Frax and ohm are two of my favourite algorithmic stable coins projects that have recently announced a partnership together, to help each other going forward and to furthur develop and build the successes of both project’s ecosystem together.
Frax and Ohm will be providing the initial LP for the FRAX-OHM uniswap pool and OHM will be supporting the usage of FRAX in their treasury, this allows for
Ohm holders can now swap to frax instead of dai, increasing usage and holders of Frax
Frax can be used to buy bonds directly from OHM. The Frax which is used here is permenantly locked away into the ohm protocol never to be redeemed (Ohm can potentially be a massive sink for permenant frax usage)
The initial LP token owned by frax should be used to purchase the 1st bond on OHM. Those who are not familiar with OHM by purchasing a bond you give up the LP token to the protocol which is forever locked in return for OHM at a discounted price.
With that OHM you can do whatever you want with it, but I suggest FRAX stakes the OHM and earns APY of 100,000%. Both projects are incentivized to help one another to grow and become a success.
PRO
The yield generated from even a small bond purchase could return astronomical ROI and allow a huge amount of FXS to be burnt from the market similiar to frax AMO
Increase exposure to frax and more holders as mention in the above paragraph
RISK
OHM is a volatile asset currently and in order to gain access to these high apy a premium is paid on each ohm (which is at its all time low so better risk:reward IMO right now), there is a chance FRAX does not earn yield and comes out with a loss if OHM were to not succeed
Olympusdao is in my opinion an great project that aims to create a floating peg currency combined with a hard working team, great community support and awareness, strong incentivized backing from reputatable VC and continual partnership with well reowned defi projects and growing. Im a hodler of both projects and can see them both do well and mutually benefit greatly from this relationship.
I think this is a good idea in moderation first and expanding our close collaboration step buy step. So I think minting FRAX to purchase some OHM is definitely a good idea. To be clear:
-The OHM won’t count in the calculation of the CR so we don’t have to worry about it fluctuating the value there
-The Frax protocol itself will be a 3, 3 staker of OHM itself so it would be tightly integrated into the upside/expansion of the OlympusDAO
-OlympusDAO will accrue FRAX into its treasury which is great for FRAX
-The overall symbiotic relationship benefits both protocols and can
I propose to purchase $1m of FRAX-OHM liquidity bonds to earn OHM for the protocol. I’d support this effort. From a protocol standpoint, the amount is small, making up less than 1% of FRAX in circulation and immediately generates cash flow for us as well as signals our long term perspective on the health of OlympusDAO which I genuinely like as a project and their ideals.
I’ve talked exclusively with Zeus and the other Ohmies and think this is one of the first deep integrations between both protocol and communities that runs deeper than just pure economic benefit but also has cultural+memetic value as well.
I think unless there’s additional discussion/counterpoints we can move it to a formal snapshot vote.
Disclaimer: I hold no OHM so this is purely a non-financial opinion. I think this would benefit both communities greatly. I hope to change that soon though and hold some OHM very soon
Olympus is one of the strongest communities in DEFI - 100% support this! Also this will be great for onboarding some of the big brains over at Olympus to contribute to FRAX!!
it has been purposed that the FRAX team just mint $500k FRAX and use this to fund half of a $1m investment in the the FRAX-OHM pool . what funds are gonna be used to back this FRAX?
the pool will be paying out 2,000 FXS a day in rewards, what happens to the rewards earned by the teams investment ?
Good question. Firstly, Olympus has proposed incentivizing the FRAX-OHM pool by 45 OHM per day which is more than 2x the current dollar value of the FXS rewards. So just purely looking at incentive value, we are getting more than we are putting in.
This OHM AMO investment would do 2 things:
1.) Give Frax protocol exposure to OlympusDAO’s success and economic alignment in their mission+success. Onboard the galaxy brains that are deep in Olympus like mentioned. I have a lot of respect for Zeus, Fiskantes, and the others there.
2.) Potentially be a great investment that leads to most robustness of potential AMO strategies that can integrate the OHM funds.
3.) If the price of FRAX drops to $.990 as a result of minting the 500k FRAX to purchase OHM, then the protocol’s recollat+redeem function kick in like usual and the CR rises+redemptions until the price is back to $1. Essentially, you can think of the investment as being denominated in dollars (FRAX) unless the market rejects the minting of FRAX by selling it until the price is $.990 which basically turns the investment into a $500k FXS → OHM investment instead of a $500k FRAX → OHM investment. Simply recall that if there’s FRAX minted, it will never cause the peg to break since FXS+recollats will just recover the amount if necessary deemed by the market.
