OHM-Style Forks and Protocol-Owned Liquidity
How OlympusDAO popularised the (3,3) game theory and protocol-owned liquidity, why the forks all collapsed, and what survived from the experiment.
What OlympusDAO Was Trying to Do
OlympusDAO (OHM, launched 2021) tried to build a decentralised reserve currency. Three key innovations: bonding (users sell ETH/DAI/LP tokens to the protocol in exchange for discounted OHM, building protocol treasury), staking (locking OHM earned rebases that grew the balance), and 'protocol-owned liquidity' (treasury owned the AMM liquidity rather than relying on third-party LPs). Initial valuations went vertical: OHM hit ~$1300/token at peak in October 2021. The protocol's '(3,3)' meme implied everyone would benefit if everyone staked.
Why It Collapsed
OHM's emissions were dramatic — staking yields exceeded 7,000% APY at peak. Math: emissions to stakers required the token price to grow continuously to maintain APY. When growth stalled, stakers had no reason to hold; selling pressure overwhelmed buying pressure. OHM dropped from ~$1300 to ~$10 in 2022 — a 99%+ drawdown. The (3,3) game theory worked in the upswing but failed catastrophically in the downturn. Most OHM forks (Wonderland TIME, KlimaDAO, many others) followed similar trajectories.
What Survived
The protocol-owned liquidity (POL) concept survived and influenced subsequent DeFi designs. Many protocols now own at least a portion of their AMM liquidity to reduce dependence on mercenary LPs. The bonding mechanism (users selling assets to protocol in exchange for discounted tokens) influenced subsequent treasury-building patterns. The lessons about emissions-driven Ponzi-shape failure were absorbed across the DeFi industry. The specific OHM-style implementation died; the ideas didn't.
- OHM tried to build a decentralised reserve currency
- Mechanisms: bonding, staking with rebases, protocol-owned liquidity
- Collapsed 99%+ when emissions-driven price growth stalled
- Forks (Wonderland TIME, Klima, others) followed similar trajectories
Key Takeaways
- OlympusDAO was the canonical OHM-style protocol
- (3,3) game theory worked in upswings, failed catastrophically in downturns
- Most OHM forks experienced similar 95%+ collapses
- Protocol-owned liquidity concept survived; emissions-driven designs didn't
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References & further reading
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