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OHM's Algorithmic Stablecoin Exploration



Recently, the algorithmic stable currency track has become lively, Basis is working hard to launch V2, and FEI has also begun to attract people's attention. Today, Blue Fox Notes is talking about OHM's algorithmic stable currency exploration. For new readers, you can refer to Blue Fox Notes' previous articles "Stablecoin: The Holy Grail of the Encrypted World", "Algorithmic Stablecoin Two Heroes: Basis", "basis and defi Lego" about algorithmic stablecoins. OHM is an algorithmic stablecoin launched by Olympus DAO. Unlike stablecoins such as Basis and Fei, which do not have equity tokens, Olympus has a single-token mechanism with only one token, OHM, which is both a stablecoin and a governance token. Olympus DAO is DAO governance, it has a PCV, which is similar to FEI. PCV is a protocol controlled value, through which the treasury reserves are controlled through the agreement, the OHM additional issuance or repurchase mechanism, and the bond mechanism are realized, thereby promoting the stability of OHM. The stability of OHM is currently anchored to DAI. Of course, if it is iterated later, it can also be anchored to other price indices instead of DAI. Olympus has its own treasury to support the value of OHM. The treasury originated from the initial issuance of OHM. With the increase of protocol income, assets such as DAI in the treasury will also be used to obtain storage income, such as depositing it in the lending agreement Maker, Compound, and Aave, thereby increasing its treasury income, thereby supporting the value of OHM. So, specifically, how does it achieve its relative stability through additional issuance and repurchase mechanisms and bond mechanisms? The current stable setting for OHM is to anchor DAI. When 1 OHM is greater than 1DAI, the agreement will add and sell OHM; when 1 OHM is lower than 1DAI, the agreement will repurchase and destroy OHM. That is, anchoring is achieved through inflation or deflation, and the mechanism is simple and clear. At the same time, no matter whether the price of OHM is higher than DAI or lower than DAI, the Olympus protocol can benefit from it. The agreement will give 90% of the proceeds to OHM pledgers, and 10% to the Olympus DAO treasury. Former FBI agent and cybersecurity expert John Caruthers announced as the keynote speaker for the 2022 EITL Virtual Forum: Jinse Finance reported that former FBI agent and cybersecurity expert John Caruthers announced as the keynote speaker for the 2022 EITL Virtual Forum. Starting September 7-8, 2022, publishing industry topics includes topics such as cryptocurrency regulations, views and trends, cybersecurity and insurance, managing artificial intelligence and related risks in a regulatory environment. [2022/8/10 12:16:11] Specifically, how to issue additional shares or repurchase them? Its core is the following two equations: epochMint = (TWAP - IV) * supply * ICV * DiscountepochBurn = (TWAP - IV) * supply * DCV * Discount The first is the equation for additional issuance, the second is for repurchase and destruction, etc. Mode. Additional issuance and destruction will change the supply of OHM. Olympus has a "Sales Contract". When the OHM market price is higher or lower than the anchor price (the current setting is 1DAI), the agreement will issue or repurchase OHM, and users can buy or sell OHM to the agreement . So, how does the Olympus protocol know whether the OHM price is higher or lower than the anchor price? The protocol will check whether the latest epoch has ended, and the period of each epoch is about 7.5 hours. If it is over, the protocol will send a transaction request (sell or buy). Buffett's disciple value investor Mohnish Pabrai: Encryption investment will eventually be a "zero": Golden Finance News, Buffett's disciple value investor Mohnish Pabrai said that encryption investment will eventually be a "zero". Similar to Buffett's view. [2022/6/20 4:39:25] According to the above equation, if the OHM TWAP price is higher than its IV (intrinsic price, 1DAI), the treasury will issue additional OHM for sale. IV is currently set to 1DAI. ICV is an inflation control variable (Infation Control Variable), which is a variable set by DAO governance to control the rhythm of inflation. If the ICV increases, more OHM will be added, and the inflation will be stronger. If the ICV decreases, the rate of new OHM decreases, and inflation is relatively flat. Discount is a discount, and the discount rate is mainly used to stimulate arbitrage behavior and stimulate users to buy or sell. DCV (Deflation Control Variable) is a deflation control variable. When the TWAP price of OHM is lower than IV (intrinsic price 1DAI), the treasury will provide DAI to the Sales Contract to purchase OHM. DCV is also a protocol variable governed by DAO to control the pace of deflation. If the DCV increases, the repurchase and destruction efforts will be greater, and there will be greater deflation; if the DCV decreases, the repurchase and destruction efforts will be smaller, and the deflation will be relatively gentle. If the protocol does not have enough OHM or DAI to satisfy the user's transaction, the remaining transactions will be completed through OHM's Sushiswap pool. According to OHM's information, an example can be used to illustrate: Assume that the current TWAP=20 DAI, IV=1DAI, ICV=0.0001, the supply is 20 million DAI, the latest price is 21 DAI, and the discount rate is 3%. Winter Olympic bobsled athlete Johnny Quinn publishes content-zce on bitcoin knowledge popularization: Jinse Finance reported that on February 3, Winter Olympic bobsleigh athlete Johnny Quinn released content-zce on bitcoin knowledge popularization. According to Johnny Quinn, he has been exposed to Bitcoin since 2021, and now hopes that people can understand this field. He recommended 9 "reading lists", as well as several industry Twitter "big Vs" including Jack Dorsey and NYDIG. "So that more people can explore Bitcoin. [2022/2/3 9:29:22] In this case, since OHM is higher than 1DAI, the protocol will issue additional OHM, and users can submit transactions to purchase OHM. Suppose a user submits 100,000 DAI to purchase OHM. The sales contract will check that the latest epoch has ended, and find that its TWAP price is 20DAI. The sales contract requests OHM from the treasury. The treasury will calculate the new additions and sales of OHM in this era according to the above equation "epochMint = (TWAP - IV) * supply * ICV * Discount": 38,000 = (20-1) * 20,000,000 * 0.0001. Then, the sales contract will get the newly added OHM tokens from the treasury, so it can execute the order. Since the discount rate is 3%, the execution price is 20.37=21*(1-0.03). According to this execution price, the user 100,000 DAI can buy 4909.18 OHM. There are 38,000 OHM in the contract, which is enough to meet the user's purchase needs. If the OHM in the sales contract is not enough, for example, if the user initiates the purchase of 1 million DAI, he can purchase 49,091.8 OHM. After purchasing an additional 38,000 OHM, the purchase order for the remaining 11,091.8 OHM will be sent to the Sushiswap market for completion , but the purchase cost for users will increase (assuming that slippage and price fluctuations are not considered, the purchase price of this part of OHM is 21DAI, that is, there is no 3% discount for this part). In this process, the agreement will generate income from it. Voice | IOHK CEO: The 2020s will be the decade of Cardano: The 2020s will be the decade of Cardano, according to Charles Hoskinson, CEO of IOHK and founder of Cardano (ADA). He believes Cardano will dominate the cryptocurrency space this decade as a true social operating system. (News Logical) [2020/1/8] In addition to the adjustment mechanism of additional issuance and repurchase, Olympus also has a Bond mechanism, which is the bond mechanism. Its bond mechanism is different from other stablecoin bond mechanisms. In the general bond mechanism, when the stable currency is lower than the anchor price, users will be encouraged to buy their bonds with stable currency, thereby reducing the total amount of stable currency, thereby pushing the stable currency back to the anchor price. In Olympus, its bonds can be purchased through OHM/DAI LP tokens. Why users are willing to use OHM/DAI LP tokens to buy Olympus bonds, because it has discounts and arbitrage opportunities. This mechanism kills two birds with one stone. First, it can motivate users to provide liquidity for OHM, and thus increase the demand for OHM; second, the treasury can also accumulate OHM liquidity. And OHM's liquid LP token itself can generate income, which can increase the source of income for the treasury, and thus support OHM. Users can use their OHM/DAI LP tokens to purchase OHM at a certain discount, but users are required to have a vesting period. Users can claim OHM by sending their OHM/DAI LP tokens to the Olympus treasury. The length of the vesting period of LP tokens determines when OHM can be claimed. During the vesting period, the user's LP tokens are not locked, and the LP tokens can be retrieved by confiscating bonds. ADA currency community official Twitter: ADA and IOHK will launch a lot of "cool things" in January next year: ADA currency community official Twitter said that Cardano (ADA) and IOHK will launch a lot of "cool things" in January next year ", can't wait to welcome the new year. Earlier today, the official Twitter of the Cardano community posted about a fake wallet appearing in the Google play store. According to Binance market data, ADA is now at $0.49, a drop of 9.29%. [2017/12/20] The bond price is determined by LP tokens and the number of issued bonds. The more bonds awaiting exercise, the lower the discount bondholders get on OHM. vice versa. In this way, the enthusiasm of people to buy bonds is adjusted. According to OHM's information, the bond price equation is as follows: bond price = RFV/PremiumRFV (Risk-free value) is the risk-free value, where RFV=2sqrt(constantProduct)∗ (LP/totalLP), through the constant product (x*y =k), LP and the ratio of total LP tokens, and the square root to get the value of RFV. When x=y, that is, when OHM=DAI, RFV is the minimum value of x+y. Premium is a premium, and it is also a parameter controlled by the protocol. The equation for the premium is Premium = 1 + (debtRatio ∗ n), while the equation for the debt ratio: debtRatio = bondsOutstanding / ohmSupply. The lower the premium, the higher the discount, which motivates people to buy bonds; the higher the premium, the lower the discount, which reduces the incentive for people to buy bonds. The premium stems from the debt ratio and scaling variables of the system. It controls the rate at which bond prices rise. According to the example of Olympus data, when the market price of OHM is 10DAI, there are 1 million OHM and 10 million DAI in the LP liquidity pool, the premium is 2, and the bond exercise period is 10,000 blocks. The user created bonds in the first block to account for 5% of the total amount, and the market value of 5% of the LP is 1 million US dollars. The bond contract calculates the RFV (risk-free value) of LP tokens: 316,226 OHM, with a premium of 2, and the final bond offer is 158,113 OHM, with a market price of $1.58 million. That is to say, LP tokens with a market value of 1 million US dollars can be exchanged for OHM with a market price of 1.58 million US dollars. If the price remains unchanged, the rate of return will reach 58%. In addition, it is also attractive to pledgers, because it increases the intrinsic value of OHM (new LP tokens are added to the treasury), and also increases the rebase of sOHM in the next epoch. Higher OHM prices will incentivize more LPs to buy bonds. When calculating the bond price, the agreement calculates the OHM value in LP tokens according to the intrinsic price of OHM instead of the market price, and bondholders usually sell their LP to the agreement at a price lower than the market value. However, this can be offset by an agreement to offer OHM to bondholders at a below-market price. This allows the value of the bond OHM to grow faster relative to the value of the LP token share. In other words, higher OHM prices will lead to greater liquidity. This mechanism is unique to the Olympus mechanism, which promotes its liquidity through OHM speculation, which is conducive to its early cold start. The release of Olympus is different from other projects. There is no airdrop and liquidity mining. Instead, it provides early members of the Discord community with a valuation of $200,000 to purchase 73% of OHM’s genesis tokens, and the remaining 27% of OHM Used to provide initial liquidity on Sushiswap. This is its "IDO" mode, where the D is Discord. Its early release ran from March 12th to March 14th, and all non-US users who entered Discord by March 3rd were eligible to participate. At that time, a total of 50,000 OHMs were issued, and each early participant received 141 OHMs at a price of $4, which was $564. At the highest point, OHM exceeded the market price of 1042 US dollars, and the highest increase was more than 260 times. Even now it is more than 400 US dollars, which is still more than 100 times the space.


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