The highly volatile nature of the cryptocurrency market makes most cryptocurrencies ineffective for day-to-day transactions. It’s widely believed that for crypto to gain wide adoption, it must be able to replace the U.S dollar as a unit of account. This is what Olympus DAO intends to solve with its OHM token.
OHM is a decentralized backed digital currency that is controlled by its token holders and run by a decentralized autonomous organization (DAO). It aims to serve as a global unit of account and a medium of exchange currency.
What is Olympus?
OHM is a decentralized reserve currency that operates on the Olympus protocol and is backed by a basket of assets. It’s a unique token that was introduced as a better alternative to both cryptocurrencies and stable coins.
It’s an alternative to stable coins because the value of OHM is not pegged to another fiat currency. For instance, unlike DAI or USDC which are pegged to the value of the U.S. dollar, OHM’s reserves are crypto assets held by the Olympus Treasury.
Unlike most cryptocurrencies, which derive their value from speculation, OHM doesn’t derive its value from speculation and its price is regulated by the protocol. This allows it to achieve stability while still maintaining a floating market-driven price.
Its Decentralized autonomous organization is widely seen as one of the most dedicated and influential communities in the cryptocurrency space.
Even though Olympus project approach doesn’t follow a dedicated roadmap, it has a clear goal and constantly introduces product improvements. One of its significant improvements is its migration to Olympus V2, which will enable the installation of on-chain governance in smart contracts. It will also launch Olympus on other layer-one and layer-two blockchains.
The goal of Olympus is to build a policy-controlled currency system that is not controlled by a centralized institution, but by token holders. The DAO often regulates the behavior of the OHM token. This way, it remains exempt from the inflationary policies in the traditional economy.
When a user buys OHM, an equivalent amount of DAI or other assets in Olympus Treasury is put into a vault. The amount is held there until an equivalent amount of Ohm is burned. This makes Ohm a backed cryptocurrency. The value of an Ohm could change depending on how much cryptocurrency is currently stored in the vault.
OHM has a price floor of 1 DAI. This means the value of Ohm will never fall below 1 DAI, and if it does, the protocol will burn tokens until the price floor is reached again.
Olympus Use Case: OlympusDAO (OHM) Staking
Olympus DAO enables holders of OHM tokens to earn extra OHM through staking OHM. Users don’t have to waste time in looking for a profitable platform to stake OHM, the website has a staking feature with rebase rewards accrued from bond sales.
The staking rewards offered often change based on the number of OHM staked and the reward rate defined by the protocol’s monetary policy.
Staking is designed in a way that attracts more users to stake their tokens, because the protocol depends on it to issue new OHM. This leads to an increase in the total supply of the token while reducing market dilution. The attractive rewards promised by the protocol helps users hedge against unexpected market volatility.
Even if the price of OHM goes below the price you purchased it for, the rewards you accumulate over time from staking are expected to reduce loss incurred. Over time, staking has become the most profitable passive, long-term strategy for holding OHM. The current APY on OHM staking is 8,088%.
When you stake OHM, you receive sOHM (a transferable token) at a 1:1 ratio. If you decide to undertake, an equal amount of sOHM tokens will be burned. The staking rewards are distributed three times a day, but there could be slight variations. The rewards are also compounded every 8 hours, explaining the high APR. Currently, 90% of the total OHM supply is staked.
Use Case: Olympus DAO (OHM) Bonding
OHM token is used by OlympusDAO, for bonding. Bonding allows Olympus protocol to acquire its protocol-owned liquidity (POL) along with some reserve assets.
Protocol Owned Liquidity implies the amount of liquidity pool owned and controlled by the Olympus treasury. The more liquidity owned by the protocol, the better it is, as it ensures that there is always sufficient liquidity locked in the protocol’s trading pools. Assets stored through bonding grow and expand the treasury, increasing the ability to mint new OHMs while paying high yields for stakers.
For OHM users, bonding is an active, short-term strategy. It is advisable for advanced investors to use because bond discounts could be unpredictable. One has to closely monitor the prices to earn a significant profit from bonding.
In bonding, a user sells a listed asset to the protocol and is rewarded with a discounted price of OHM by the end of the vesting period. Currently, there are 5 types of bond offered by Olympus: DAI bond, FRAX bond, wETH bond, OHM-DAI LP bond, and OHM-FRAX LP bond.
Rewards are claimable partially throughout the vesting period which is 15 epochs( an epoch is 8 hours). At the end of the period, the full amount can be withdrawn.
Use Case: Regulating Token Price
OHM is used by the Olympus protocol to influence and stabilize its price. It uses a unique algorithm to achieve this. If OHM price increases beyond what is backed by the assets in the treasury, the protocol tries to reduce the price. It does this by minting and distributing new OHM to the market.
Doing this increases the circulating supply of the token and reduces the value of the token. On the other hand, if the price of OHM reduces below what is backed by the treasury, the protocol buys more OHM tokens from exchanges and burns them. This reduces the circulating supply and causes an increase in the price of the token.
This process helps maintain a desirable price for the OHM token, no matter how the supply and demand fluctuate.
However, the protocol doesn’t carry out this process in an autocratic way. It burns and mints tokens only if the market demands it. Also, the community makes the changes to the protocol through a DAO. Not by the project’s team.
Use Case: Governance Token for OlympusDAO
OHM also serves as a governance token that can be used to vote on proposals on Scattershot, authorizing holders of the token to have a say in the decision-making process of the Olympus.
Once an official proposal has been made on Scattershot, community members can vote in favor of it with their OHM tokens. Interest in the proposal will continue to be expressed on the forum and server by community members throughout this process.
If a proposal is approved by the community (through the voting process), there is a DAO consisting of team members, investors, and advisors that will go ahead and implement the necessary transactions and execute the final decision made by the snapshot.
The DAO was established to prevent bad actors from buying up a big portion of the supply and executing unwanted changes to the protocol.
Proposals usually have a duration of 2 days for holders of the OHM token to vote on which option they want. The more OHM a user has, the more voting power they represent. The voting process is completely gasless and requires no transaction. Users only need to sign off on their vote using their wallets. This encourages more token holders to participate.
The Future of OHM Token
OlympusDAO has a unique pricing mechanism that aims to eventually bring stability to cryptocurrencies without relying on centralized institutions.
OHM is the governance token on OlympusDAO. It connects together the interests of all participants in the ecosystem. It aims to become an algorithmic reserve currency with a free-flowing value that users can always fall back on.
In the near future, the coin aims to reach a high level of stability and consistency to enable it to function as a global unit-of-account and medium-of-exchange currency. It currently offers attractive incentives to its holders through staking and bonding.