Skip to content

Latest commit

 

History

History
117 lines (81 loc) · 5.66 KB

inverse-bonds.md

File metadata and controls

117 lines (81 loc) · 5.66 KB

Inverse Bonds (OIP-76)

What are inverse bonds?

  • They buy your OHM and sell you a backing asset from the treasury.
  • They buy your OHM at a premium (slightly above market price) and then burn it.
  • They have no vesting and the asset exchange is instant.
  • They are only available while the OHM market price is below the backing per OHM.
  • They are launched by the policy team.
  • Their price is determined by the market.

Why are these bonds being introduced?

  • The policy team enacts monetary policy to support the health of the protocol.
  • Inverse bonds are an additional tool for the policy team to do that effectively.
  • They allow OHM to be sold without directly affecting its market price.
  • Their purpose is
    • to absorb some sell pressure for OHM.
    • to increase the backing per OHM.
  • They mirror the properties of regular bonds that have been incredibly effective.

What assets can I bond?

  • You can bond only OHM v2.
  • You must unstake your sOHM or gOHM first.

How much will these bonds cost?

  • Their pricing mechanic is basically the same as for regular bonds:
    • The price and payout value of an inverse bond start at the market price of OHM.
    • The payout amount (premium) slowly increases until someone buys a bond.
    • The payout amount (premium) is then reduced and will slowly increase again.
  • They will effectively buy OHM at a premium – slightly above market price.
  • You will get more value for your OHM compared to selling directly to the market.

What asset will I get for these bonds?

  • Different bonds will be provided that pay out different assets.
  • The policy team will add and remove bonds based on market conditions.

How many of these bonds will be available?

  • Bonds have a limited capacity and are sold out once their capacity is reached.
  • Bond capacity will be determined by the policy team based on market conditions.

When will these bonds become available?

  • First they need to pass the vote in the Olympus forum.
  • Next they need to pass the Snapshot governance vote.
  • After the vote a modified version of v2 bonds will be deployed for inverse bonds.
  • Finally, the policy team will decide if and when inverse bonds will be made available.

Where can I buy these bonds?

  • You will be able to buy them on the Olympus website but only on the Ethereum network.
  • They will be offered only while OHM trades below the backing per OHM.

How do these bonds affect the backing per OHM?

  • The protocol acquires and burns OHM for a fraction of the backing per OHM.
  • The remaining fraction of the backing increases the backing of all other OHM tokens.

How do these bonds effect the runway?

  • Bonds that pay out risk-free assets will shorten the runway.
  • Bonds that pay out other assets will extend the runway.

Do these bonds guarantee a price floor?

  • No. They simply increase the backing per OHM and absorb some sell pressure.
  • That has a positive effect on the market price of OHM.

Can these bonds drain the treasury?

  • The policy team decides how much OHM can be bonded in total.
  • The policy team allocates the amount of payout assets upfront to safeguard the treasury.
  • Inverse bonds do not have direct access to treasury assets.

Will the DAO itself bond OHM?

  • No, OHM in DAO funds will not be used for inverse bonds.

Why are they called "inverse" bonds?

  • Regular bonds take in treasury assets in exchange for OHM.
  • Inverse bonds take in OHM in exchange for treasury assets, so the inverse.

Are these bonds the same as a buyback?

While they seem similar there are notable differences:

  • They absorb sell pressure because they buy OHM slightly above the market price.
  • They reduce sell pressure further because they increase the backing per OHM.
  • Their availability is limited to certain market conditions.
  • The amount of OHM tokens that the protocol will acquire and burn is limited.
  • Sales are driven by market demand and not by the protocol or the DAO.

What is the backing per OHM?

  • The USD value of the assets in the treasury is called “backing” or “reserves”.
  • OHM in liquidity does not count towards the backing.
  • Locked assets like vlCVX and veFXS do not count towards the backing (for this purpose).
  • That backing divided by the amount of OHM in circulation is the “backing per OHM”.
  • The current backing can be found in the Olympus Lookout dashboard under “Backing”.
    Note that the backing on the dashboard is higher as it does include locked assets.

Example

  • ETH inverse bond
  • $120 backing per OHM
  • $100 market price of OHM
  • $100 bond price
  • $105 payout per bond (5% premium over the market price of OHM)

→ Treasury takes in $100 in OHM in exchange for $105 in ETH.
→ That OHM is burnt.
→ $15 of backing can be allocated to the remaining OHM tokens, increasing overall backing.