OlympusDAO Establishes $OHM as Liquid Asset on Balancer
Projects now able to maximize protocol-owned liquidity in $OHM through Balancer LBPs using CopperLaunch and PrimeDAO.
We are thrilled to announce a collaboration between decentralized reserve currency OlympusDAO and leading DeFi protocol Balancer. By migrating liquidity to Balancer Protocol, OlympusDAO establishes $OHM as a liquid asset within the Balancer ecosystem. This migration provides a path for Olympus Pro partners to leverage Balancer’s Liquidity Bootstrapping Pools (LBPs) to conduct initial fundraising denominated in OlympusDAO’s native token $OHM with the front end facilitated by CopperLaunch and PrimeDAO.
- OlympusDAO will relocate a portion of their liquidity to Balancer Protocol, establishing $OHM as a liquid asset in the Balancer ecosystem.
- Balancer Protocol’s Multi-token Weighted Pools reduce liquidity fragmentation and provide unparalleled flexibility.
- CopperLaunch and PrimeDAO will facilitate the front end of the LBPs by adding $OHM as a trading pair/collateral token.
$OHM Liquidity Migration
Following the unanimous governance proposal, OlympusDAO will deploy $50 million of liquidity to Balancer Protocol to start. As this structure was focused on the access point to $OHM via $DAI and $WETH, lowering price impact was the primary goal. Through a collaborative exercise with OlympusDAO, Balancer DAO, and Balancer Labs contributors, it was determined that an OHM/ETH/DAI – 50/25/25 Pool would be the best solution to propose to the Olympus community.
The maximum treasury allocation will consist of $25 million $OHM and $12.5 million each of $DAI and $ETH. Depending on liquidity available during the migration, the first iteration will be a DAI/ETH – 50/50 deployment. There is a growing demand from protocols to conduct their token public auctions in OHM, and to date, there has not been sufficient OHM liquidity on Balancer protocol to facilitate this type of auction. The OHM/ETH/DAI – 50/25/25 Balancer liquidity pool established by Olympus will increase the network effects of OHM, further increase volume exposure to OHM, generating pool trading fees, and enhance the utility of the liquidity.
Balancer Protocol’s Unique Structure
Balancer’s differentiated flexibility is on full display in this collaboration. For example, Balancer’s multi-token capability and variable weighting flexibility is being leveraged to solve for lowering liquidity fragmentation. On Balancer, the $OHM liquidity can be aggregated with both exchange assets (WETH and DAI), which results in a potential 25% improvement in price impact compared to fragmenting liquidity across two separate pools of OHM-DAI and OHM-WETH.
Balancer’s invariant AMM provides meaningful customization when compared to a 50/50 constant product AMM. Balancer provides the flexibility to determine any weighting between 1-99% across several tokens. A 50/25/25 weighting was the optimal structure when solving for the lowest price impact for swappers and minimal IL for OlympusDAO as LP.
The core blocks of Balancer V2 are security, flexibility, and capital efficiency. An invariant AMM is flexible while a constant product AMM is rigid. While it is true that a 50/50 weighting between two tokens will result in the lowest relative price impact for swappers, not all situations are equal. Balancer’s flexibility provides the tools for LPs to structure tailormade solutions for their unique use cases. The example with Olympus highlights the benefits of aggregating liquidity to improve price impact for swappers.
Another example can be made for liquidity pools that are experiencing low utilization. In other words, price impact is not as much of consideration given volume as a percentage of available liquidity (price depth). In this example, the pool weightings could be optimized on Balancer to mitigate IL and reserve upside while maintaining similar volume at no cost to swappers. We have all seen the 100x situations; LPs can have their cake and eat it too!
CopperLaunch and PrimeDAO’s Frontend Facilitation
Copper and PrimeDAO have aligned initiatives with Balancer, paving the way for future token projects to perform an IDO. Both frontends allow for permissionless price discovery that enables a global network of projects to raise capital without barriers to entry. No more “wen whitelist,” no more gatekeepers, no more geographical barriers.
Both PrimeDAO and Copper will add $OHM as a trading pair/collateral token, allowing projects who wish to raise funds in $OHM the opportunity to do so. The addition allows projects aligned with Olympus to utilize Balancer as their platform of choice when launching a Liquidity Bootstrapping Pool (LBP).
Establishing an OHM-DAI-ETH liquidity pool on Balancer will allow projects to fundraise in OHM and enhance the utility of OlympusDAO owned liquidity. This pool provides an efficient runway for LBP participants to acquire $OHM through either of the two DeFi native tokens of exchange.
The migration of $OHM liquidity to Balancer Protocol provides a case study for any project that controls its liquidity on a decentralized exchange or that is incentivizing liquidity on a DEX. The flexibility and customization of Balancer Weighted Pools married with the utility of Balancer Protocol products, such as LBPs, provides a one-stop-shop solution for liquidity management. Solving for more than just price impact is possible and can be executed in parallel to minimizing liquidity fragmentation.
LBP Funding Program
Establishing $OHM as a liquid asset on Balancer also brings forth a LBP funding program that fetches far greater value to the OlympusDAO ecosystem. The funding program will loan treasury $OHM to approved users for the required non-native portion – pools will start with weights of 5%OHM- 95% governance token. This program will allow Olympus to help facilitate the raising in OHM by lending protocols to the non-native pool share of their LBP.
Balancer LBPs facilitate the growth of a decentralized future. A fairly distributed token ownership is at the core of growing a protocol. The formation of the LBP funding program will serve as a building block for both blossoming and established projects in the DeFi ecosystem.
The migration of a portion of OHM liquidity is one example of the effortless process of establishing a token as a liquid asset in the Balancer ecosystem. Whether you are interested in pooling your $OHM on Balancer Protocol, or participating in a LBP within Copper or PrimeDAO, this collaboration will bring constructive additions to the DeFi ecosystem. Not only can you now make balanced trades, but you can also both build pools with multiple tokens that act as a personal index, or participate in LBPs using $OHM as your vehicle to do so.
If you are a DeFi treasury interested in exploring different ways to maximize your protocol-owned liquidity or incentive programs, get in touch with the Balancer Labs business development team.
About Balancer Protocol
Balancer is an open-source protocol, automated portfolio manager, liquidity provider, and decentralized exchange. Built on the Ethereum blockchain, Balancer offers new solutions to the problems of traditional and centralized exchanges. Developers leverage Balancer as a permissionless building block to innovate freely and create new treasury management systems. Balancer’s mission is to become the primary source of DeFi liquidity by providing the most flexible and powerful platform for programmable liquidity.
Olympus is a decentralized financial reserve protocol that provides sustainable compounding interest through its community-owned and protected treasury.