First Principles of Liquidity: Olympus’ Balancer Pool
Occasionally, enterprises arise together that complement each other in astounding ways. Through Olympus’ collaboration with Balancer, we have realized one of those distinct alignments. Balancer, with it’s novel and limitlessly custom liquidity pools, along with LBP (Liquidity Bootstrapping Pool) front-ends facilitated by both Copper and PrimeDAO; will create a harmonious symbiosis within the Olympus ecosystem and create a stronger econohmy. By migrating $7.5m in OHM, ETH, and DAI to Balancer Protocol, we are creating deep liquidity for $OHM as an asset within Balancer. The seeding of this liquidity will bring about new ways that protocols can use $OHM when enacting initial raises for capital and then own that liquid capital through Olympus Pro.
What is Balancer?
To put it simply, Balancer is a flexible liquidity pooling service that can act as a DEX, automated portfolio manager, liquidity provider, or price sensor all in one. Balancer pools, unlike traditional liquidity pools, can contain two or more tokens for traders to swap between. Just like other DEXs, pool providers still get fees from transactions happening within liquidity pools just like they would with two token pairs. However, in the case of Balancer, fragmenting the liquidity over multiple assets allows for a lesser impact on price than a two-token system.
Balancer also gives pool organizers the option to incorporate variable weighting which allows for balance to be achieved in many ways, with many tokens — now including $OHM.
Balancer serves LP’s and the Olympus Ecosystem in these two main ways: allowing for the fragmentation of pools into multiple token types, while also mitigating the fixation of different weights amongst those token types. LP’s & traders have access to open, decentralized exchanges for whatever they like, whenever they like, at a low fee cost.
By breaking bread with our friends at Balancer we have agreed to bring incredible value to our Ohmies. As we want to provide easy access points to $OHM for those who will use the pool in LBP’s, the tokens we dichotomized are $ETH, and $DAI. It was determined through much deliberation between Olympus and Balancer teams that the splits be: 50/25/25; $OHM, $ETH, $DAI — in order to keep price impact low.
How Do Copper and PrimeDAO Complement This Partnership?
Copper and PrimeDAO are platforms — utilizing Balancer’s LBPs — for open and transparent TLA’s (Token Launch Auctions). TLAs allow for permission-less price discovery that enables a global network of projects to raise capital without barriers to entry. No more “wen whitelist”, no more gatekeepers or geographical barriers.
These products are all about the best way to level the playing field for fair launches. Any protocol can now be supported by a community of investors participating in transparent and equitable partnerships. Copper and PrimeDAO are both incorporating $OHM as a collateral token.
The above diagram shows how a LBP can look in practice. This model illustrates a scenario wherein starting capital can begin small so that projects with lower amounts of initial capital will be able to raise a strong liquidity pool alongside $DAI, $ETH, or $OHM (or in the case of Balancer, a mix of all three). In typical liquidity pool solutions, you would have to provide a 50% match to the stable amount you would want to raise, whereas this solution helps lower the barrier to entry for many projects while enabling healthy price discovery.
What Benefits Will This Bring to the OHM Ecosystem?
Establishing $OHM as a liquid asset on Balancer also brings forth an LBP funding program that produces great value to the OlympusDAO ecosystem. This funding program will loan treasury $OHM to approved users for the required non-native portion — pools will start with weights of 5% OHM - 95% governance token. This program will allow our protocol to help facilitate the raising in OHM for protocols, by lending those protocols the non-native pool share of their LBP.
Balancer LBPs expedite the growth of a decentralized future. Fairly distributed token ownership is at the core of growing a protocol. The formation of the LBP funding program will serve as a building block for both blossoming and established projects in the DeFi ecosystem.
PrimeDAO and Copper’s integration of $OHM into the front end of their fair launch systems is another prosperous benefit. Projects will now be able to raise capital in $OHM. The innate exposure this adds to the Olympus ecosystem is behemoth and only works to further realize our future as the reserve currency of DeFi. As more projects launch on these tools and raise in $OHM over $ETH or stable coins, the more we can increase our pervasiveness in the market and help projects bloom.
What To Remember:
Whether you are interested in pooling your $OHM on Balancer, or participating in a TLA within PrimeDAO or Copper, this building block will bring constructive additions to the Olympus ecosystem. Not only can you now make balanced trades, you can both build pools with multiple tokens that act as a personal index, or participate in TLA’s; all using $OHM as your vehicle to do so.
We are honored to bring Balancer into the econohmy of Olympus and as always are committed to making a better, more accessible DeFi world.
Olympus is a decentralized financial reserve protocol that provides sustainable compounding interest through its community-owned and protected treasury.