Background
Staking plays an important role in Olympus. (3, 3) is more than just a meme; it is a cooperative mindset centered around growing the pie together instead of fighting to divide it.
Staking is important for the health of the protocol. The treasury is constantly trying to sell into the market to raise reserves. To do so effectively, demand in the market needs to be greater than supply. So, staking is meant to remove supply so that the treasury can grow unimpeded.
The vast majority of Ohmies have done their jobs, and done it well. They sit cozy on the sidelines, 3,3ing their balance up. This is what they’re meant to do, and when everyone does it it goes quite well.
The Problem
Here’s the thing: balances go up at quite a high rate, and this has the effect of letting the few mess things up for the many. A small group can quickly accumulate enough supply, due to the high reward rate, that they adversely effect everyone else. We should correct this dynamic.
I think its important that we align on what the reward rate is. The reward rate does not dictate how much supply you will receive; this is determined by reserves in the treasury. The reward rate only dictates how quickly you receive it. The difference between a high and a low rate is not what you get, but when.
This means that high rates are actually skewed toward short term players. They don’t intend to stick around that long, and so high rates are great for them. It’s not so much the case for ohmies. If you see the vision, and you want this thing to grow for the long term, high rates shouldn’t really matter.
In fact, I believe high rates are actively harmful to those with long term mindsets. The more we pay out to the short term players, the less the treasury can take in. In other words, the faster we distribute rewards, the less rewards there will be to distribute.
The Solution
You may notice my issue does not lie in the high rewards themself, but in who receives them. This is not a runway issue. It is a matter of who is compensated and for what. Long term ohmies should get more than short term ohmies. That doesn’t mean the short term players should get none, just less.
I think we should roll out locked staking. This would reserve the higher returns for those willing to commit to doing their job. Unlocked staking would remain, but it would yield a lower amount. This aligns incentives toward long term mentalities without casting anyone out. I honestly think everyone wins with this.
How it would work
Locked staking would use the same mechanism as bonds. A staker would commit to a term at a set payout. Over time, they would vest into that payout. This allows stakers to lock in yield for the term.
An example
You’re an ohmie with 15 OHM. Locked staking just came out, and you go to check it out. You see that the current payout per OHM is 4, and the term is 3 months. You say “fuck it, let’s ride” and you lock your OHM. You have been promised 60 OHM by the end of your term.
For the first half of the three months, you can’t claim anything. For this period you’re pure 3, 3. Once you hit that halfway point though, rewards will start to become claimable. In week 7, there would be 10 OHM to claim (60 / 6). Week 8, another 10. As time goes on, more and more becomes available to you until week 12, when everything has been claimed and the lock is complete.
When you claim, you have a choice. You can either 1) redeem and take the OHM; 2) redeem and stake the OHM without locking, or; 3) roll the stake into a new lock. By rolling over, you’d receive a small multiplier on your payout. This multiplier would only be available to those claiming rewards from a previous lock, serving as an extra incentive to stay there.
Determining Payout
The biggest issue, in my opinion, with staking today is that the reward rate is completely arbitrary. There is nothing that determines the rate except a hard-coded number that was derived from what we could maintain, given the treasury’s growth.
Rewards need to be tied to something. There needs to be an external driver of rates going up or down. The market needs to decide this, not governance. This system allows for just that.
It’s the same as bonds. As more people lock, the return would get lower. As more people redeem, the return would get higher. Market demand for rewards would determine what the rewards are.
Like bonds, which have a floor price, we would have a ceiling return. This is the max amount that can be paid out. The first x% of supply would get that max return, and once enough supply is locked, the return would start to decrease. It would look something like this:
The exact numbers here are to be determined, but I am personally for what is shown here. A payout of 4 would be roughly equivalent to 100,000% APY, and once more than 33% of supply has locked, that return would start to decrease. If 80% of supply were to lock, the last person would still be locking in 10,000% for a 3 month term.
Determining Unlocked Rewards
Unlocked rewards would be set as a function of what locked staking yields. Let’s say we want to have the unlocked return be half of what locked receives. If locked stakers are receiving 3 new OHM per OHM (100k% rate), unlocked should receive 1.5 new OHM per OHM (10k% rate). If locked now yields 1.5 more, unlocked should yield 0.75. This makes unlocked staking still competitive, but incentivizes locking with a multiplier.
Longer terms
I believe we should start with a single 3 month option. As stakers start to receive their coins (3 months in), we can add shorter and longer terms (i.e. a one month term and a six month term). Three months currently feels like a sweet spot in alignment with the proposed Expansion Plan that you can read about here.
