The Rise and Fall of Olympus DAO: From Glory to Big Dump

Once upon a time, Olympus DAO rose to prominence in the cryptocurrency market with its innovative mechanisms and impressive high yields, attracting the attention of countless investors. However, this once star DeFi project ultimately could not escape the fate of a big dump. This article will delve into the core mechanisms of Olympus DAO, the reasons for its rapid rise, and the factors that ultimately led to its decline.

Project Overview

The native token OHM of Olympus DAO aims to be a value-stable reserve currency. Unlike traditional stablecoins, OHM does not directly peg to the US dollar but promises that each OHM is supported by at least 1 DAI as a reserve. This design is intended to achieve stability by maintaining stable purchasing power rather than a fixed exchange value, reducing reliance on traditional markets and liquidity providers.

Core Mechanism

Bonding

The Bonding mechanism allows users to exchange specific assets for OHM, which are locked in the protocol as reserves. Users can typically obtain OHM at a price lower than the market price, but these tokens are gradually released over a certain period. This design aims to increase the protocol's asset reserves while balancing market supply and price stability.

Staking and Rebase

Users can stake OHM into the protocol to receive sOHM and enjoy "reset rewards". When the market value of OHM is higher than the target value, the reset mechanism increases the supply of OHM and allocates the newly added tokens to stakers. This mechanism once provided an annualized yield of up to over 8000%.

Rise and Fall

Reasons for Rapid Rise

1. The extremely high staking yield has attracted a large number of investors.
2. "(3,3)" Game Theory marketing strategies make staking the preferred choice for investors.
3. The Bonding and Staking mechanisms effectively control the circulation of tokens and reduce selling pressure.
4. Continuous buying by early investors has pushed up the price of OHM.

main factors of decline

1. Unsustainable ultra-high returns lead to increased inflation pressure.
2. The shift in market sentiment and doubts about the sustainability of the protocol have led to a large-scale outflow of funds.
3. The assumptions of game theory are broken, and staking is no longer the optimal strategy.
4. A large number of investors withdrew their staking, increasing the market circulation and putting downward pressure on prices.

Reflection and Lessons

1. High-yield strategies may attract funds in the short term, but they are difficult to maintain in the long term.
2. The token economic model needs to consider long-term sustainability, rather than solely relying on continuous new investments.
3. Investors should carefully assess the risks of similar projects, especially those that rely on models of continuous growth.
4. The project team needs to find a balance between attracting investors and maintaining long-term stability.

The rise and fall of Olympus DAO provides valuable lessons for the cryptocurrency market. It showcases the potential of innovative financial models, while also warning us to be cautious with seemingly perfect high-yield schemes. For future similar projects, establishing sustainable economic models and reasonable risk management mechanisms will become crucial.