OHM, BTRFLY, and the pursuit of CRV

An introduction and discussion of how [REDACTED] is combining OHM and CRV

[REDACTED] is a protocol that is using OHM mechanics to participate in the quietly waged Curve wars. In this article, I will give a summary of OHM and CRV, and explore how [REDACTED] is combining them.

OHM

OlympusDAO is the most interesting economic experiment we have seen in recent years. Its use and memeing of the Nash Equilibrium, (3,3), has been a unique and successful approach to demanding both social and financial attention.

A short history of OHM:

OlympusDAO was launched in May 2021 by pseudonymous founders, namely Zeus, a somewhat outspoken individual who is theorised by most to be 14 years old. (Probably not true, unless said 14 year old has the voice of a grown man!)

OHM aims to be a ‘decentralised reserve currency’ whose behaviour is closely monitored and controlled by its DAO. Their thesis is that this will optimise the stability and consistency of OHM in the long term, whilst creating efficient growth and wealth in the short term.

So far, they have really proven themselves right; currently, OHM’s index is 57, meaning if you bought 1 OHM and staked it on launch you would now have 57 (around $170k at time of writing).

As a degen might say, ‘number goes brrrrrrr’.

Each OHM token is ‘backed’ by 1 DAI (a stable coin == $1). Unlike a pegged coin OHM’s price can rise above its backed value, allowing for price discovery and a premium on its intrinsic value.

How does OHM provide tokens to its users?

Bond sales generate profit for the treasury and are used to mint x OHM at a cost of x DAI. Effectively, minting 1 OHM turns $1 of bonding profit into the current market price of OHM.

Crazy right!

This works for a couple of reasons, but to give one overarching factor; the DAO acts in the DAOs best interests. Minting 1x10^100 OHM and bringing the price of OHM crashing down to $1 does not benefit the DAO.

Policy is implemented in a manner that creates the most beneficial outcome for the protocol/DAO.

The novel concept of OHM/OHM forks for users is the choice of whether to stake or bond in order to participate in the ecosystem.

Staking is the simplest choice; just buy OHM, sign 2 transactions, and collect those sweet rebases. Every 8 hours, stakers receive a 0.3655% return on their staked tokens (at the time of writing).

This compounds. Hopefully, that explains some of the crazy numbers you see surrounding OHM forks.

The second choice a user can make is bonding. Bonding allows users to purchase OHM at a discount and takes 5 days to fully vest. This is OHM’s main innovation, as it provides the protocol itself with liquidity, in a process they have coined POL (protocol owned liquidity).

This provides several benefits:

• Olympus doesn’t have to pay farming rewards to liquidity providers

• Liquidity is guaranteed for transactions

• They earn revenue through LP fees

The innovation and popularisation of OlympusDAO has led to numerous copycats referred to as ‘OHM forks’, as the code is ‘forked’ straight from OlympusDAO’s smart contracts.

[REDACTED] is one such fork.

For a comprehensive education on OlympusDAO, visit their documentation;

https://docs.olympusdao.finance/main/

CRV

The Curve ecosystem has also captured the attention of DeFi users in 2021, and is the single most important protocol within DeFi; $20 billion TVL (total value locked)is nothing to scoff at.

It is also the largest AMM (automated market maker) in DeFi, which means it will probably stay that way. To put it simply:

Largest AMM → Deepest available liquidity → Best pegging → More stable coins and users → Largest AMM

It’s a never-ending cycle that Curve has captured and now benefits from massively.

I recommend knower’s excellent article about the ‘Curve wars’ to familiarise yourself with it;

https://theknower.substack.com/p/the-mythos-of-curve-finance

TLDR: Everyone wants a slice of the CRV pie for various reasons, but presently, the goal is to get the most traffic possible directed towards their coin.

BTRFLY

[REDACTED] is OlympusDAO’s first official fork as per OIP-46, although I’d suggest that’s a little insulting to the butterflies. [REDACTED] have taken OHM’s bonding and staking mechanics and transformed them into a ‘recruiting tool’ for the fastest rising army in the Curve wars.

It works surprisingly simply:

Users bond their tokens (CRV, CVX, and potentially a new token. Clue, it has tentacles) for BTRFLY, which can be staked for rebasing goodies ala OlympusDAO’s mechanics, albeit with a much higher APY.

Degens chase numbers. Why stake your CRV for measly single-digit APYs, when you can give it to [REDACTED] for 160,000% APY?

[REDACTED]’s innovation on the OHM model is how it is using its treasury. Whereas OlympusDAO aims to become a stable and consistent reserve currency, [REDACTED] aims to grow, grow, and grow some more.

Caterpillar → BTFLY

In mid-December [REDACTED] launched ‘Operation: Swallowtail‘, a treasury bootstrapping event done through a dutch auction. This raised an impressive $73,267,961 in OHM, CRV and CVX tokens.

The next step was to deploy these assets in order to further grow the treasury. On the 22nd, they deployed $25M of CRV into cvxCRV and the cvxCRV/CRV factory pool. This is netting them >$35k a day in CRV tokens.

$28M in CVX has also been locked up for Votium use, giving the treasury a revenue of around $105k daily in bribes.

That’s $140k a day, $980k a week, $3.9M a month.

What. The. Fuck.

I hope that’s FOMO I smell, anon.

This increase in treasury size should in theory cause an appreciation of BTRFLY, providing incentives to stake beyond just rebases.

And, as always, compounding is a thing. The more these strategies grow the treasury, the more the treasury can grow these strategies.

Hopefully, the potential of this protocol is becoming clearer and clearer. In a meta way, staking BTRFLY is being long on the CRV and CVX.

Another reason to be bullish on BTRFLY is InformationTokenDAO’s involvement in the project.

InfoTokenDAO is a community of the biggest brains in crypto. This is empirical; GCR is a member :p

They are advising internal and external policy for [REDACTED], and imo will do a damn good job at it.

Good policy decisions are partly what made OlympusDAO what it is today. It is a criminally underrated factor during the comparison and analysis of OHM forks.

[REDACTED] is not coming lacking on that front.

Conclusion

At the start of this article, I called OlympusDAO the most interesting economic experiment of recent years. I think it might struggle in its title bout against [REDACTED] in 2022.

Time will tell where these protocols go, and how the Curve wars will be waged in new and more innovative ways.

Until then, grab some popcorn and enjoy the show. [REDACTED] is all out of bubblegum.