Summary:
OlympusDAO x Alchemix partnership to introduce new OHM reserve bonds utilizing the alUSD-3crv pool LP tokens.

Abstract:
Olympus is entering a new phase as it seeks to bolster its treasury through partnerships with other protocols. Olympus can leverage its unique bonding mechanism, in which it acquires assets through the sale of OHM, to help partners achieve sustainable liquidity for their most important pairs.
Maintaining a 1:1 alUSD:USD peg is central to the Alchemix Dai vault. To date, the peg has remained strong due to a combination of robust liquidity, market incentives and a backstop in the form the Transmuter, which ensures that alUSD can be redeemed 1:1 for DAI. Much of the ~$400 million in liquidity in the curve pool is attributable to liquidity mining incentives, with the pool earning 2900 ALCX per week.
By creating OHM bonds that would allow Olympus to acquire alUSD-3crv LP tokens, Alchemix can reduce its reliance on liquidity incentives and ensure that substantial liquidity remains locked in the Olympus treasury. Furthermore, these bonds can serve as a test run for other LP assets in the future including alUSD/OHM, ALCX/OHM, alETH/ETH, etc.

Benefits for Alchemix:

  • alUSD-3crv liquidity “locked” in the Olympus treasury, forming a liquidity floor
  • Reduce pool reliance on liquidity mining incentives
  • Free up ALCX for other pool incentives
  • Olympus will never sell ALCX tokens earned through staking; while Olympus will maintain the tokens for governance, they can be viewed as “burned” from a market perspective

Benefits for Olympus:

  • Increase and diversify treasury assets
  • New form of productive backing
  • Treasury earns ALCX and Curve rewards in addition to swap fees
  • Proof of concept

Mechanics:
Liquidity providers to the alUSD-3crv pool sell their LP tokens to Olympus in exchange for OHM that vests linearly over 5 days. The trade is attractive when these “bonds” offer a substantial discount on the market price of OHM. As rewards are claimed, they can either be staked to earn more OHM or sold (perhaps to for a now larger LP position).
The Olympus treasury holds the LP tokens and uses the underlying value to back the minting of OHM. The treasury will never sell or breakup the LP position unless price of OHM falls below intrinsic.

Considerations for Alchemix:

  • OHM Price falling below 1 Dai, however unlikely, could result in LP position being removed

Considerations for Olympus:

  • 3crv contains centralized stablecoins – USDT and USDC
  • alUSD falling below peg for sustained period would result in loss for the treasury

    I love this idea. I think it's a great synergy between two awesome protocols. We pay a lot in ALCX to keep that 3 Curve Pool highly liquid and stable. If Olympus is able to bond enough LP and create a strong floor of liquidity, that would be super valuable. In the future, we could shift those rewards to new vaults like the alETH/ETH. The benefits well outweigh the risks on this one in my opinion. And if this is successful, it could be done with future curve pools like alETH/ETH and alBTC/BTC which would increase the diversity, fees, and rewards of Olympus' DAO and lock up a lot of liquidity for us.

    Great proposal Ja.

      A very sound proposal, I'm looking forward to hearing what the core team and big brains have to say.

      I love this idea and echo everything said by JaLa and RogueItachi. This would be a beautiful symbiotic relationship between OHM and The only risk I could imagine is that if the OHM treasury were to buy the majority of LP tokens we may become dependent on the success of OHM in not needing to ever liquidate it’s treasury assets. Despite that, I agree with @RogueItachi that the benefits greatly outweigh that, both in terms of the flexibility it gives us in directing emission allocations, but also in providing a safe floor of liquidity for the Curve pool.

      My questions would be:

      • Is there any way to actively monitor the bonding price to be able to easily determine when that discount is present?
      • Considering how beneficial this would be for Alchemix, is it worth adding an indicator somewhere in the UI with a link to purhase OHM using LP tokens?

        What keeps Olympus from selling the ALCX tokens it earns from LP? And, pending clarity, would these same assumptions hold if applied to other asset classes alETH etc as indicated at the end of the proposal.

          Nothing of substance to add here beyond I love this idea. Great work Ja.

          senor Olympus wants to grow their treasury to have multiple assets backing ohm and they also want numerous partnerships across DeFi. They already have Sushi in their treasury and want to further integrate with Rari, Frax, Alchemix etc. Selling ALCX tokens would be counter-productive for their goals of integration and using their "treasury as a service" to create a new type of DeFi primitive: fractional reserve central banking for DeFi. It's in their long term interest to become a trusted space to lock up tokens.

          I don't have much to add to this conversation but I wanted to express how interesting and ingenious of an idea I think this is.

          Coming from Mount Olympus I want to express my gratitude and support for this proposal. Feel free to reach out for any OlympusDAO related questions. Thank you JaLa for the great work so far. LFG

          Love this proposal @JaLa ! Thanks!
          Super interesting idea! The only risk I see for ALCX is when something goes wrong with OHM to when olympus decides to sell for whatever reason. However, we're in a free market, so it is impossible to avoid all such behaviour.

          The advantages greatly outweigh the risk IMO.
          Very curious to see how this evolves!

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