Introduction
Greetings!
There’s an OHM craze in Defi right now.
Anyone who’s dabbled a bit into the Defi world, new or old, would have seen OlympusDAO and all its similar replicas on other chains (i.e Forks).
The (3,3) model is there for everyone to research and see.
It’s mainstream.
Now, question time:
- Did retail investors (and small ones in particular) research the model fully?
- Are adopters really after a long-term sustainable model that is supposed to change the way Defi works? Or is it only the quick buck they’re after?
- Are they just blindsided by the 5–6 digit APYs on offer?
- Is there another system that exists under the radar trying to solve the same issues OHM is trying to solve for DEFI in general and more?
The answers to all these questions are not straight-forward and will raise loads of discussions in both directions.
I’m here writing this post -to the best of my knowledge- to try and compare a very similar Defi product (that was born in FEB this year) which addresses multiple DeFi problems and not only what OlympusDAO is trying to solve. Added to that, it is 1000x less mainstream.
A model that less people know about, but eventually will.
OHM meets TOAD Network; the less-mainstream, less-known community-driven project, that has a similar answer to what OlympusDAO is trying to solve (in the world of stable coins, rebasing and backing) and more.
This article will focus on 3 very important analogies:
- Volume (Money movement) effect on both ecosystems
- The theoretical Sustainability of the models in question
- The strategic approach to Partnerships and how this will help or dent the projects’ growth curve overall.
Let’s take a deep dive into both models, and elaborate on the points above.
Disclaimer: This intro’s goal was to focus on the elements needed to support the article’s main purpose, and not to discuss the 2 projects in depth. For that, you will need to DYOR.
Let’s start with a brief introduction into both OHM & TOAD.
OLYMPUS DAO
https://docs.olympusdao.finance/main/
Don’t get me wrong, I’m all for innovation.
Olympus is still early, and has introduced an interesting model to the crypto-sphere.
I’m sure I wouldn’t be able to explain their whole system in a single story, so if you’re interested in going through their systems in full and haven’t yet managed to do that: read through their official docs here: https://docs.olympusdao.finance/
OHM has a very straightforward model to an outsider: Stake your money, stay with us through the ups and downs regardless of where the markets decide to go, and you will be rewarded for your loyalty by sOHM tokens.
Those tokens are backed by DAI 1:1 but not pegged to its price.
The market is what decides the price of your rewards. Which could be 400x higher than 1 DAI at a single point of time but not lower than a single DAI; as the treasury protocol keeps that in check.
This allows the model to maintain high advertised APYs, which means that people will be fighting for a seat to get those rewards as the APYs advertised luring them in.
Its all good, as long as the TREASURY has plenty of funds available.
MINTING OHM from the profits to keep rewarding loyal stakers, is also at the core of the setup’s model.
OHM is modelled around the psychology of a trader, using the game theory and the prisoner’s dilemma to incentivise people to buy Bonds and stake rather than sell because it’s in their best interest. This is where OHM employs to (3,3) theory, which keeps focusing on the importance of funds’ staying as idle as possible i.e. “we all win if we keep funds in, staked/lended etc.” Hopefully you started to hear the water-wheel squeaking by now?
Now here’s the catch, what if the stakers “i.e water stream” in the (3,3) model decided to call it quits in droves and sold their sOHM s en masse “Bank run”. Where would your OHM end at? 1 DAI? Yes and No. Remember that the protocol invests from the treasury and, if the protocol is doing it right, then “1 DAI+Premium” is what you’d expect. No ONE can guarantee the premium’s amount.
Olympus have also spiced up their solution and introduced bonding incentives: Incentivizing more holding and bringing more DAI to the treasury. But again we’re back to square one.
We all need to HOLD.
Let’s face it, retail & human nature will prevail..
Money is made to be moved. And the forks on less gas-fee demanding chains are ensuring that this is now happening, live, en masse.
Will someone who mega profited from OHM by being early, come back for more? Why wouldn’t everyone be cashing out and looking elsewhere for a more fresh copy that can do the same in a quicker way?
Questions, questions.
Now Enter: TOAD Network
TOAD
https://docs.toad.network
I won’t be discussing TOAD’s whole ecosystem in this story.
Going through all the ins and outs will take weeks, and that’s not what this article’s main purpose is. You can always check Toad’s wiki for the most up-to-date aspects of the system here https://docs.toad.network
Right… So now that this is out of the way, let’s try to summarize one of TOAD’s most important players “Padswap” and its famous “VAULT”.
- Toad.network’s ecosystem’s most important aspect of all is that it has its own automated market maker: Padswap.
This is by far the main driver behind the whole system, as the fees generated through token-swaps, liquidity-providing and yield-farming staking/unstaking operations all work in tandem to feed the chain’s vault. A separate vault exists on every chain Padswap crosses to (more about why this is important later).
The locked vault — that no one has access to except by burning the utility token and redeeming its backing — is the TREASURY that utility token PAD relies on as a price floor.
“ The vault is not there to feed into the creators’ pockets “ Is TOAD’s mantra.
At the time of this writing, the multiple vaults’ holdings consist of multiple crypto assets (Bluechips, various tokens, and Liquidity pairs) with a certain $$ value. It’s also worth to note that -in the near future- governance through DAO -the whole TOAD community- will vote on the vault’s future investments using a portion of its $$ value. Also, take note that those investments don’t necessarily have to be Crypto-market investments -if that’s what the DAO chooses-. DAO will also have a say into how incentives are distributed and which new farms/solutions they prefer to see on their system.
- Here’s another TOAD unique innovation which is very important for our storyline here: DPLP.
In its most basic form, DPLP is the way liquidity is decentralized and not just benefiting certain clusters within the ecosystem. When used along with Yield-farming, it’s a way to ensure projects stay rug-proof. And when used in tandem with let’s say the “Auctions” it ensures money keeps flowing back into the system.
Think of it as an endless stream, and in Defi that stream is the most important of all “Liquidity”. It’s simply a unique take on how trusting the code could work in your favor, and that regulations can be really decentralized without regulators stepping in.
It’s discussed in full here https://docs.toad.network/products/dplp
- Will TOAD’s less mainstream system work?
- How is it supposed to be sustainable long-term?
- Why haven’t I heard about it from my favorite influencer yet?
- Is it worth the hustle for newcomers?
Another set of Questions…..
Ok, so now that we have a basic idea on what OlympusDAO’s approach is, and what TOAD network’s Padswap, the Vault, and DAO are doing to combat similar problems; let’s start our discussion based on the analogies mentioned earlier (Volume, Scalability, and Sustainability)
VOLUME & MONEY MOVEMENT
Volume in Toad’s case is generated through natural market forces.
As the swap is a fully functional decentralized AMM -that anyone can provide liquidity on/to- : normal user swaps/trades will occur and arbitrage traders/bots will always find their way to the system.
Exchanges -no matter how small- attract volume, and decentralized exchanges “especially those operating on cheaper gas-driven layer 2 chains” are no exception.
Padswap is currently on two L2 chains: BSC and Moonriver, and will be on more Layer-2 chains soon as their code is built to be deployed quickly across future chains.
TOAD network also offers the TOAD token, which will link all Padswap deployments across chains.
Mainly linking volume, and also making TOAD a REAL governance token going forward.
Add to that: Yield-farming -which is the common way exchanges attract and keep liquidity in-house nowadays- also incentivizes volume, and more so in Padswap’s case than other setups in the space, as the utility token backed by the vault is dripped into a rewards’ pool which is then distributed to the farms “Sharing the Pads minted”.
You can read more about Padswap’s Liquidity mining setup here https://docs.toad.network/products/padswap/yield-farming
The above setup, and especially if it’s widely adopted, will ensure volume will keep rippling through; as more projects and investors join in. This becomes more and more important if start-ups choose the DPLP path which WILL even be easier to access once the automated Launchpad is live.
Anyone, regardless of their coding experience, will be able to launch their own token and DONATE liquidity to the DPLP setup, liquidity will then be farmed by all stakers forever.
So there you go, liquidity forever will most certainly mean enormous volume drivers as well, regardless of startup-projects delivering or not.
Volume in OHM’s case, or any of its various forks, is a different story altogether.
The natural market forces in OHM’s case are APY shoppers which the system will continue relying on forever to keep the model afloat.
The advertised APY is the main marketing driver, and always will be, the sole use-case.
Money movement doesn’t really drive the protocol, instead it’s advertised as a deterrent and harms the system.
But what about auto-compounding? You still need fresh $$ to keep coming in, for that to be as effective as advertised.
You’re also (as an adopter) left marketing OHM and only OHM in this case.
Other “partner” tokens don’t have that direct effect on volume ripples.
Add to that, bonding, isn’t the most attractive to small retail capital. Besides, the bonding model is designed to keep your money as idle as possible for the treasury to flourish.
In short, you don’t want ppl to move their holdings.
“Don’t you two sell or else it’s -6” Is OHM’s mantra
OHM, by design, incentivizes people to stay put and stake for as long as possible. Period.
Will ppl stay in? Short answer is no. Ppl will move; this is how money works and this wasn’t designed to be a retirement fund after all.
TOAD 1 – OHM 0
<Ribbit>
Scalability & Sustainability
This will be theoretical in Toad’s case as it’s fair to say that the 2 systems are worlds apart when it comes to adoption.
Olympus is 1000x more “Defi-mainstream” than TOAD.
TOAD’s scalability
In addition to TOAD network’s Padswap being built to have its utility “PAD” act as a backed token, PAD is also a deflationary token. With a capped supply.
You burn it, not stake it, to redeem its value from the vault.
Its supply is reduced FOREVER then.
This is also the case if you stake it solo in one of the multiple chain Padswap farms and take the route of reinvesting it while compounding: 1% is burned FOREVER while you’re compounding the rest of the 99% back to your farm share with a fraction of a dollar as a gas fee.
What this means is that with growth and adoption, PAD’s supply is guaranteed to go down in supply.. More pressure on the price to go up.. Fair for all adopters even if it grows to 2000x from here.
PAD’s upcoming auctions will also be a very interesting introduction as they will ensure no one can buy a huge amount of the supply and harm the system. PAD’s auctions will keep PADs offered in infinite 48-hour spans. You stake tokens or liquidity and get your PAD in bigger chunks. Part of the staked tokens go back into the DPLP setup for more liquidity streams throughout.
Well thought of.
OHM’s scalability
Let’s get straight to the point.
OHM’s scalability is under fire.. Like right now..
Early whale plays into OHM made them get into OHM for a fraction of a price of MANY current investors’ entry points.
You are forcing ppl who bought the top or near it.. Hint: they’re a whole lot .. to shill their bags hard to lure more people in.. 0_o Ponzi? Pyrramiddd sche…. ?
It’s worth noting that a large issue with OHM’s scalability comes from the treasury MINT function. This means that the tokens scalability is heavily affected by this, the bigger the coin, the more need for more minting to feed incentives. This means that the token is constantly relying on its in-flow of revenue being higher than the inflationary effects of an increasing supply. The release of the OIP-18 OlympusDAO proposed a change to the reward rates based on the total supply. This means that the amount of tokens that stakers are rewarded is diminishing.
The key thing to point out here is that this model is built on supply increments. According to the OIP-18 reward rate framework and reduction proposal, the next reduction in reward rate is proposed for when the token supply reaches 10 Million, this is over 5 times the current supply.
Fun fact: if OHM remains at a $800 Mil MC, at that supply, the market value of OHM would be $80 a token and current holders would be down around 80% from the current value. The next one stated is 100 Million. At this level the current market price would be $8.
As you can see, this means that overtime, the minting reward system through the treasury protocol is putting an immense amount of downward price pressure, and in order for this to be negated, the protocol requires a constant increase in revenue. It is fair to say that this is definitely not a sustainable nor scalable strategy.
How dare you say that you “unknown swap”. We’re big and therefore legit. They said
TOAD 2 — OHM 0
<ribbit , ribbit>
DPLP approach vs standard partnerships’ approach
Ok let’s talk partnerships.
Toad’s take
Revolves around partnerships in this space, they thrive on connecting people.. Not to benefit the creators no, but to get more eyes and increase the adoption of their system.
Wealth distribution is naturally flattened this way BY DESIGN.
Via DPLP, you’re actually incentivizing adopting projects to work harder and be as innovative as possible. The owners can’t pull their liquidity as it was already donated, so trading/farming operations are naturally incentivized. Anddd we’re back to volume.. And then the vault and then PAD..
It’s worth mentioning that, this way, marketing is also naturally spread across communities.
The more adoption for any of the partners’ projects, the better it is for TOAD Network overall.
Doesn’t matter what your project’s concept is: it could be a meme with no utility or a space program project. This all doesn’t matter in Defi’s free market.
Is this Defi 2.0? Maybe. But proof of a working product is there for all to see.
OlympusDAO’s take
Olympus have now expanded their reach to lending and bonding protocol partners to mostly incentivize the treasury.
You’re utilizing your already mined reward “sOHM” as a collateral to borrow another token or to even purchase bonds for a better price than what you think OHM will appreciate to, over a shorter period of time.
Those partnerships are all about trying to mix and match, and gain more utility for OHM overall.
But how will small retail investors with low capital benefit from this? Isn’t this benefiting big capital only? Are the Lending incentives enough to distribute marketing efforts?
Let’s face it, lending is a very interesting take on growing your audience.
Doesn’t matter if your audience are just starting their journey or are already lending veterans, it’s got a solid following.
It’s a great way to grow your user base and open the door to a solid Defi pillar to flourish and help the treasury grow.
OlympusDAO -and most of their forks- are targeting this niche market very well.
This all can’t be belittled, and OHM are definitely ahead of TOAD in this regard.
OHM wins this round. For now o_O
Conclusion
Jokes aside, this whole post wasn’t meant to be financial advice; but more of a brief, basic, and straight to the point research into how being small doesn’t mean you’re worse.
One can’t just simply compare TOAD and OHM fully because both have different approaches and different models.
The bottom line is: The sooner people realize that “OHM modeling” is unfair to small retail adopters, the better. OHM’s future vision is entering a grey area, and doubt is on the rise.
How they’ll combat all this with their V2 proposal is yet to be seen in practice; but don’t expect fireworks anytime soon.
Toad on the other hand, is a low cap that is so undervalued for what it offers.
They’re simply a dedicated small core team working hard on building, all while community members hit the road to shovel and spread facts. Every day.
They’re building in-house games, they’re offering great meme art, and they do math HARD.
It’s not an easy path they’re taking, as the space is already jammed with competitors.
Will definitely take some time and effort to grow this, but the foundations are definitely solid.
TL;DR
OHM is mainstream. TOAD is not. This lower adoption rate doesn’t mean TOAD NETWORK is a failure, because it’s not.
It’s just slowly but surely taking its time to flourish.
What I would really advise you to do is to ignore all the noise and think about it as an early chance. Not financial advice, but a chance to uncover something unique.
Thanks for reading and I wish you all godspeed.
