Ape Hour - Olympus (3,3)

Krishang Nadgauda

Krishang Nadgauda / August 26, 2021

3 min read

Written in

I'm drifting through my DeFi discord servers when I see "14,000% APY". As I continue to get familiar with DeFi, the large return rates don't fascinate me as much as

1) where those returns are coming from, and

2) whether those return rates are sustainable.

I clicked the link dropped by the fellow ape touting the 14,000% APY and found myself on olympusdao.finance. A quick skim through the website and I realized that I had landed at the source of the (3,3) meme. The "(3,3)" signature is something you might have noticed on the usernames of certain degens in crypto twitter, who proudly go by "ohmies".

A five figure APY and a meme blazing through crypto twitter was signal enough to take a deep dive into OlympusDAO. So this is it — the inaugural Ape hour — an ape readable breakdown of the decentralized, grass roots federal reserve, OlympusDAO.

Overview: what exactly is Olympus?

Olympus is a decentralized, stable asset protocol based on the OHM token — the stable asset in question.

Stablecoins dominate the DeFi landscape. They're ERC 20 tokens whose value is, in one way or another, tied to fiat currencies like the US dollar. Finance requires a stable unit of measure to operate as a well oiled engine of wealth creation. That's because fundamental actions like, say, lending and borrowing across multiple assets require

1) a common unit of measure to gauge the relative value of the assets in question, and

2) confidence, on the part of all participants, in the unit of measure.

Even though DeFi is built on the ethos of creating a sovereign financial system, fiat units like the US dollar dominate the landscape as the units in which DeFi assets are priced in. In part, that's because at this time, goods and services are largely priced in fiat units, giving a sum of value more utility if that value exists in the form of a fiat currency, rather than a cryptocurrency.

This irony of DeFi thriving on fiat units isn't lost on the ecosystem. At the same time, it needn't be alarming. It is perhaps natural that onboarding value into DeFi requires measuring value in fiat units. But it would be a shame if DeFi forms a dependency on fiat units that is later impractical to untangle.

This is, in part, the motivation behind the OHM token — a stable asset that is backed by other crypto assets, unlike other stable assets e.g. USDC or DAI that are pegged to a fiat currency. At the time of writing this, 1 OHM is meant to be backed 1 DAI, where DAI is itself a stablecoin pegged to the US dollar. As a result, the distinction between 'backed' and 'pegged' assets may not hold much ground, but we're not ones to miss the forest for the trees.

... to be continued, fellow ape.