Once the poster child of the “DeFi 2.0” movement, Olympus DAO has had a rough year.
Taking another step toward its “bond-centric future,” Olympus, a DeFi protocol with more than $200M in total value locked, will slash the sky-high yield that holders of its native token have enjoyed for the past year and a half.
Staking OHM once yielded six-digit APYs. On Thursday, the annualized return for staking OHM was 266% – still far above the average DeFi protocol. But that rate will be cut over the next several weeks to a mere 7%, according to Olympus representatives who took to Discord to answer users’ questions.
The eye-popping yields fueled rapid growth, with the number of wallets holding OHM jumping from 15,000 in September 2021 to 75,000 that November. At one point, each OHM token was worth almost $1,500. But Olympus fell just as quickly.
OHM is now worth less than $11, down more than 99% from its peak.
OlympusDAO’s vision is grand: it wants to provide “the digital world with its own currency,” in the words of its pseudonymous founder, Zeus.
Olympus pioneered a bonding model by which users could receive discounted OHM by providing liquidity or depositing other assets like DAI. The vested OHM could then be staked for more OHM tokens.
The protocol has since moved to ‘Inverse Bonds’, which allow OHM holders to redeem their tokens for treasury assets.
A new iteration of OHM Bonds is expected to launch soon.
The protocol’s original high interest rate incentivized passive participation, OlympusDAO, the organization that governs the Olympus protocol, said in a Twitter thread on Thursday.
“A lower rate incentivizes Ohmies, protocols, and DAOs alike, to actively participate in the network,” according to OlympusDAO. For example, OHM holders will soon stand to earn better rewards for contributing to liquidity pools than by simply staking the token.
Additionally, the mechanism that underlies the lower yield will be simpler, Olympus said, replacing the byzantine mechanism on which the high APY was based.
“In the current framework, there’s no way to adjust the rate lower,” the proposal to change the emissions framework, approved Wednesday in a vote by OHM holders, reads. “When the protocol is not growing, [high APY] is just inflation that [doesn’t] go towards productive economic activity,” a situation that “prevents (upcoming) credit markets from functioning at all.”
Markets hardly reacted to the news, with OHM dropping by a fifth of a percent in the past 24 hours.