The DeFi market has exploded in the past two years. In 2020, the TVL stood at less than $750 million. Fast forward to 2021, DeFi is standing at $99.61 billion with more than a 10,000% increase. Though an unprecedented leap, yet the market is ripe for innovation. Especially, when users have to safeguard their assets. In such a situation, they look at stable coins. In spite of that, stable coins are not free from their shortcomings. The Tether scam is still simmering bright. In the absence of asset-backed security, algorithmic stable coins make sense. However, they have shown a bad track record. The Iron Finance fiasco haunts many. That brings us to the question of how to stabilize the DeFi market in terms of using stable coins. At this point, to answer these shortcomings, Olympus DAO is making a difference through OHM Tokens.
What is Olympus DAO and OHM Token?
Olympus DAO is a decentralized reserve currency protocol that overcomes shortcomings of former stable coins where their liquidity remained vulnerable and they were not immune to inflation. The protocol derives the value for its native OHM token through a basket of assets. As a result, OHM, the native token of Olympus DAO, remains stable and appreciates gradually when compared to other stable coins over time. In this way, it is a perfect hedge against inflation.
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How does the Olympus DAO Protocol Work?
Olympus DAO uses two strategies for sustainability in the DeFi verse:Staking & Bonding. In staking, users lock their OHM tokens for a specific time frame. They receive sOHM for staking their tokens. At the time they want to capitalise their yield, they have to burn sOHMs to book profits. Whereas, in bonding, the ecosystem provides OHM in exchange for discounted price. The only term would be to lock the tokens for a while. In such a situation, the reserve of Olympus DAO increases. Hence Olympus DAO can mint more OHMs against a basket of other assets and keep the prices stable or even higher.
Can OHM Be a Strong Contender of DeFi 2.0?
OHM has the potential since the project has cloaked $700 million in assets from its treasury in 7 months. At the same time, OHM’s community is one of the strongest in the DeFi space. With the use-case of a perfect hedge against inflation, OHM is the answer to other stable coins backed by fiat. In times of regulations, OHM could end up as a perfect answer to stabilise the DeFi space as a stable token of choice.