatic stabilizer for the protocol (defaults shrink supply, acting as a deflationary pressure that benefits remaining holders). To facilitate Cooler Loans, Olympus keeps a large portion of its treasury in liquid stable assets (e.g. DAI) – currently 95% of treasury value – so that it can meet any loan demand . In essence, Cooler Loans privatize risk (users borrowing take on the risk of their OHM value) while protecting the system’s backing , moving Olympus closer to an autonomous, minimally risk-exposed reserve.
• Yield Repurchase Facility (YRF): OlympusDAO has substantial assets, and many of these are deployed to earn yield (for example, DAI in the DAI Savings Rate, which was ~8% APY, or newer cross-chain deployments on Berachain as we’ll discuss). The YRF is an **automated system that takes the yield generated by Olympus’s treasury and uses it to buy back OHM from the open market . It operates continuously (on a regular cycle, currently weekly for calculating yield and daily for executing purchases) and effectively turns external yield (which could be considered “profit” for the DAO) into buy pressure on OHM. This is analogous to a company using profits to buy back its own stock – benefiting shareholders by reducing supply or supporting the price. The YRF in Olympus goes a step further: when it buys OHM, it actually redeems the newly purchased OHM for its backing assets and burns the OHM . In practice, that means YRF might purchase OHM, then immediately cash it in (via an internal mechanism using the treasury’s stablecoin USDS) to increase the effective funds available for more buybacks while destroying those OHM tokens. This clever design amplifies the impact of each unit of yield: not only is yield used to buy OHM, but the OHM acquired contributes its backing to fuel additional purchases, all while reducing circulating OHM supply. Over time, YRF can significantly bolster OHM’s price floor and even counteract modest selling pressure, as long as the treasury continues to generate income . YRF exemplifies Olympus’s commitment to accreting value to OHM holders: any productive use of treasury assets ultimately funnels back into supporting OHM’s market value.
• Convertible Deposits: This is a new mechanism that Olympus is introducing, which functions similar to a call option or convertible bond that the protocol issues. In a Convertible Deposit, an investor deposits some asset (e.g. DAI or other stablecoin) into Olympus for a fixed term (say, 6 months) . In return, at the end of the term the investor has the right to convert that deposit into OHM at a predetermined price. If the market price of OHM is above that predetermined “strike” price at maturity, the investor will exercise and receive OHM at a discount (acquiring OHM cheaper than market, which is a profit for them). If the market price is below the strike, the rational move is not to convert; instead, the investor simply **withdraws their original deposit back – with no loss . For the investor, this is an attractive no-downside bet: the worst-case scenario is they got zero yield (just their money back), and the best case is they get OHM at a bargain if OHM’s price went up. For Olympus, Convertible Deposits serve multiple purposes: (a) Olympus gets to use the deposited funds during those 6 months – effectively an interest-free loan or temporary treasury inflow which can be deployed to generate yield or support OHM; (b) if the conversion happens, it means OHM’s price appreciated enough – Olympus is then happy to mint and give out OHM at the strike price, since that price is likely above backing and the event signals strong demand for OHM. If conversion doesn’t happen (OHM price stayed low), Olympus simply returns the funds, effectively having gotten free use of capital for 6 months. Thus, much like a company issuing convertible bonds, Olympus can raise non-dilutive capital when it needs, only diluting (issuing new OHM) if the token’s performance is strong (and even then at a favorable price). Convertible Deposits will generate external yield (from how Olympus invests the deposits) which again can feed mechanisms like YRF, and they create a deferred supply issuance that is conditional on success – a very aligned form of fundraising/dilution. In summary, investors get upside exposure with no principal risk, and Olympus gains utility of funds and potentially new OHM holders in the future . This innovative instrument helps Olympus attract capital from more risk-averse investors (or even TradFi players) who might not buy OHM outright but would be interested in a safe note with upside potential.
• Emissions Management (Bonds and RBS): OlympusDAO originally became famous (and infamous) for its bonding mechanism – selling discounted OHM in exchange for other assets to grow its treasury. In the current framework, Olympus still uses bonds but in a much more controlled manner tied to its reserve-backed model. Specifically, if OHM trades at a high premium above its backing (e.g. >100% above intrinsic value), the protocol can issue new OHM via bonds to take in more reserve assets . This increases the treasury (and thus raises backing per OHM), while the increased OHM supply should help bring the price down toward a sane range. Conversely, Olympus’s buyback policies (via YRF or direct allocation of treasury funds) kick in during times of price weakness to support OHM’s price from the downside. The Range-Bound Stability system formalized this by setting trigger thresholds (e.g. ±15% from a moving average) where the protocol would intervene . Notably, RBS was active through much of 2023–2024 and proved effective at guiding OHM’s price; it was deactivated at the end of 2024 when OHM’s market conditions were stable, but it remains an available tool . In effect, Olympus has codified a monetary policy: when OHM is too strong, prioritize growth (mint more, accumulate reserves); when OHM is too weak, prioritize defense (use reserves to buy and burn OHM). This oscillation is meant to keep OHM relatively stable over the long term, instilling confidence that OHM won’t wildly inflate or deflate unexpectedly.

All these mechanisms – low-interest collateralized loans, automatic yield buybacks, call-option-like deposits, and controlled supply expansion – work in concert. They create a self-reinforcing system where treasury growth and OHM supply adjustments maintain a balance between supply and demand . If OHM demand surges, the treasury and supply grow (ensuring OHM remains well-backed); if demand falls, the treasury’s energy (yield, reserves) is used to reduce supply and incentivize demand. OlympusDAO’s design thus far has defied the early skeptics who called it unsustainable – the protocol has increased its backing and stabilized OHM while phasing out the sky-high APYs of its youth. As one recent analysis put it, Olympus has evolved into a system where “mechanics reinforce one another to maintain balanced supply and demand,” far beyond the simplistic “Ponzi” it was once accused of being .

Governance and Treasury Management

OlympusDAO’s governance and treasury management have likewise matured to support its long-term vision. Initially governed by a DAO of community members through OIPs (Olympus Improvement Proposals) on Snapshot, Olympus is now transitioning to on-chain governance for direct, trustless execution of decisions. In late 2023, the DAO outlined a plan (codenamed “Parthenon”) to achieve a fully autonomous Olympus within six months . The idea is to minimize human intervention in protocol operations: with Cooler Loans automating treasury outflows and RBS automating market operations, the remaining step was to allow anyone to propose and implement upgrades via on-chain voting . By early 2024, Olympus aimed to dissolve its “working DAO” structure and let the community and smart contracts completely run the system. In this model, contributors can still build new features (e.g. new modules or integrations), but they would do so by getting community approval on-chain, rather than through a core team’s blessing. This move to on-chain governance is significant – it aligns with the vision of OHM being a decentralized reserve currency managed by its holders, not by a centralized committee. It also reduces costs and risks associated with a large centralized treasury team, and empowers the community to take ownership of Olympus’s direction . The governance token is effectively OHM (since gOHM represents governance shares), meaning OHM holders will directly steer the future of the protocol.

On the treasury management side, Olympus has adopted a conservative yet flexible strategy. A recent framework proposal details how all treasury income is allocated across a few key buckets :

• Floor Reserves (Safety) – e.g. keeping a substantial portion of assets in risk-free yield like DAI deposited in the DAI Savings Rate (DSR). This ensures the base backing for OHM grows steadily (currently, Olympus puts a large DAI stack into DSR’s ~8% APY) . These reserves are not to be touched except to defend OHM’s backing or honor loans (as noted, Olympus keeps enough DAI on hand to cover any Cooler Loan demands) .
• Buybacks – a portion of yield or profit is set aside to buy OHM on the market and burn it, but only under certain conditions. Similar to how central banks buy their currency during depreciation, Olympus will allocate e.g. one-third of treasury income to buybacks when OHM is trading at or slightly above its backing price (to support a stable range) . Rules can be codified (for instance, only buyback if OHM is within 10-15% above backing, and taper off buybacks as price rises) . These repurchases above the absolute floor help provide a “soft floor” and also reduce supply over time, benefiting holders.
• Growth (Risk Asset Investments) – the remaining portion of income can be deployed into higher-yield opportunities or strategic assets, with strict risk criteria. For example, Olympus might take some profit and invest in other stablecoins or DeFi protocols, but only if they offer a return significantly above the risk-free rate (e.g. DSR + 10%) . This ensures that the treasury isn’t unduly exposed to risky bets for marginal gain. Any such allocations would ideally bolster OHM’s position – e.g. acquiring governance tokens of another protocol that could benefit Olympus, or supporting a stablecoin that aligns with Olympus’s goals . Notably, any project seeking treasury investment knows that Olympus will only consider using this specific budgeted slice of income and not the core reserves , making engagements very structured and transparent.

These policies are periodically reviewed by the community, and adjustments require on-chain votes, ensuring accountability and adaptability . By having a clear budget for every dollar earned (safety, buybacks, growth), Olympus provides transparency to both its community and to external parties on how it manages its funds . This level of professionalism is inviting to partners – it signals Olympus isn’t just a speculative project, but a well-managed fund/currency issuer with rules and objectives.

Today, Olympus’s treasury remains heavily weighted in stable assets (DAI and others) and owns a large share of OHM liquidity across chains. It also holds some ETH and other assets from past bond acquisitions. With the developments around Berachain (discussed soon), Olympus is also diversifying a portion of its treasury into staking positions on this new chain, which could become a significant source of yield. Governance-wise, the community continues to propose new ideas (OIPs) such as deploying OHM on new networks, integrating with other protocols, or tweaking parameters like loan terms. One example was the decision to deprecate the high APY staking model – Olympus famously turned off its rebase staking rewards (which once printed thousands of % APY) as they were no longer needed, transitioning OHM fully to the backed model. This was a major governance milestone and reflected the community’s buy-in to the long-term vision over short-term incentives.

Long-Term Vision: OHM as a Reserve Currency

OlympusDAO’s endgame is for **OHM to function as a decentralized reserve currency for Web3 – a kind of “crypto central bank asset” that is used widely across ecosystems as a store of value, unit of account, and medium of exchange (at least within DeFi). Achieving this vision means OHM must be stable enough to be trusted as collateral and a quote asset, decentralized enough to resist censorship or centralized manipulation, and widely held enough that many ecosystems integrate it by default.

In Olympus’s own terms, since inception the goal has been a “decentralized, automated and fully autonomous reserve currency” . The DAO’s role is to build the pieces (treasury, mechanisms, integrations) to make that a reality. Over the past two years, Olympus has built those pieces: a strong treasury backing, POL for market stability, mechanisms like Cooler Loans and Convertible Deposits to extend utility, and governance processes to decentralize control. Little by little, Olympus is shedding any remaining centralized characteristics (like moving to on-chain governance and automating operations) to position OHM as a neutral, infrastructure-level asset.

The long-term vision for OHM sees it being used in a variety of ways by other protocols and users: as a base pair on DEXs (instead of using ETH or USDC, other tokens could trade against OHM if OHM is stable and liquid enough), as a Treasury reserve asset for DAOs (much like how companies hold cash or gold, DAOs could hold OHM knowing it’s a value-preserving asset with upside from active management), and as collateral for lending (if OHM’s volatility is managed, lenders will be happy to accept it for loans). Olympus’s focus on cross-chain deployment – issuing OHM on multiple networks – supports this, as OHM needs to be ubiquitous to be a reserve. We will see in the next sections how Olympus is leveraging one such network (Berachain) to forward this mission.

It’s worth noting that OlympusDAO’s model draws some parallels with traditional central banking and commodity-backed currencies, but with a DeFi twist. The idea of a currency backed by reserves is reminiscent of the gold standard or currency boards, and the idea of adjusting supply to stabilize price is what central banks do with open market operations. However, Olympus does this autonomously and transparently through code, and its reserves include yield-bearing assets (not just idle gold). The “protocol-owned liquidity” model is also novel, effectively making Olympus its own market maker. If OHM succeeds as planned, it could become a cornerstone of DeFi – a base asset that isn’t pegged to USD (unlike most stablecoins) yet maintains purchasing power and deep liquidity. This has huge implications: it would reduce the space’s reliance on centralized stablecoins and could serve as a hedge against both crypto market downturns and TradFi inflation (since OHM’s value is actively managed). While it’s still an open experiment, Olympus’s resilience and continuous innovation have kept the vision very much alive. As one observer noted, “Whether OHM will become a cornerstone of DeFi remains to be seen, but its resilience and systemic approach certainly warrant attention.” .

Berachain: A Novel Blockchain with Proof-of-Liquidity Consensus

Overview of Berachain

Berachain is a new Layer-1 blockchain (EVM-compatible) that introduces a fundamentally new consensus and economic model called Proof-of-Liquidity (PoL) . Berachain’s ethos is encapsulated in its meme of “bears with bongs” – a playful culture – but under the hood it brings serious innovation to how a blockchain incentivizes validators and users. Unlike standard Proof-of-Stake (PoS) where validators stake the native token to secure the network and receive inflationary rewards, Berachain’s PoL ties the blockchain’s security and its DeFi ecosystem together. In other words, participants are rewarded not just for locking up the native token, but for actively providing liquidity and fostering economic activity on the chain.

Berachain’s architecture features a three-token economy (often referred to as the Berachain trifecta):

1. $BERA – the native gas and staking token. BERA is equivalent to ETH in Ethereum or SOL in Solana; it’s what users pay transaction fees in, and what validators must stake to produce blocks . BERA has a fixed supply or predetermined emissions (details aside, it’s the asset that secures the chain). It does not grant block rewards directly beyond fees.
2. $BGT – the Bear Governance Token (often nicknamed “Barrel Governance Token” in community lore). BGT is a soulbound token distributed as block rewards in Berachain’s PoL system . “Soulbound” means once it’s in an address, it cannot be freely transferred to another (it’s non-transferable except through specific mechanisms like delegation or burning). BGT represents governance power and is the key to Berachain’s incentive mechanism: validators earn BGT for proposing blocks, and this BGT is used to reward liquidity providers (as we’ll explain). BGT is essentially an accounting of one’s contribution to the chain’s DeFi activity – holding more BGT gives influence (e.g. voting on chain governance proposals) and a share of network earnings, but it’s not a currency you trade on an open market.
3. $HONEY – the chain’s native stablecoin. HONEY is designed to be a stable unit of account within Berachain’s ecosystem (valued around $1). Notably, HONEY is interest-bearing , meaning simply holding HONEY can yield some return over time (similar concept to an index like AMPL or an interest-accruing stable, possibly via integration with on-chain lending). HONEY is the base token for many of Berachain’s DeFi protocols – for example, it’s used as the primary quote and collateral asset in Berachain’s native perpetual futures platform and likely in lending markets . It’s often described that HONEY is over-collateralized by assets like USDC (e.g. through a vault mechanism) and used widely in the ecosystem (the “bears” theme extends to honey as their stable token).

This three-token setup allows Berachain to separate concerns: BERA secures the network and carries value (like ETH), BGT carries governance and incentive weight, and HONEY serves as a stable medium for transactions and DeFi. This contrasts with typical L1s where one token (e.g. ETH) has to do all roles (security, fees, governance, and often as a DeFi asset). By separating them, Berachain can, for instance, inflate BGT to reward activity without directly diluting the value of BERA, and adjust HONEY’s supply to meet stablecoin demand without affecting security or governance.

Proof-of-Liquidity Mechanics

At the heart of Berachain is the Proof-of-Liquidity consensus, which extends Proof-of-Stake by introducing liquidity and governance into the reward loop. Here’s how it works:

• Validator Set: Berachain maintains a fixed-size active validator set (currently 69 validators, an ode to the community’s humor) . To become a validator, one must stake a sufficient amount of $BERA (with only the top 69 BERA stakes making it in). This is similar to any delegated PoS system – BERA staking is required to propose blocks, and if a validator misbehaves, their BERA stake can be slashed (this is the security foundation). So BERA is the skin-in-the-game for validators.
• Block Rewards in BGT: When a validator in Berachain successfully proposes a block, the chain mints a certain amount of $BGT as a block reward . However, unlike typical PoS, the validator doesn’t just pocket these tokens directly. Instead, the validator has the authority to distribute (direct) the BGT emissions to various “reward vaults” in the ecosystem. In fact, a validator’s BGT reward increases if more people delegate BGT to them (we’ll touch on delegation shortly), but crucially, validators can’t transfer BGT to themselves freely – they can only route it to reward vaults . A small portion may be a “base reward” they keep, but the majority is meant to incentivize others.
• Reward Vaults: A Reward Vault is a special smart contract associated with a particular asset or liquidity pool where users can deposit that asset to earn rewards . For example, there might be a reward vault for the HONEY-BERA LP token of the main DEX, or a vault for staked OHM on Berachain (as we’ll see Olympus likely having one). Each vault is whitelisted via governance – this prevents spam vaults and focuses incentives on meaningful pools. When a validator directs X amount of BGT to a vault in a given block, that BGT is essentially distributed among all users who have deposits in that vault (proportionally to their share) . Over time, as blocks accumulate, each vault accrues BGT which users can claim. In essence, liquidity providers (or other participants) who stake into these vaults earn the chain’s block rewards (BGT) instead of validators keeping them all. This is a core idea: those who provide liquidity/security to the ecosystem are the ones who get the new token emissions, not just the validators.
• BGT Delegation: Now, once users receive BGT from vaults, what do they do with it (since BGT is soulbound and can’t be sold)? They can delegate that BGT to a validator of their choice . Delegating BGT is similar to delegating stake in PoS – it signals support to a validator. The total amount of BGT delegated to a validator determines how much additional BGT that validator is allowed to emit in block rewards (the validator’s “emission weight”) . This creates a feedback loop: a validator who is popular (lots of BGT delegations) will be able to direct more BGT per block to vaults, making them an attractive validator to delegate to (because they’ll be involved in distributing more rewards to the ecosystem). It does not give the validator more BERA or direct profits, but it gives them influence to spread more rewards, which in turn can earn them other incentives (as next point explains). BGT holders delegate based on who they think will best utilize the emissions – typically they’ll choose validators who support the vaults that they themselves care about (for instance, if you are providing liquidity in a particular vault, you want validators who will direct emissions to that vault, since that’s how you earn yield).
• Protocol Incentives (Bribes): The final piece is that protocols (dApp developers) can incentivize validators to choose their vaults . Suppose there’s a DEX that wants more liquidity in the HONEY-USDC pool. It can create a reward vault for the HONEY-USDC LP. Now, to make sure this vault gets BGT emissions (so LPs get yield), the DEX project can offer a bribe to validators: e.g. for every 1 BGT you direct to our vault, we’ll pay you 0.1 of our governance token (or some amount of HONEY, or any whitelisted token). Validators, being profit-motivated, will compare the available incentives across different vaults and route their BGT accordingly to maximize their gains . These incentives are set up as on-chain contracts that automatically pay out when conditions are met (so it’s a transparent system, much like Curve’s bribe system but at the consensus layer). By collecting these incentives, validators (and by extension, their delegators, since validators often share a portion with those who delegated BGT to them) earn extra income beyond just gas fees . This means a successful validator in Berachain is one who not only has a big BERA stake, but also aligns with protocols to direct emissions where they are wanted, and shares the rewards with their supporters .

Bringing it together, Berachain’s PoL creates a multi-sided market:

• Validators compete to attract BGT delegations (from users) and incentives (from protocols). They do this by effectively managing their BGT emissions: picking the “right” vaults to send BGT into.
• Liquidity Providers/Users stake assets in vaults to earn BGT (this is their reward for helping the ecosystem). They then delegate that BGT to validators who will further support the vaults they care about, closing the loop. Notably, delegating BGT has no slashing risk – if a validator misbehaves, only their BERA is slashed, not the delegators’ BGT . This encourages users to delegate freely to whoever will best drive rewards to them.
• Protocols/Projects on Berachain effectively “purchase” liquidity mining by incentivizing vaults. Instead of directly distributing their own token to LPs, they can use a smaller amount of tokens to bribe validators, who then direct BGT (the chain’s inflation) to those LPs . It’s a more efficient market: protocols with the most need or willingness to pay get the lion’s share of BGT directed to their vaults, and thus their users get high yields and flock there. It’s similar to the Curve Wars dynamic (where protocols bribe CRV holders for gauge votes), but integrated at L1 and involving validators as intermediaries.

The economic design here aligns incentives in a novel way. Validators, normally only caring about token price and fees, now deeply care about the TVL and activity on the chain, because that’s how they maximize bribes and delegations. Liquidity providers, who in other ecosystems might be mercenary, here gain a governance role (via BGT) and are incentivized to stick around and re-delegate to keep the flywheel going. Projects can’t just vampire attack liquidity easily – they need to win over the community (validators and BGT holders) to get emissions. This fosters collaboration: a project might team up with a big validator or convince a large group of users of the merits of their vault to get more BGT flow. The net effect is hoped to be a stickier, more stable liquidity environment where everyone has skin in the game for the chain’s overall success. As the Berachain docs put it, PoL creates “meaningful economic alignment between previously isolated groups” (stakers, LPs, dApps) .

Another important aspect is Berachain’s protocol revenue distribution. Not only do validators get bribes and users get BGT, but fees generated by base protocols (gas fees, DEX fees, etc.) are also shared with BGT holders. For instance, Berachain’s native DEX (say, “Berswap”) or its stablecoin lending fees are considered Block Captured Value – these fees are pooled and distributed to validators/delegators in proportion to BGT stake . So if you are a liquidity provider with BGT delegated to a validator, you also indirectly earn a slice of all trading and lending fees on the chain (like a dividend to ecosystem participants). This further ties the value of participating in PoL to the growth of the whole ecosystem.

Validator and Economic Dynamics

Under PoL, the role of a validator becomes part-technician, part-portfolio manager:

• Securing BERA Stake: First, a validator needs a large BERA stake to be in the active set (top 69). This requires either owning a lot of BERA or attracting delegators of BERA (if delegation of BERA is allowed, which likely it is, similar to Cosmos chains). Being in the active set is crucial – outside of it, you get no block rewards.
• Attracting BGT Delegations: Once a validator is active, they want as much BGT delegated to them as possible, because more BGT weight means higher BGT emission rate for them . They attract delegations by signalling they will deliver good returns. Typically, a validator might publicly commit to focusing on certain vaults and sharing a high percentage of bribe rewards with delegators. Some validators may align with specific protocols – e.g. Validator A might focus on DEX pools, Validator B on lending pools. BGT holders will choose accordingly.
• Optimizing Incentive Collection: Validators earn gas fees and priority fees from users (like any chain), but these could be relatively small compared to what’s at stake with incentives. The big earnings come from protocol incentives (bribes). For example, if a certain vault is paying 100 HONEY per week to validators that send BGT there, a validator will weigh that against other vaults’ incentives. Validators also usually take a commission on the BGT rewards they pass to delegators or the incentives they collect . Successful validators will likely run analytics or algorithms to maximize their “yield” on BGT emissions: effectively deciding which vaults give the best return per BGT directed. It’s almost like allocating a budget across yield farming opportunities. This dynamic is fluid – as more validators direct to a given vault, that vault’s APR (in terms of bribes per BGT) might drop, so it’s a competitive market.
• Distributing Value to Delegators: To remain attractive, validators will pass most of the value (bribes and perhaps some BGT-derived benefits) to their delegators, only keeping a commission. Delegators (the BGT holders) will likely shop around for validators who give the best cut and focus on vaults that matter to them . This resembles how in Cosmos chains, validators compete on commission rates and community involvement.

From an economic design standpoint, Berachain’s model is trying to solve the problem of “secure the chain vs. grow the chain”. In regular PoS, validators have no built-in reason to care if DeFi on the chain thrives or not – they get their rewards regardless. Berachain makes it so that to maximize rewards, validators must actively foster and participate in the chain’s DeFi economy. It bridges Layer1 security with Layer2 (dApp) success. The emissions model of BGT is inflationary (there will be continual BGT issuance), but because BGT can’t be sold on the market (it’s soulbound), this inflation doesn’t directly translate to sell pressure or token price depreciation. Instead, the “value” of BGT is realized by using it (delegating it) or by the indirect benefits it gives (fee sharing, governance influence). One could say BGT is similar to a loyalty point or influence point rather than a currency.

Governance-wise, BGT is the voting token for chain governance proposals (like protocol upgrades, adding new reward vaults, etc.). This means governance power accrues to those who are providing the most liquidity (since they earn BGT) and those most active in the ecosystem – a very community-first approach. It’s not a plutocracy of coin holders, but rather a meritocracy of liquidity providers and validators. This could lead to governance decisions that prioritize DeFi user interests (since those are the voters) rather than just coin holder interests.

It’s worth noting that Berachain also embraces the concept of restaking in a sense: projects like Beradrome (mentioned in a Flywheel article) aim to create marketplaces for restaking and liquidity incentives on Bera . Beradrome, for instance, is described as a “native restaking and liquidity marketplace” that even offers liquidation-free HONEY loans backed by USDC – likely an application leveraging PoL and stablecoin issuance. These kinds of protocols will add layers where, say, BGT or other tokens can be further utilized.

Lastly, HONEY being interest-bearing adds a unique dynamic. If HONEY is the only interest-bearing asset on the chain (as per testnet info) , holding HONEY might automatically yield due to integration with a HONEY reserve or because HONEY is essentially a claim on underlying collateral that grows. This could make HONEY a popular asset for parking value, and since many vault rewards or protocol incentives might be paid in HONEY, users holding those rewards actually see them grow. It’s somewhat analogous to holding DAI in the DSR by default. This again encourages people to stay within the ecosystem (keeping funds in HONEY rather than cashing out) – fostering an “inside economy”.

In summary, Berachain’s architecture is a cutting-edge experiment in aligning a blockchain’s security incentives with its DeFi ecosystem’s growth. By rewarding liquidity provision at the consensus level, it aims to bootstrap a vibrant economy where the chain’s token (BERA) value is upheld by real usage and TVL, and the DeFi protocols on the chain are strongly supported by the base layer. It’s a complex system, but if it works, Berachain could achieve high liquidity-to-marketcap efficiency (lots of on-chain liquidity for relatively low cost of incentives, since incentives are largely recycled as BGT). This makes it an attractive platform for protocols like OlympusDAO to deploy on, as we’ll see next.

Complementary Dynamics Between OlympusDAO and Berachain

Strategic Alignment

From the outset, OlympusDAO and Berachain identified a mutually beneficial alignment. OlympusDAO, with its large treasury and goal of expanding OHM’s presence cross-chain, saw in Berachain a fertile ground: an L1 tailor-made for liquidity and DeFi activity, where OHM could play a big role. Berachain’s team, on the other hand, courted Olympus as a “heavyweight” DeFi project whose early participation would lend the chain credibility and jump-start its on-chain liquidity. The result was a strategic partnership where OlympusDAO became deeply involved in Berachain even before the chain’s mainnet launch.

Olympus as a Berachain Stakeholder: OlympusDAO (via its DAO treasury) received an allocation of $BERA tokens – likely as part of Berachain’s early contributor or ecosystem grants (many DeFi protocols were allocated BERA to align incentives). Instead of treating this as a mere investment to hold, Olympus has chosen to actively stake and utilize its BERA to support Berachain and earn returns. In the Olympus community, a proposal was passed to commit 100% of Olympus’s BERA holdings to staking with Berachain validators from day one . They split this stake between two reputable validator groups: Infrared (85% of the BERA, via their liquid staking token iBERA) and The Honey Jar (THJ) (15%, via fatBERA) . In essence, Olympus is locking up its BERA into these validators who will run nodes and participate in consensus. Because of Berachain’s vesting rules, this BERA stake is illiquid for some time (unstaking isn’t enabled immediately on mainnet) , but Olympus carefully chose a mix of validator partners to maximize its yield and influence.

By doing this, Olympus becomes one of the significant delegators in Berachain’s PoL. The yield Olympus will earn includes: a share of transaction fees, MEV and priority fees, plus whatever boosted rewards come from BGT delegations to these validators . Each of the chosen validators (Infrared and THJ) are likely to attract a lot of BGT (they are prominent and possibly aligned with Olympus itself), meaning they’ll get good BGT emission rates. Olympus’s staked BERA (through iBERA and fatBERA) will auto-compound, increasing its BERA position over time as rewards are earned and restaked . This is essentially Olympus turning part of its treasury into a yield-generating asset on Berachain.

Crucially, the revenue Olympus earns from staking BERA will flow back into Olympus’s treasury and be used to support OHM. The proposal explicitly states that liquid earnings (the yield that can be harvested without waiting for vesting) will go to fund the Yield Repurchase Facility or similar strategies . That means, for example, the DEX fees or bribes that Olympus accrues from its validator stakes will be converted into buybacks of OHM via YRF. This creates a feedback loop between Berachain’s success and OHM’s value. If Berachain becomes very active (high fees, high bribe rewards), Olympus’s treasury grows faster, which in turn allows Olympus to burn more OHM or accumulate more backing, pushing OHM’s price up or its backing per token higher. It’s a symbiotic relationship: Olympus benefits financially from Berachain, and it channels those benefits to make OHM stronger as a reserve asset.

From Berachain’s perspective, having Olympus commit a meaningful amount of BERA to secure the network is a big positive. It demonstrates confidence in Berachain’s long-term prospects (since Olympus is locking in stake and can’t pull it out quickly), and it means Berachain’s validator set gets a well-capitalized participant. Olympus also brings its community along, which can bolster Berachain’s early user base.

Multisig and Infrastructure Deployment: OlympusDAO isn’t just passively staking; it’s deploying its infrastructure on Berachain. Plans were made to set up an Olympus multi-sig wallet on Berachain, deploy the Olympus V3 smart contracts (Kernel, Treasury (TRSRY) module, Migrator, etc.) on Berachain, and enable a cross-chain bridge between Ethereum and Berachain for OHM . Essentially, Olympus is treating Berachain as an extension of its protocol: OHM can be minted or moved on Berachain under the same framework that it operates on Ethereum mainnet. By having the Olympus Treasury contract and other core modules on Bera, Olympus can manage OHM supply and treasury actions natively on that chain, subject to governance. They intend Berachain to be the primary hub for “hOHM” (OHM on Berachain) outside of Ethereum . This setup allows Olympus to do things like on-chain governance votes that span chains, or automated strategy execution on Bera through its Heart (control) contract.

All of this indicates Olympus views Berachain not just as another farm, but as a key pillar in its cross-chain strategy – a place to innovate and expand OHM’s use cases. The Olympus team has mentioned that new OHM features and automation might debut on Berachain, leveraging the chain’s flexibility . For instance, Olympus could test cross-chain governance (voting on Bera affecting Ethereum contracts via bridge) or new policy modules in a more nimble environment.

OHM as a Cross-Chain Reserve Asset (hOHM on Berachain)

A cornerstone of the Olympus-Berachain partnership is making OHM (branded as hOHM on Berachain) a major asset within the Berachain ecosystem. For OHM to fulfill its reserve currency mandate, it needs to be present and useful wherever there is DeFi activity – Berachain provides a fresh arena for that.

At Berachain’s launch (sometimes referred to as “Phase Q5” by Olympus, as if it’s the next quarter of deployment), Olympus plans to bridge a substantial amount of OHM onto Berachain and seed critical liquidity pools there. Specifically, Olympus will deploy about 250,000 OHM tokens (a significant sum, given OHM’s circulating supply is on the order of tens of millions) paired with stablecoins in liquidity pools on Berachain’s main DEX (which is called Kodiak, a concentrated liquidity AMM) . One planned pool is OHM/HONEY – pairing OHM with Berachain’s native stablecoin – set with a range from roughly the backing price of OHM to infinity, ensuring deep liquidity up to very high prices . By providing this protocol-owned liquidity (POL), Olympus ensures that anyone coming to Berachain can easily swap into or out of OHM with minimal slippage. The size of this deployment (~25% of Olympus’s total liquidity, per the proposal) shows the commitment to making OHM a core trading pair on Bera .

In addition to OHM/HONEY, Olympus will likely provide liquidity for OHM/BERA (OHM vs the gas token) and possibly an OHM/ETH if bridged ETH exists, but the key pairs identified are OHM with the local reserve assets (HONEY and BERA). An interesting pair mentioned is OHM/hOHM – this would be a pool linking the native OHM on Ethereum (bridged over) and “hOHM” which might actually represent the same thing (perhaps they mean gOHM vs OHM or different wrappers). This kind of pool could allow arbitrage between mainnet and Berachain OHM prices if any divergence occurs, effectively keeping OHM’s value consistent across chains.

Once the initial liquidity is set up, Olympus and Berachain plan to turbocharge it using PoL. Olympus will work to get Reward Vaults established for all major OHM pairs: hOHM-HONEY, hOHM-BERA, OHM-HONEY, OHM-BERA, and OHM-hOHM . Each of these, when approved by Berachain governance, becomes a target for BGT emissions. Olympus can then leverage its relationships with validators (and its own BGT earned via LSD staking) to push BGT rewards to these OHM vaults . In practice, this means liquidity providers in those OHM pools on Berachain will start earning BGT inflation rewards on top of trading fees. The Olympus team noted that as soon as even one of these gauges (vaults) is live, they would encourage using any BGT voting power (either held by partners like Infrared/THJ or potentially the community) to direct emissions there . This is Olympus leveraging Berachain’s PoL to incentivize OHM liquidity – effectively getting the chain to reward OHM holders and LPs, rather than Olympus having to incentivize with OHM emissions.

The goal stated was to have Olympus’s own liquidity matched or exceeded by external liquidity attracted through these incentives . For example, if Olympus provides 250k OHM liquidity, they’d love to see another 250k (or even 500k) OHM worth of liquidity provided by other users, lured by the juicy BGT (and possibly other token) rewards. If that happens, Olympus can gradually reduce its share (or just enjoy being a smaller player) while the market sustains deep OHM liquidity on its own. High liquidity also cements OHM’s price stability and utility (tight spreads, large trades possible).

OHM Utility on Berachain: With OHM (hOHM) present on Bera, numerous use cases open up:

• Collateral for Loans: Olympus is in talks with Berachain’s lending protocols (like Bend – possibly a native borrowing market on Berachain) to list OHM as a collateral asset . If OHM is seen as stable (due to backing and Olympus’s policies), it makes an ideal collateral like DAI or ETH. Users could deposit OHM and borrow HONEY or other stablecoins, which is basically the Cooler Loan concept but in the open market. Indeed, Olympus indicated they want to integrate Cooler V2 directly with partners like Dolomite and Bend, so that OHM collateral borrowers get subsidized interest rates . This could mean that protocols incorporate Olympus’s 0.5% loan rate for OHM – offering cheaper loans to OHM holders than normal users get, thanks to Cooler. For Berachain, having OHM as a top-tier collateral expands HONEY’s backing and usage. It’s not far-fetched that HONEY (the stablecoin) itself could partially be backed by OHM in the future, spreading out its collateral beyond just USDC (though currently Beradrome suggests HONEY is backed by USDC mainly) .
• Base Pair for Trades: As mentioned, OHM can be a base pair on DEXs. Traders on Berachain might swap tokens against OHM, especially if they want to move between volatile assets without going through USD stable (this could become more relevant if OHM proves to hold value and perhaps even appreciate with backing growth – traders might speculate via OHM pairs).
• Yield Source: Through the various vaults, OHM holders on Berachain can earn yields: BGT emissions for LPing, or yields from lending markets, etc. We’ll discuss more on leveraging OHM via Origami in the next section.
• Governance and Community: Olympus is likely to be active in Berachain’s governance (even if indirectly). While Olympus stated it will not directly vote with BGT (preferring to stay liquid and let partners like Infrared handle governance) , the presence of many OHM holders on Berachain (earning BGT from vaults) means the Olympus community will have a voice. Additionally, Olympus has “genesis partnerships” with projects like BeraLand (the NFT land ecosystem on Bera) to engage socially . This hints at Olympus wanting to embed itself culturally as well – perhaps sponsoring in-game economies or community events on Bera, using OHM as a reward or currency in those contexts.

In strategic terms, Olympus and Berachain are performing a two-way peg of value: Olympus is bringing value (liquidity, a stable asset, treasury investment) to Berachain, and Berachain is giving value back (yield opportunities, a user base, integration into a new economy) to Olympus. Olympus is effectively acting as an anchor tenant for Berachain’s DeFi mall – attracting others to come where OHM liquidity and incentives are already present. Meanwhile, Berachain offers Olympus a frontier to prove OHM’s reserve capabilities in a contained environment.

The long-term vision could be that as Berachain grows (if it becomes a popular chain with many dApps), OHM might be the go-to reserve asset on Berachain – much like how DAI or USDC are on other chains. If protocols start holding OHM in their treasuries, or denominating values in OHM, that would be a huge win for Olympus’s vision. Berachain could see OHM as a “neutral” unit that isn’t controlled by any single chain (since it’s cross-chain and backed by a basket of assets). In a sense, Berachain gets to bootstrap a reserve currency without creating one from scratch – it leverages Olympus. Conversely, Olympus gets a chance to operate in an environment where the entire chain’s incentive structure is aligned with deepening OHM’s liquidity and usage – something not true on Ethereum or others.

Leveraging PoL and Infrastructure

OlympusDAO’s clever use of Berachain’s PoL infrastructure is worth highlighting. Essentially, Olympus is getting “liquidity mining as a service” from Berachain. In the past, if Olympus wanted to encourage liquidity for OHM, it had to either pay OHM incentives (diluting supply) or rely on high organic volume (which was tough in downturns). On Berachain, Olympus can rely on BGT emissions to reward OHM LPs, as long as those vaults are set up. This means the cost of incentivizing liquidity is largely borne by Berachain’s issuance, not Olympus. Olympus might still contribute some incentives – for example, they could bribe a bit of OHM or HONEY on platforms like Beradrome to further boost OHM pool yields . The OIP-175 notes possibly contributing OHM for bribes to Beradrome (a Solidly/ve(3,3) DEX on Bera) and getting an NFT in return that gives voting power on emissions . So Olympus will engage in bribing and governance of DEX emissions too. But these bribes can be relatively small and strategic (and Olympus can even use Bera-derived earnings for them) .

By partnering with specialized infrastructure projects, Olympus avoids having to micromanage everything. For instance, Infrared and THJ will handle validator operations and BGT optimization; Olympus just stakes with them and reaps yield . Origami will handle the mechanics of leverage for OHM (discussed soon), so Olympus doesn’t need to create its own leverage product. Kodiak and Beradrome handle the DEX side of liquidity and gauges; Olympus simply provides liquidity and maybe some votes . This division of labor means Olympus can achieve a lot (deep liquidity, lending integration, etc.) by coordinating with the right partners instead of building everything in-house. It’s a strategy of focusing on core competence (treasury and monetary policy) while outsourcing or collaborating on execution.

One interesting stance Olympus took is not hoarding BGT governance power for itself . They openly state they won’t directly accumulate BGT to sway Berachain governance or gauge weight. Instead, they’ll rely on partners who do aggregate BGT (like large validator/LSD operators) to align on objectives (like supporting OHM vaults). This keeps Olympus nimble and liquid – they can convert any BGT they indirectly earn into other assets (like HONEY or DAI) rather than locking it up. It also avoids any conflict where Olympus might be seen as dominating Bera’s governance – they’d rather be one voice among many, albeit an influential one through partnerships. From an investor perspective, that shows Olympus isn’t trying to “control” Berachain, but rather integrate respectfully, which likely earns goodwill from other Berachain community members.

Finally, Olympus’s presence likely encourages other “blue chip” DeFi projects to also deploy on Berachain. If OHM is there with liquidity, projects that use OHM or want exposure to that ecosystem might follow. It’s mentioned that Berachain had hundreds of projects on testnet; having a big name like Olympus among the first can catalyze others to seriously commit.

In summary, Olympus is using Berachain’s PoL to externalize what used to be internal costs (liquidity incentives), and using Berachain’s infrastructure to extend OHM’s capabilities (via lending, leverage, etc.). Berachain, in turn, uses Olympus as a case study of how a protocol can thrive on its platform, likely attracting more users to the chain.

Liquidity Loops and Leverage: hOHM in Action on Berachain

hOHM and Origami Finance

A major technical highlight of Olympus’s integration with Berachain is the introduction of hOHM liquidity loops via Origami Finance. Origami Finance is a DeFi project focused on automated leverage strategies (sometimes described as the “leverage layer” for DeFi) . They offer vaults where users can deposit assets and, in one click, take on leveraged positions without manually borrowing or rebalancing. For Berachain, Origami has developed a suite of vaults, and notably a “max leverage” vault specifically for OHM – often dubbed the hOHM vault .

So what exactly is the hOHM vault? It is essentially a smart contract that takes your OHM (or hOHM on Bera) and uses it as collateral to borrow more funds, buys more OHM, and repeats this to maximize your OHM position. In leverage terms, if you deposit 1 OHM, the vault might borrow enough to end up holding, say, 3 OHM and some debt (depending on risk parameters). The key is that the vault manages this for you: it will find the optimal loop and handle the borrowing on a lending platform (like Bend) and the swapping of borrowed funds into more OHM. You, as a user, simply deposit and withdraw a token representing your leveraged position.

Origami calls these position tokens “lovTokens” (Leveraged Origami Vault tokens) . For example, depositing into the OHM vault could give you lovOHM (or perhaps they brand it as HOHM). This token is effectively interest-bearing and auto-rebalancing: as the vault earns yield or needs to adjust leverage, the value of lovOHM changes relative to OHM. If OHM’s price stays stable or rises, lovOHM might gradually appreciate (or maintain a higher OHM-equivalent balance) because the vault could claim trading fees, farming yields, etc., and reinvest them. If OHM’s price starts to fall significantly, the vault might partially sell some OHM to repay debt and reduce leverage (to avoid liquidation), which would reflect in the lovOHM value (it might lose some OHM-equivalent value but ideally avoids a full liquidation loss).

The Origami OHM vault is considered safe enough to allow maximum looping . That implies the Origami team did analysis and determined OHM’s characteristics (maybe its historically lower volatility since adopting RBS, plus its guaranteed backing floor) make it viable to push leverage high without immediate liquidation risk. They might allow, for example, 5x leverage on OHM if the backing floor is, say, 50% below current price – giving a cushion. In contrast, they wouldn’t allow 5x on a very volatile memecoin. This demonstrates confidence in OHM’s stability.

What’s particularly exciting is how Origami’s strategy can integrate with Berachain’s incentives to create a virtuous cycle:

1. Leverage Demand = OHM Buying: When users enter the hOHM vault, the vault will likely borrow HONEY (or another stablecoin) from a platform like Bend, and swap that HONEY to buy more OHM on the Berachain DEX (Kodiak). This drives up demand for OHM and utilizes the liquidity that Olympus provided. Essentially, it creates leveraged long OHM positions on Berachain. If many users do this, it can amplify any upward price movement of OHM (and similarly, if they unwind, it can amplify downward movement – though the vault automating risk management helps smooth that).
2. Vault Earns Yield: The borrowed capital and the provided collateral might also earn yields:
   • The OHM purchased is likely just held in the vault (or possibly could even be deployed to earn yield, though typically it’s kept for collateral).
   • The vault could also provide some of the OHM as liquidity or stake it somewhere. But more straightforward: the vault might earn Origami’s reward token, $KAMI. Origami’s vaults often distribute their own token as an incentive for use (like many yield aggregators do) – indeed Origami has $KAMI and promises up to 110% APY in some cases including KAMI rewards .
   • Additionally, if the vault supplies to a lending protocol, it might earn some interest on what it deposits. If it’s borrowing, it pays interest; if it also supplies, it might offset a bit.
   • Origami’s focus is more on directional leverage rather than yield farming, so the main “yield” for the OHM vault comes from OHM price appreciation (if it happens) and possibly any trading fees the vault earns if they also LP (though that’s speculative).
3. Earning BGT via Liquidity Provision: One strategy likely considered is using the leveraged OHM to provide liquidity in an OHM-HONEY pair. In fact, a tweet snippet from Origami (Part I) hinted: “bridge hOHM to Berachain, then provide liquidity on Kodiak, and stake the LP…” . It sounds like one of the “Bringing it hOHM” articles described a loop where a user can not just hold leveraged OHM, but also pair it with HONEY to earn trading fees and BGT rewards. Imagine:For example, Origami might partner with KamiKaze (KAMI’s ecosystem) or others, where using their vault also yields partner tokens (the snippet mentions KDK – possibly Kodiak’s token? and others ).
   • You deposit OHM to Origami.
   • The vault leverages to get more OHM and perhaps also some HONEY via borrowing.
   • Instead of holding all OHM, it pairs the OHM and HONEY into an LP token, which it stakes in a reward vault.
   • Now the user’s position is a leveraged LP position (so they earn swap fees and BGT from that vault, plus KAMI rewards from Origami, plus they are long OHM effectively).This is a complex position, but Origami’s “Smart Leverage Vaults” are meant for things like yield-bearing assets and LP tokens as well . The mention of “max-looped $OHM… auto managed by Origami’s engine” , and “looping OHM (hOHM) will be cheaper on Berachain… earning BGT, KAMI, and many more” strongly suggests the strategy involves looped OHM used in multiple yield streams (BGT from PoL, KAMI from Origami, perhaps other tokens like DEX rewards).
4. Automatic Risk Management: The beauty of Origami’s vault is that it handles all rebalancing. If OHM’s price drops, the vault might remove some liquidity and pay back some loan to lower the leverage, preventing liquidation. If OHM’s price rises a lot, the vault might even increase leverage (borrow more because it can safely do so) or just let the position ride and grow. This removes the burden from users to monitor their collateral ratio daily – a big selling point (just “leverage and chill” ).

In terms of community benefit: leveraged OHM positions amplify the buy pressure and lock-up of OHM on Berachain. Every OHM that goes into Origami’s vault effectively becomes multiple OHM in demand (via buying more) and possibly locked in LP (supporting liquidity and earning BGT). This reduces circulating supply (since a lot of OHM ends up in smart contracts and not being sold) and can increase price stability through deeper liquidity. Additionally, by earning BGT and other rewards, these vault users become stakeholders in Berachain and OHM governance (they get BGT to delegate, KAMI to vote in Origami perhaps, etc.). So it intertwines the Olympus community with Berachain’s PoL community.

From an investor perspective, Origami’s OHM vault provides a way to get enhanced exposure to OHM’s growth: If one believes OHM will maintain or increase value (especially as Olympus and Berachain efforts pay off), a leveraged position could yield higher returns. And thanks to Olympus’s own policies (like backing and buybacks), the downside risk might be perceived as lower than a typical DeFi token leverage – there’s a sort of built-in floor.

Liquidity and Lending Synergies

Olympus isn’t stopping at just liquidity and leverage; it’s also transplanting its lending and risk management products into Berachain, often with twists to integrate local primitives:

• Cooler V2 (“Funny Ooga Money Coolers”): Olympus plans to deploy an updated version of Cooler Loans on Berachain, humorously codenamed FOMC (a play on Federal Open Market Committee, and also “Funny Ooga Money Coolers”) . These will operate similarly to mainnet Cooler – OHM (hOHM) as collateral for borrowing HONEY (likely) at extremely low interest. By launching it natively, they can tailor it to Berachain assets and even use Berachain’s native stability mechanisms. For instance, the loans might be in HONEY instead of DAI, which would support HONEY’s utility as well. Cooler V2 might incorporate improvements learned from mainnet and possibly allow different terms or multiple loan markets. The presence of Cooler on Berachain could undercut other money markets (why borrow at 5% on a standard market if Olympus offers 0.5% via Cooler?). However, since Cooler is limited by backing value, it won’t replace all lending – it just offers a super low-rate option for OHM holders, reinforcing OHM as prime collateral.
• Liquid Coolers (LP Collateral Loans): A very novel concept mentioned is using liquidity pool (LP) tokens that include OHM as collateral for loans . If Olympus allows, say, an OHM-HONEY LP token to be collateral, users could deposit that and get a loan (likely in HONEY or other stable). This is powerful: normally, when you provide liquidity, the downside is you’ve tied up capital in the LP token and can’t use it elsewhere without withdrawing and losing your position. Liquid Coolers would let you keep your LP providing liquidity (earning fees and BGT) and unlock some cash from it via a loan. Because an OHM-HONEY LP token’s value is ultimately backed by two assets (one being OHM with its backing, the other HONEY which is stable-ish), Olympus might be comfortable lending against it, perhaps at a more conservative LTV. This essentially creates leverage on liquidity provision: you could LP, borrow against LP, use loan to buy more OHM and LP again – a loop not unlike Origami’s, but here Olympus itself provides the leverage via Cooler. It encourages more people to become LPs since the opportunity cost (liquidity lock-up) is mitigated.
• Convertible Deposits & OHM Options Market: Olympus also aims to deploy its Convertible Deposits on Berachain and tokenize them . This means if someone does a Convertible Deposit (e.g. lock 1000 HONEY for 6 months for the option to buy OHM at $20), that position could be represented as an NFT or ERC-20 token. A marketplace can then form where these “OHM call options” trade – essentially creating an options or bond market for OHM. Traders could buy these tokens to speculate on OHM’s price (if they think OHM will moon, they’d buy up these claims to get OHM cheap later), or sell them if they want liquidity before maturity. This adds a whole new dimension to OHM’s presence on Berachain, as sophisticated financial instruments usually indicate a certain maturity of an asset. It also benefits Olympus: if these tokens trade at premium, it means the market is valuing OHM’s future highly, and Olympus could potentially issue more Convertible Deposits at new terms accordingly. Also, having them on Berachain might tie into that chain’s DeFi stack – for instance, they could be used as collateral or be paired in pools (imagine an OHM Convertible token as part of an LP, though that’s speculative). In any case, the liquidity of these positions would make participating in Olympus’s convertible program more attractive, since you’re not locked in for the full term – you could sell your position if you need funds, which lowers the opportunity cost for investors.

Each of these – Coolers and Convertible Deposits – are about providing liquidity and flexibility to OHM holders, which in turn makes holding OHM more attractive. If you know you can always borrow cheap against your OHM or exit a position via selling a convertible note, you’re more likely to hold OHM rather than some other asset.

On Berachain, these tools also integrate with other protocols. For example, Olympus mentioned working with Dolomite (a DeFi project) to integrate Cooler V2 so that Dolomite users can access subsidized-interest loans with OHM as collateral . So even third-party UIs or apps will utilize Olympus’s lending rate to benefit users, spreading OHM’s influence.

Value Accrual via these Mechanisms: When OHM is heavily used (as collateral, in LPs, etc.), Olympus’s protocol benefits in several ways:

• Loan Interest and Fees: While 0.5% is very low, if volume is high, it’s still revenue. Also, if they ever offer higher LTV or other tiers at different rates, that could be a revenue stream. Even 0.5% on tens of millions of loans is non-trivial, and that goes to treasury (potentially into YRF to burn OHM or grow backing).
• OHM Burn and Treasury Growth from Defaults: If any user fails to repay a Cooler loan on Berachain, the OHM collateral is burned, strengthening OHM’s scarcity . Similarly, if Convertible Deposits convert, new OHM is issued at a profitable rate (since Olympus got to use funds for 6 months and presumably OHM’s backing has grown in that time, offsetting dilution). If they don’t convert, Olympus kept the yield from those funds with no OHM issued. Both outcomes are fine for Olympus.
• Partnership Rewards: By integrating with various protocols (Dolomite, Bend, etc.), Olympus might receive partnership tokens or simply gain influence which can be turned into value. For instance, they mentioned exploring a product with THJ (The Honey Jar) – perhaps some joint vault or a special yield product combining OHM and THJ’s offerings. If that generates profit, it could feed Olympus’s treasury.
• Community Growth: Berachain is attracting a community of DeFi degens and enthusiasts (with its meme-heavy, high-innovation environment). By being one of the core projects on Bera, Olympus gains exposure to this community, potentially converting some into OHM believers (“Ohmies”). That’s an intangible but important asset – more community members and developers who might contribute to Olympus or build on top of it.

To sum up, OlympusDAO is leveraging Berachain as a sandbox and accelerator for OHM’s utility. Almost every feature in Olympus’s playbook is being translated into the Berachain context:

• Reserve-backed stability → used to justify high LTV loans and heavy leverage on OHM.
• Cheap credit → offered via Coolers to make OHM the best collateral.
• Active treasury management → Olympus staking BERA and using that yield for OHM buybacks.
• Community governance → Olympus aligns with Bera’s community-driven PoL to deploy its governance (Parthenon on-chain votes may extend to Bera).
• Incentive alignment → instead of fighting mercenary capital, Olympus flows with Berachain’s incentive streams (BGT to OHM vaults, etc.).

This full-spectrum integration is somewhat rare; we don’t often see a DAO so thoroughly embed into a new chain. It speaks to the conviction both sides have that together they can create an economically sustainable microcosm: Berachain gets a stable “currency” (OHM) deeply rooted in its economy, and Olympus gets a whole network of applications that treat OHM as a core piece.

A New Model for Sustainable DeFi Growth and Community-Centric Design

The collaboration between OlympusDAO and Berachain presents a potential paradigm shift for DeFi in terms of sustainability and alignment. It combines the concept of a treasury-backed, self-regulating currency (OHM) with a chain that natively incentivizes productive economic activity (Berachain). For founders and investors, several key insights emerge from this model:

Ecosystem Alignment and Symbiosis

In earlier DeFi models, projects often operated in isolation, or worse, in competition for liquidity and users – frequently leading to short-term, unsustainable strategies like liquidity mining wars. In contrast, OlympusDAO and Berachain demonstrate ecosystem alignment: each has skin in the other’s success. Olympus has literally staked on Berachain’s growth (through BERA staking), and Berachain’s design is such that it rewards making OHM successful (through PoL directing rewards to OHM liquidity). This is a form of symbiosis unusual in crypto – typically L1s care about their native token and DeFi protocols care about theirs, sometimes at odds (e.g., yield farms dumping the L1 token rewards). Here, Berachain’s BGT rewards and Olympus’s OHM policies work in tandem, not at cross purposes.

For example, consider liquidity provision: Olympus wants deep, stable OHM liquidity; Berachain wants lots of liquidity on its DEXs. By using BGT to reward OHM pools, both goals are met without either Olympus or Berachain feeling they are “paying” a cost – it’s an investment by the chain into an asset that gives back value via stability and usage. This kind of alignment may be a blueprint: protocols launching new tokens could consider doing so on chains that have mechanisms to directly support those tokens’ liquidity and usage. Conversely, new chains might attract projects by offering economic structures that integrate with the projects’ tokenomics.

Sustainable Tokenomics and Shared Value Capture

OlympusDAO’s revamped tokenomics and Berachain’s PoL both focus on sustainability:

• Olympus replaced unsustainably high OHM inflation (stupid-high APYs) with organically funded yield (via its treasury investments and system revenues like loan interest). OHM’s supply now mostly grows only when it’s accretive (when backing is growing or when price is high and can handle new supply) . This prevents the death spiral that many early DeFi tokens faced.
• Berachain issues BGT continuously, but BGT isn’t freely dumpable, and its issuance is tied to real value behaviors (LPing, etc.). This avoids the common scenario of a chain printing rewards that are immediately sold by farmers. Instead, BGT’s value is largely realized by participating in governance and earning fees, aligning with long-term engagement.

Both systems show a trend: reward participants with increased influence and long-term upside, not just short-term cash. OHM holders get the benefit of a growing treasury and buybacks (so their share of backing can increase over time), and BGT holders (liquidity providers) accumulate governance power and a stake in the chain’s success (fee share). This is more sustainable because it incentivizes users to stick around and keep contributing (you don’t want to lose your influence or future upside).

The Olympus-Berachain model also demonstrates shared value capture. Instead of one extracting value from the other, both capture value together. Olympus’s treasury gains from Berachain yields, Berachain gains from Olympus’s liquidity and usage (which drives fees and HONEY utilization). The combined ecosystem could potentially achieve a form of reflexive growth: success of OHM on Bera -> more users and TVL on Bera -> more fees and BGT value -> more yield to Olympus -> more OHM buybacks -> stronger OHM -> attracts more users to use OHM on Bera, and so on. This is reminiscent of how traditional economies grow in synergy (e.g., a country’s strong currency can bolster its capital markets, which in turn strengthens the currency).

For founders, this suggests that designing tokenomics in a vacuum is less powerful than designing for an ecosystem fit. Olympus tailored its moves (like issuing convertible deposits, or deciding where to deploy liquidity) in a way that meshes with Berachain’s offerings. Founders of new projects might similarly consider which chain or protocol can amplify their model – e.g., a lending protocol might launch on a chain that can feed it a stablecoin or insurance mechanism natively. The day of monolithic “do everything yourself” DeFi protocols may give way to specialized ones that connect like LEGO pieces, each reinforcing the other.

Community-First and Decentralized Governance

Both OlympusDAO and Berachain champion community control and participation, which is a cornerstone of community-first token design. Olympus’s push to on-chain governance ensures the community of OHM holders directs the protocol’s future . Berachain’s PoL literally hands governance (BGT) to those who add value (LPs and protocol users), rather than just those who buy a token early . This approach can lead to more resilient communities and fairer outcomes. For instance, if Berachain succeeds, the biggest winners in governance power will be those who actively provided liquidity and believed in the ecosystem, not just VC funds that bought tokens – a stark difference from many other networks.

For investors, community-first design can be a double-edged sword: it may mean less immediate control or profit for token holders who just want passive upside (since value is partly returned to users via incentives, etc.), but it often indicates greater long-term viability. A strong community can carry a project through market cycles, adjust tokenomics via governance if something isn’t working, and fend off opportunistic exploitation. In Olympus’s case, the community proved its commitment by weathering a dramatic rebase era and then voting to evolve beyond it. In Berachain’s case, a community of “Beras” (the bear-themed supporters) has been actively testing and contributing even before they could trade any token – showing genuine buy-in.

From a regulatory and ethical perspective, community-driven models might also have advantages, as they distribute power and potentially could be seen as more decentralized (a factor in how regulators view tokens).

New Opportunities and Innovations

The Olympus-Berachain story also highlights specific innovations that could inspire new models:

• Leveraged Reserve Assets: The idea of leveraging a reserve currency like OHM in a controlled environment (Origami’s vault) to amplify liquidity is novel. It’s essentially fractional reserve banking but transparently on-chain and over-collateralized (since even at max leverage, there’s still underlying collateral and enforced ratios). This might spur others to create leveraged vaults for other semi-stable assets, or for LP tokens (leverage your liquidity positions as Origami is doing with “smart vaults”). It can increase capital efficiency in DeFi significantly.
• Smart Liquidity & Liquid Governance: Berachain’s concept of liquid governance (BGT delegation) and liquid incentives (vault incentive markets) could spread. We might see other chains adopt dual-token models, or even Ethereum layer-2s implementing modules that work similarly (perhaps not at consensus, but as protocols on top). The fine-grained control of where emissions go (via validators) is like a DAO coordinating liquidity across the entire chain. If successful, it might reduce the need for each protocol to bootstrap their own token incentives – they could rely on the chain’s mechanisms, as Olympus is doing. This could reduce the proliferation of farm tokens that eventually go to zero, consolidating value into more central tokens like BGT or base assets.
• Reserve Asset as Service: Olympus on Berachain could become a template for a “reserve asset as a service” model. Essentially, Olympus provides a service to Berachain: it supplies a relatively stable, backed asset (OHM) plus a suite of financial tools (loans, vaults, etc.), which the chain can use to enhance its DeFi offerings. In return, the chain provides yield and a user base. Other protocols might aim to do this – e.g., a project like Frax or Maker’s DAI could play a similar role on different chains (indeed, Frax is doing FraxBP on many chains). Olympus is distinct because OHM isn’t pegged to $1, but perhaps future reserve currencies might partner with chains to play that role.
• Cross-Chain Governance and Automation: Olympus’s plan to have cross-chain governance (voting on Bera that affects Ethereum contracts and vice versa) can set precedents for multi-chain DAOs. As more DAOs become chain-agnostic, they’ll look to how Olympus manages a treasury and policy spanning several networks.

For investors specifically, the combination of Olympus and Berachain might be seen as a hedge against each other’s risks. Olympus gains exposure to a potentially high-growth L1 (which could multiply treasury value if BERA does well), while Berachain gains a quasi-stable asset in OHM that could dampen purely speculative swings on the chain. If one falters (say BERA price drops, or OHM has issues), the other’s mechanisms may counterbalance (OHM might not drop as much if backing is intact, or BERA usage might stay high if OHM drives transactions). It’s a more complex play than just holding one token, but potentially more resilient.

Challenges and Outlook

It’s important to temper the enthusiasm with awareness of challenges. This model is unproven at scale: Berachain is only just launching, and Olympus is still fighting to fully shake off its early hyperinflation reputation and prove OHM can maintain value long-term. Potential challenges include:

• Market Volatility: If a severe downturn hits crypto broadly, will OHM hold up better than other assets? Its backing provides a floor, but sentiment could still drive it below backing (though arbitrage via Cooler would likely restore it). Berachain’s BGT incentives may not be enough if the dollar value of everything is dropping – liquidity might still flee to safer havens.
• Complexity: The system is complex, and users might find it overwhelming (OHM, gOHM, hOHM, BGT, BERA, HONEY, KAMI… a zoo of tokens). Educating users and ensuring they understand the risks (especially with leveraged vaults) is crucial to avoid mishaps that could erode trust.
• Execution Risk: Both Olympus and Berachain need to execute well – smart contracts must be secure (a hack in Cooler or Origami could be disastrous), and parameters (like interest rates, emission rates) need to be tuned correctly. Decentralized governance can be slow to react if something needs quick change, although both communities are relatively agile.
• Adoption: Berachain is new and competing with many L1s/L2s. If it fails to attract a broad user base beyond the initial hype, the whole OHM expansion there might reach a ceiling. Conversely, if OHM doesn’t attract enough new holders on Berachain and it’s mostly the same Ethereum Ohmies just bridging over, the growth might be limited. Both need to break into new user segments.

However, the vision remains compelling. Imagine a future scenario: It’s 2026, Berachain has flourished with dozens of protocols, and OHM on Berachain is used everywhere – as collateral in multiple apps, as a trading pair, even as a unit of account for NFT trades (perhaps some NFTs are priced in OHM). OHM’s price is relatively stable in USD terms, slowly growing as its backing grows, and the volatility it does have is dampened by active market operations and deep liquidity. Meanwhile, Berachain’s BERA has value from gas and a vibrant economy, and BGT is highly sought-after by protocols vying for user liquidity. The OlympusDAO is essentially acting as a quasi central bank on Berachain, but one that’s transparent and governed by users. The community of Ohmies and Bera users overlaps significantly – many are “Ohmibears” who participate in both governance processes. This combined community has proven that you can have a decentralized currency (OHM) maintaining stability without a peg, by smart algorithmic intervention and strong backing, and a decentralized blockchain (Bera) that can thrive without resorting to extractive tokenomics, by aligning incentives of all participants.

Such an outcome would indeed mark a new chapter in DeFi: one where cooperation trumps competition, and where community-owned finance (a reserve currency and a chain owned by its users) can provide services traditionally expected of centralized entities (stable currency, credit facilities, etc.), but in a way that rewards the community itself for making it all work. It’s an optimistic vision, but one that OlympusDAO and Berachain are actively working towards. As one contributor noted, a protocol once dismissed as a Ponzi is now expanding its capabilities and growing its treasury , and a chain that started as a meme is pioneering a potentially groundbreaking consensus model – together, they might confound the skeptics and deliver one of the most robust ecosystems in DeFi.

Conclusion

OlympusDAO and Berachain represent a compelling experiment at the intersection of DeFi protocol and blockchain design. OlympusDAO brings to the table a novel reserve currency model with OHM – a token managed by algorithmic policy and backed by a diverse treasury, aiming for stability and longevity. Berachain introduces an innovative Proof-of-Liquidity consensus that bakes DeFi incentives into the core of the network, aligning validators, users, and developers to work towards a liquid and thriving economy. Individually, each is tackling a core challenge of DeFi (Olympus: creating a stable, value-backed medium of exchange; Berachain: sustainably incentivizing liquidity and use of a network). Together, they amplify each other’s strengths: Berachain provides an arena for OHM to function as a reserve asset with high utility, and Olympus provides Berachain with a ready-made economic engine (a stable token, deep liquidity, and an engaged community).

We explored how OlympusDAO’s mechanisms – Cooler Loans, YRF, Convertible Deposits, governance, and treasury management – fortify OHM’s value proposition, and how Berachain’s architecture – multi-token economy, reward vaults, and validator dynamics – fosters a cooperative environment for projects like Olympus. The integration, including liquidity loops via hOHM and Origami’s leverage vault, shows a path to achieve high capital efficiency without compromising system stability.

For founders and investors, the Olympus-Berachain alliance offers a blueprint for sustainable DeFi growth: it emphasizes real yield (from productive assets and chain fees) over unsustainable emissions, uses clever game theory to align incentives across stakeholders, and keeps the community at the heart of governance and value accrual. This stands in contrast to the boom-and-bust liquidity mining strategies of past cycles. While challenges remain and the approach will be tested by time and market forces, the thoughtful design and collaborative strategy of OlympusDAO and Berachain suggest a positive step toward a more resilient DeFi ecosystem – one where a community can build, own, and utilize its very own reserve currency on its own optimized blockchain.

In conclusion, OlympusDAO and Berachain’s partnership is more than just a case of a DeFi protocol deploying on a new chain; it’s an ambitious attempt to synchronize monetary policy with blockchain consensus. If successful, it could inspire a wave of “application-chain” co-developments, and we may witness OHM becoming not only a reserve currency for Berachain but a template for reserve assets across the multi-chain world. DeFi has always promised a revolution in how we think about money and value – with OlympusDAO and Berachain, that revolution is taking another bold step, rooted in principles of sound economics, decentralization, and community empowerment.