Stablecoins are becoming increasingly well known as cryptocurrency grows in popularity around the world. Most stablecoins are pegged to a centralised currency, implying their value is equivalent to the value of their pegged real-world fiat assets.
In other cases, it could also be backed by a currency that is not immune to inflation and other financial issues that may result in volatility. Olympus, on the other hand, is a new breed bound to change this norm.
Specifically, Olympus functions on price-based purchases of its cryptocurrency, creating a market-driven price while maintaining stability. In other words, the coin wants to achieve the feature of a pegged token without actually being pegged to any real fiat currency.
The conventional US dollar may not back it, but it has grown to become the fifth-largest stablecoin on the market and intends to grow even bigger. But before we begin to understand, ‘What is Olympus Dao?’ Let’s consider its history and the vision behind its creation.
Over time, there has been an influx of stablecoins, in place of reserves, because they are more stable and less volatile. Although that’s a step forward in the right direction, the majority of these coins are pegged to the dollar, which is run by a centralised government. Unfortunately, this spinoff defeats the purpose of a decentralised coin.
To that end, a pseudo-anonymous team created Olympus to become a stable decentralised currency that can be used in day to day transactions while maintaining a stable price point that is not dictated by a government or centralised system. Its vision is to be a more stablecoin than other cryptocurrencies and be suited for everyday use.
What is Olympus DAO (OHM)?
The Olympus DAO (OHM) is a decentralised cryptocurrency protocol created to maintain a stable buying power while being driven by the market. Simply put, this stablecoin can maintain the market price without being matched at a 1:1 ratio to the dollar or any other fiat currency for that matter.
In contrast to other stable coins on the market, the OHM is backed by DAI and FRAX units within the Olympus treasury. Therefore, it prevents the value from falling below the benchmark.
How does Olympus Dao work?
As previously stated, OHM is backed by the DAI tokens at a 1:1 ratio, meaning for every OHM token on the market, you have a DAI token kept in the treasury. Now, to maintain the market-driven price, these tokens are minted by burning and produced by protocols written based on the price fluctuations of the market.
As a result, when OHM measures below 1 DAI, a certain amount of OHM in circulation is burned according to the protocol’s whitepaper. Meanwhile, if OHM is more than 1 DAI, new OHM units are created and put into circulation, thereby maintaining a balance.
For each OHM the protocol creates, the Olympus treasury holds an equal number of DAI tokens. So, the OHM can’t fall below its integral value as the coin grows. Regardless, the treasury always has a DAI for each OHM token, which means the OHM will maintain its known value for a very long time.
Furthermore, DAI per OHM, whenever OHM tokens are sold or bought, there is a turnover. The protocol is set up to spend less than 1 DAI when buying OHM or receive more than 1 DAI when selling OHM.
As every decentralised cryptocurrency must have its governance, Olympus’s is done via Scattershot, a branch of Snapshot created by Float protocol that enables voting for multiple choices. Decisions are open for two days, and during that time, OHM holders can vote for any choice they want, and more OHM equals more voting power.
Once a decision has been reached, if there is a need for a change in the protocol or an upgrade, the Genesis DAO begins the prep for contracts and transactions needed for this decision to be carried out. The team then has an internal vote, but their decision must be in line with that reached by the community, but they also have the authority to overrule any vote they deem malicious.
OHM is a crypto-backed coin, which means it can have a more significant value than the cryptocurrency of that asset. Often you will hear this coin be referred to as non-pegged crypto. Compared to a pegged or a backed crypto, the OHM token can do much better price-wise.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.