The rising DeFi sector has been decentralized exchanges (DEXes), upon which users can trade tokens 24/7 and in a non-custodial and permission-less fashion. DeFi came as an idea to avoid control and the heavy hand of central banks by a group of crypto enthusiasts in 2017. They made an alternative solution to offer every financial service you need — savings, loans, trade, insurance, and others, all available through decentralized platforms and internet connections.
What is DeFi 2.0?
Decentralized Finance (or simply DeFi derived from the Ethereum community and aims to remove any aspect of centralization implemented within smart contracts) refers to an ecosystem of financial applications that are built on top of blockchain networks.
DeFi 2.0 is an upgraded version of DeFi attempting to fix the existing weaknesses and leverage the strengths of the current DeFi, which can open even more promising possibilities for users. Some of the weaknesses of DeFi are scalability, liquidity, security, capital efficiency, etc. In the context of liquidity, DeFi 2.0 refers to a few emerging DeFi projects that hope to revolutionize the common problems associated with liquidity provisioning and incentivization.
One solution that has risen to the forefront of the DeFi community in 2021 is OlympusDAO’s bonding model, which focuses on Protocol-Owned Liquidity (POL).
What is OlympusDAO?
Let’s find out more about Olympus DAO. OlympusDAO (OHM) is the mechanism of swapping LP tokens for Bonds, reducing the frequency of the farm and dump situation, and creating sustainable liquidity. Olympus is one of the new DAOs (Decentralized Autonomous Organization) looking to create a currency to compete with the dollar. Its native token, OHM is not a stable coin, it is a free-floating currency backed by a basket of assets held in its treasury. By focusing on supply growth rather than price appreciation, OlympusDAO hopes that OHM can function as a currency that can hold its purchasing power regardless of market volatility. The protocol was founded by a group of anonymous accounts going by the names of “Zeus,” “Apollo,” “Unbanksy,” and “Wartul.” All decisions are formed by community members on the forum and made by token holders through snapshot voting.
How does OlympusDAO work?
Treasury is what allows the purchase of bonds — which is essentially the mechanism that enables you to buy OHM tokens from a treasury, but with a discount. To be eligible for the discount, you must pay for another token or coin.
Users can participate in two main strategies, staking, and bonding. All are connected to the OHM token, which improves its use. There is a selling option as well. Staking and bonding are considered beneficial to the protocol, while selling is considered detrimental.
Staking is long term, passive strategy. Staking is essentially a mechanism of locking up cryptocurrencies to acquire rewards and gain interest. You just need to deposit your OHM to gain more OHM. Stakers stake their OHM on the Olympus website. When you stake, you lock OHM and receive an equal amount of sOHM.
Bonding is a short-term strategy that earns OHM a decent amount of money while giving bonders a chance to earn a profit. Olympus will permit the creation of OHM tokens as long the price is pegged to $1. The only risk in this kind of investment is the chances of having the prices of OHM fall. Bonding allows Olympus to accumulate its own liquidity.
What are (3,3) and (1,1)?
It exemplifies an idea from a game theory, (3.3) that if everyone cooperated it would create the greatest gain for everyone. The best possible case within the matrix is when you and everyone else in the blockchain stake the token, while the worst-case scenario is when everyone puts their holdings on sale.
- Staking (+3) and bonding (+1) are beneficial to the Olympus protocol
- Selling (-1) on the market is detrimental to the protocol.
The best scenario for the protocol is 3+3=6 points when users stake their OHM on the Olympus website. The worst-case is -1–1=-2 when users are selling their OHM tokens. And other cases are shown in the table below.
What is a fork?
According to Coinbase, most digital currencies have independent development teams responsible for changes and improvements to the network, much in the same way that changes to internet protocols allow web browsing to become better over time. So sometimes a fork happens to make a cryptocurrency more secure or add other features. But it’s also possible for the developers of a new cryptocurrency to use a fork to create entire new coins and ecosystems.
Forks work by introducing changes to the software protocol of the blockchain. The most common method is to create new tokens from scratch. This means ‘copying and pasting the existing code, which is then modified and launched as a new token. The network needs to be built from scratch, and people need to be persuaded to use the new cryptocurrency.
There is another method and that is to fork the existing blockchain. Changes are made to the existing blockchain and do not start from scratch. In this case, two versions of the blockchain are created as the network is shared.
There are 2 types of forks: hard forks and soft forks. A good example of a hard fork is the creations of Bitcoin cash from Bitcoin. Soft forks are generally used to implement software upgrades.
How to Start Your Own OlympusDAO fork
OlympusDAO’s Success Inspires Dozens of Forks. A slew of forks of the OlympusDAO codebase has emerged. Wonderland is on the Avalanche blockchain and is basically a one-to-one fork of Olympus, a contributor to OlympusDAO who wished to remain anonymous told The Defiant.
Being a fork, Wonderland uses the same bonding mechanism as Olympus to purchase TIME at a discount in exchange for key liquidity pairs like TIME-AVAX and TIME-MIM. Like Olympus, Wonderland also has a staking mechanism that offers to take the tokens off the market in exchange for rebases of the token.
Besides Wonderland, there are more OlympusDAO forks, like Klima, RomeDAO, TempleDAO, SnowBank, HectorDAO, Spartacus, and much more trying to copy the OlympusDAO model.
As far as the Olympus codes are open-sourced, anyone can clone the git repository and build a similar blockchain environment. Making a fork of an existing blockchain such as OlypusDAO fairly saves development costs, as far as the process is not that time-consuming in comparison to starting your own custom cryptocurrency from scratch.
Wonderland is a fork of OlympusDAO (OHM), which means that Wonderland essentially used the framework from OlympusDAO to create its project.
If you want to start your own OlympusDAO you need developer skills. In software engineering, a project fork happens when developers take a copy of source code from one software package and start independent development on it, creating a distinct and separate piece of software. OlymusDAo software is open source, so it can be duplicated and modified.
Developers are using a legal copy of course code from a software package and starting their own development on it, creating a new version of the software. Free and open-source software makes this possible and legal, without violating any copyright laws. This means that this type of software can be legally forked without obtaining any prior permission from those managing the project of distributing the software.