What is OlympusDAO? - OHM Explained with Animations

Summary

This video from Whiteboard Crypto delves into the innovative world of Olympus DAO, a cryptocurrency project that offers a stablecoin with an impressive 8,000% APY. The Ohm token, backed by a basket of crypto assets, uses a unique bonding and staking mechanism to increase its supply while maintaining value. The video explores the protocol's potential and compares it to traditional currency systems, highlighting the importance of community trust and the role of game theory in its design. It also addresses potential risks and the project's resilience against bank runs, presenting Olympus DAO as a fascinating experiment in cryptoeconomics.

Takeaways

• 💡 The script introduces a hypothetical cryptocurrency, Olympus DAO, which is a stablecoin with the potential for high returns, unlike traditional stablecoins backed by fiat currencies like the US dollar.
• 🏛️ Olympus DAO's OHM token is backed by a basket of crypto assets, including DAI, FRAX, and RAPTOR Ethereum, providing a floor value for the token's price.
• 🔗 The concept of 'backing' versus 'pegging' is clarified, explaining that OHM is backed by assets, unlike stablecoins pegged to a currency like USDT which are exchangeable at a 1:1 ratio with the dollar.
• 💰 The script explains the treasury mechanism of Olympus DAO, which allows for the buying of OHM tokens at a discount, effectively generating profit for the treasury and offering high APY to investors.
• 🔑 The treasury's ability to mint new OHM tokens and distribute them to stakers is highlighted, which is a key factor in the high interest rates offered by Olympus DAO.
• 📈 The importance of LP (Liquidity Pool) rewards is underscored, as Olympus DAO captures nearly all trading fees due to its significant ownership of OHM's liquidity.
• 🤔 The '3 comma 3' meme is discussed as a representation of game theory concepts, suggesting an optimal outcome if all participants choose to stake OHM tokens.
• 💡 The script touches on the potential risks of Olympus DAO, including the possibility of a bank run and the reliance on human behavior aligning with rational game theory predictions.
• 🛡️ The protocol's floor price mechanism is explained, which is designed to prevent the value of OHM from falling below the amount of assets in the treasury.
• ⏳ The script acknowledges the uncertainty of the project's long-term success, noting that it is an experiment in behavioral economics within the cryptocurrency space.
• 👏 The video concludes by crediting the 'Calculator Guy' for his contribution to the script, promoting his channel for further down-to-earth crypto content.

Q & A

What is the main concept behind the Olympus DAO project?

Olympus DAO is a cryptocurrency project that introduces a stablecoin called OHM, which is backed by a basket of crypto assets and offers high APY to its holders. It is governed by the community and aims to create a reserve currency protocol for digital assets.

What is the difference between being 'backed by' and 'pegged to' something in the context of cryptocurrencies?

Being 'backed by' something means the cryptocurrency has an underlying value in the form of assets, while 'pegged to' refers to a stablecoin that maintains a fixed exchange rate with a particular asset, usually a fiat currency like the US dollar.

How does the treasury mechanism in Olympus DAO work?

The treasury in Olympus DAO allows users to buy OHM tokens at a discount by paying with other cryptocurrencies like Ethereum. This mechanism helps the treasury to accumulate more assets and also provides an opportunity for users to earn a profit.

What is the significance of the '3 comma 3' meme in the context of Olympus DAO?

The '3 comma 3' meme represents an idea from game theory, suggesting an optimal outcome where everyone participates in staking OHM tokens, leading to a mutually beneficial situation for all involved.

How does Olympus DAO ensure that the value of OHM tokens does not fall below a certain level?

Olympus DAO has a floor price mechanism where if the price of OHM falls below the value of the assets backing it, the protocol will buy back OHM tokens, reducing the total supply and supporting the price.

What is the role of staking in Olympus DAO?

Staking in Olympus DAO allows holders to deposit their OHM tokens to earn more OHM tokens. It reduces the total supply of OHM in the market and provides holders with additional tokens as a reward.

How does Olympus DAO generate revenue to support its high APY offerings?

Olympus DAO generates revenue primarily from the trading fees collected on its own liquidity pools, as it owns a significant portion of OHM's liquidity, capturing nearly all the trading fees involved.

What is the relationship between Olympus DAO and the stablecoin Die?

OHM tokens in Olympus DAO are currently backed by Die, a stablecoin that is meant to maintain a value around one US dollar, providing a stable foundation for the value of OHM tokens.

How does the bonding mechanism in Olympus DAO differ from traditional stablecoin pegging?

While traditional stablecoins are pegged to a specific value and can be exchanged directly with the pegged asset, Olympus DAO's bonding mechanism involves buying OHM tokens at a discount with other cryptocurrencies and waiting a period to receive the OHM tokens.

What are the potential risks associated with Olympus DAO's model?

The potential risks include the possibility of a bank run, where holders sell their OHM tokens, causing a drop in price. However, unlike some other projects, Olympus DAO has a floor price to prevent the value from falling too low.

How does Olympus DAO's approach differ from the Iron Finance and Titan token model?

Unlike Iron Finance and Titan, which were susceptible to bank runs and could collapse to zero value, Olympus DAO has a floor price and a protocol that buys back OHM tokens if the price falls, providing a safeguard against complete loss.

Outlines

00:00

🪙 Introduction to Olympus DAO and the Ohm Token

The video script introduces a unique cryptocurrency called Olympus DAO, which has a stablecoin called Ohm that offers an impressive 8,000% APY. Unlike traditional stablecoins pegged to the US dollar, Ohm is backed by a basket of crypto assets and is governed by the community. The script also mentions the '3 comma 3' meme, a reference to game theory concepts, and sets the stage for explaining the complex workings of Olympus DAO. The video aims to clarify the Ohm token's backing, the treasury mechanism, and the high interest rates offered, emphasizing the project's innovative approach to cryptocurrency valuation and community governance.

05:00

💼 The Treasury Mechanism and Staking in Olympus DAO

This paragraph delves into the treasury mechanism of Olympus DAO, explaining how it allows participants to buy Ohm tokens at a discount through bonding, which in turn increases the treasury's assets. The paragraph clarifies the difference between being backed by assets and being pegged to a currency, using the example of USDT. It also introduces the concept of staking, where holders can deposit their Ohm tokens to earn more, effectively reducing the supply and increasing the value. The script discusses the treasury's role in capturing trading fees and the potential risks and rewards associated with the protocol, including the floor price mechanism that prevents the token value from falling below a certain point.

10:00

📊 Game Theory and Risks in Olympus DAO

The final paragraph explores the application of game theory in Olympus DAO, particularly the '3 comma 3' meme, which represents the idea of achieving the best outcome through cooperation. It uses the prisoner's dilemma to illustrate the concept and extends it to a 3x3 matrix to represent the possible outcomes for stakeholders in Olympus DAO. The paragraph also addresses potential worst-case scenarios, such as a price drop to the floor value, and how the protocol responds to maintain stability. It contrasts the risks of Olympus DAO with those of Iron Finance and emphasizes the protocol's unique approach to preventing bank runs and maintaining value over time.

Keywords

💡Cryptocurrency

Cryptocurrency refers to digital or virtual currencies that use cryptography for security and operate independently of a central bank. In the video's context, it discusses a hypothetical stable cryptocurrency that offers high returns, which is a central theme of the video. The script mentions 'crypto assets' in the treasury, indicating the broad application of cryptocurrencies in the financial ecosystem being discussed.

💡Stable Coin

A stable coin is a type of cryptocurrency designed to minimize price volatility by pegging it to a stable asset, such as the U.S. dollar. The video explores the concept of a stable coin that is not only stable but also offers an unusually high APY (Annual Percentage Yield), which is a key point of interest in the discussion.

💡APY (Annual Percentage Yield)

APY represents the annual rate of return earned on an investment, including the effect of compound interest. The video script highlights the potential to earn 'up to 8,000 APY' on the stable coin, emphasizing the unusually high return on investment as a distinctive feature of the cryptocurrency being discussed.

💡Backing

In the context of currency, 'backing' refers to the assets that support the value of a currency. The script explains that traditional currencies like the U.S. dollar were once backed by gold, and it introduces the concept of the OHM token being backed by a basket of crypto assets, which is a significant departure from traditional stable coins.

💡Pegged

To be 'pegged' to a currency means that a coin's value is fixed to that of another stable asset. The script differentiates between being 'backed' by assets and being 'pegged' to a currency, explaining that OHM tokens are not pegged to a currency like the U.S. dollar but are instead backed by other crypto assets.

💡Treasury

In the context of the video, the 'treasury' refers to the reserve of assets held by the Olympus protocol. It plays a crucial role in the backing of the OHM token and in the bonding and staking mechanisms, which are explained as ways to earn profits and support the token's value.

💡Bonding

Bonding, in the video's narrative, is a financial mechanism where participants can buy OHM tokens from the treasury at a discount. This process is used to increase the treasury's assets and to provide an opportunity for profit to those who bond, as it is a key part of the protocol's economic model.

💡Staking

Staking involves depositing tokens to support a cryptocurrency network and earn rewards. The script describes staking OHM tokens to earn more OHM, which takes tokens off the market, reduces supply, and is part of the protocol's strategy to maintain and increase the value of the token.

💡LP Rewards

LP stands for 'Liquidity Provider.' LP Rewards refer to the incentives given to those who provide liquidity to a cryptocurrency exchange or market. The video explains that Olympus protocol earns a significant portion of its revenue from trading fees due to its large share of OHM's liquidity, which is a critical aspect of its financial model.

💡3 comma 3 meme

The '3 comma 3 meme' mentioned in the script is a reference to a concept from game theory, suggesting an ideal scenario where everyone participates in staking OHM tokens for the benefit of the community. It represents an aspirational outcome based on rational behavior and cooperation within the protocol's user base.

💡Game Theory

Game theory is the study of mathematical models of strategic interaction among rational decision-makers. The video uses game theory to discuss the potential outcomes of the Olympus protocol, particularly the '3 comma 3 meme,' which is based on the idea that participants will choose to cooperate (stake) for the best collective outcome.

💡Prisoner's Dilemma

The Prisoner's Dilemma is a standard example of a game in game theory that shows why two completely rational individuals might not cooperate, even if it appears that it is in their best interest to do so. The video script uses this concept to illustrate the decision-making process within the Olympus protocol and the potential for collective action.

💡Floor Price

The 'floor price' is the minimum price at which a token should not fall below, as determined by the assets in the treasury. The script explains that if the price of OHM falls below this floor, the protocol will buy back tokens, reducing supply and supporting the token's value, which is a protective mechanism against extreme price drops.

Highlights

Introduction to the concept of a stablecoin that offers up to 8,000% APY, backed by assets other than traditional currencies like the US dollar.

The Olympus DAO project is community-driven, with decisions made quickly and at a low cost, unlike centralized systems.

Explanation of the '3, comma, 3' meme in the context of game theory and its relation to Olympus DAO.

The Ohm token, created by Olympus DAO, is backed by a basket of crypto assets, providing a floor value.

Clarification of the difference between being 'backed' by assets versus being 'pegged' to a currency.

The treasury mechanism of Olympus DAO, allowing for the purchase of Ohm tokens at a discount.

How Olympus DAO earns revenue through the sale of bonds and the capture of trading fees from its own liquidity.

Staking Ohm tokens to earn more, while reducing market supply and benefiting from protocol revenue.

The rebase mechanism of Olympus DAO, which mints new tokens for stakers when the protocol is over-backed.

The protocol's response to under-collateralization, including buy-backs to support the Ohm token's price.

The role of LP (Liquidity Provider) rewards in Olympus DAO's revenue model and its impact on the treasury.

Analysis of the 3x3 matrix in game theory, illustrating the best and worst-case scenarios for Olympus DAO participants.

Risk assessment of Olympus DAO, comparing it to the Iron Finance incident and highlighting the protocol's unique safeguards.

The potential long-term growth of Olympus DAO's treasury due to its control over its liquidity and fee collection.

The importance of community behavior and rational decision-making in the success of Olympus DAO's economic model.

Acknowledgment of the Calculator Guy's contribution to understanding Olympus DAO and a call to action for viewers to explore his content.

Transcripts

what if there was a cryptocurrency that

was meant to be a stable coin but you

could earn up to 8 000

apy on it what if this stable coin was

actually backed by something unlike the

us dollar and the decisions about the

project were made by the community in a

quick and cheap way also unlike the us

dollar one last question i have for you

is that have you seen that strange three

comma three meme on twitter or youtube

that hardly anyone explains welcome to

whiteboard crypto the number one youtube

channel for crypto education and here we

explain topics of the cryptocurrency

world using analogies stories and

examples so that you can easily

understand them in this video we are

going to explain how olympus dow works

the simple math behind it and what 3

comma 3 actually means now before we

start this video i do want to say

olympus tao is very complicated and it

personally took me quite a while to

completely understand it so let's dig in

first off money is simply something that

a bunch of people agree have value and

that we use for transferring that value

for example a long time ago specific

seashells used to be used as money they

were traded between groups of people for

other things like tools and food now the

shills technically represented tools and

food because they could be traded for

them eventually people stopped using

seashells and started using more rare

things like metals now not too long ago

our us dollar was actually backed by

gold meaning that every dollar had its

own equivalent of gold somewhere in

storage and if you wanted to you could

trade in your dollars for gold however

for many reasons that we will not

discuss in this video we went from being

backed by gold to silver meaning that

every dollar was then backed by silver

and then eventually we went to the

dollar not being backed by much now this

is important because it means that your

dollars only hold value by other people

thinking that they're worth something

which was technically the case when it

was backed by gold however it was

difficult to make more gold while

printing money is so easy that it's done

by criminals the big issue here is that

we have to trust our government with the

power of printing more money and

basically affecting what our currency is

worth taking a look into the future we

may start to use digital assets to trade

with but the question this video is

going to take a look at is will a

reserve currency protocol actually work

for digital assets too so olympus dow

created a token called the ohm token and

right now all ohm tokens are backed by

die now before we explain this we first

need to explain the difference between

being backed by something and being

pegged to something if you buy a stable

coin like usdt that coin is pegged to

the us dollar now you might ask how well

if you give tether a dollar they will

give you one usd t and if you give them

a usd t they will give you a dollar so

it's like an open exchange that allows

for trading your united states dollars

to and from the blockchain the

terminology for this is being pegged to

a dollar and this is not how ohm works i

actually recently had a great talk with

the calculator guy who helped me

completely understand how olympus

actually works it might even be better

if i let him explain it ohm is actually

backed by a basket of crypto assets in

the treasury including dye frax and

raptor ethereum giving home a floor or

bottom value where the backing assets

will keep the price until supply

increases the market value of olympus

dow's treasury assets is over 700

million dollars and each home is

currently backed by 178 worth of assets

to explain the crazy high interest rate

that olympus is currently offering we

first need to understand the treasury so

the treasury allows you to buy bonds and

this is basically a mechanism where you

can buy ohm tokens from the treasury but

at a discount they might be wondering

how you get that discount well first you

must pay in another coin or token like

ethereum for this example let's say ohm

is ten thousand dollars and you want to

buy one ohm token the treasury allows

you to buy ohm at nine thousand and six

hundred dollars effectively cutting you

a four percent discount on it but the

catch is that you must pay with ethereum

and you must also wait five days to

receive all of that ohm if the price

stays the same you made a profit in a

more advanced example you can sell

liquidity pool tokens to the treasury

for discounted owned and this is where

olympus really shines this allows the

treasury to own more and more of the

total owned liquidity enable the

protocol to earn the fees that traders

pay when buying or selling home in short

this means olympus is actually earning

money all right let's go back to buying

ohm at a discount the trick here is that

one ohm is only supposed to be worth one

die now dye is a stable coin technically

worth around one dollar so when the

treasury sells you an ohm token for nine

thousand six hundred dollars technically

nine thousand five hundred and ninety

nine dollars of that is all profit to

the treasury so bonding is a mechanism

that actually earns the olympus treasury

money and it also gives bonders the

opportunity to earn a profit and the

only risk they're taking is that the own

price might fall in short bonding allows

olympus to create more ohm tokens as

long as a price of ohm is over a dollar

the treasury also allows staking which

is a mechanism where you can deposit

your own tokens to earn even more ohm

tokens staking takes ohm off of the

market decreasing the total supply but

the main benefit to you is that it

allows holders to gain all those extra

printed ohm tokens using our example

earlier since olympus technically has an

extra nine thousand and five hundred

ninety nine dollars worth of ethereum in

its treasury it can now mint nine

thousand five hundred ninety nine own

tokens and it gives these tokens to the

stakers the idea is that when you stake

you're not selling additionally when you

buy bonds you're not selling either way

your actions are not selling so even

though the total supply increases with

each rebase the value of ohm is not

dramatically impacted by that increasing

supply now here's a quick recap when om

is backed by more than it needs it

simply prints more tokens and gives

those tokens to the stakers however when

om is backed by less than it needs

olympus will actually start to buy back

ohm and we'll talk about this later

another important thing worth thinking

about is something called lp rewards

remember how we said that the treasury

actually buys their own liquidity

through the bonding mechanisms because

of this olympus owns a very large

majority of ohm's liquidity

99.88 actually because of this they

capture nearly 100 of all the trading

fees involving ohm they actually earn

millions of dollars from people simply

buying and selling the own token this

acts as a major source of revenue for

olympus now and this is what helps build

the ohm treasury to actually back their

own tokens moving on let's talk about

the 3 comma 3 meme now the 3 comma 3

meme that you probably see floating

around here and there is representative

of something bigger it actually

represents an idea out of game theory

which is a philosophical thought process

of how to win games using economics and

human behavior first let's explain

something called the prisoner's dilemma

let's say there's two criminals and they

both have two options to either

cooperate with law enforcement or not to

cooperate if a criminal cooperates that

criminal gets a better sentence but

their partner gets a worse sentence if

they both cooperate and confess they

both get a pretty bad sentence but if

they both deny the accusations they

actually both get off easier now

assuming you don't know which idea your

partner is going to choose which one do

you choose let's take a look at the

prisoner's dilemma square this shows the

outcome for both criminals depending on

what they choose you can see in these

two squares that if one confesses and

the other doesn't it ends well for

whoever confesses but really bad for

whoever doesn't you can also see here

that if they both confess that it ends

up equally bad for both of them lastly

if they both deny they both receive the

best possible treatment for them both

and because of this game theory says

that if both criminals are rational

people they should select this option

now olympus dow extends this square into

their own realm of a 3x3 matrix using

the same theory the best possible case

is if you and everyone else stakes the

ohm token while the worst possible case

is if everyone sells again this means

that the best possible case is if

everyone stakes long term assuming

everyone participating is rational and

aware of this thought process i will say

unfortunately this relies on humans so

you'll have to check back in a year or

maybe 10 years to see the outcome

however instead of guessing what might

happen let's quickly go through two

worst case scenarios the first is what

happens if the price falls to what it's

backed by one die remember how i said

each ohm is supposed to be equal to one

dollar well that's technically the very

minimum that it should ever be in fact

there's something called the floor price

which represents the price at which ohms

should not fall below due to the amount

of money in the treasury now i haven't

talked about this yet but let's say

there's a thousand ohm tokens out there

and the treasury owns four thousand

dollars this means each home is backed

by four dollars worth of assets and if

the price of home ever goes below four

dollars then olympus itself as a

protocol will start buying back ohm

tokens reducing the total supply out

there now some of you may be wondering

how this project might be similar to

iron finance and the titan token ohm is

actually completely different from the

iron finance bank run which resulted in

the collapse of the project iron and

titan were susceptible to bank runs all

the way down to zero olympus is

susceptible to the same thing but this

time there is actually a floor to the

price and the protocol will actually buy

back your tokens and in theory you won't

lose all of your money if a bank run

happens you would only lose the

difference between the current price and

the amount of backing each own now as

time goes on and more people buy ohm the

protocol will continue to collect fees

since it technically owns over 99 of its

own liquidity meaning that the treasury

should continue to grow at a quick rate

so yes the olympus dial protocol does

have risks but it should be noted that

they differ from the iron finance risks

ending this video we can't be sure if

olympus will survive well in the next

five years or if there'll be a bug in

the code that allows exploitations or

even for some reason it just won't fall

like iron finance although the project

has definitely brought some new ideas to

light it's an impressive experiment in

behavioral economics and in the world of

crypto as we end this video we want to

give the calculator guy a huge shout out

for helping with this script if you

haven't already go check out his channel

and give some love to an honest down to

earth crypto content creator on youtube

he's got some great videos on his

channel anyways thank you guys for

watching this video we hope that you

enjoyed it we really hope that maybe

you've learned something and most of all

we hope to see you in our next video

you