Dear Ludwigs,
As our incredible exchange has grown, it’s become clear that the bonds of our community are growing stronger as well. In an effort to ensure the strength and sustainability of our future, we now look to continue expanding a different type of bond. The bonding program with Olympus Pro.
This unique initiative has ushered in a new era of opportunity for Beethoven X, in the form of Protocol Owned Liquidity (POL). Protocol owned liquidity is quickly proving to be a pivotal lifeline for all projects in the DeFi 2.0 ecosystem. With the passing of a recent community vote, we forge ahead with a 3 month continuation of our bonding program participation.
Throughout this piece we will explain how Olympus Pro bonding helps protocols, the overall results for Beethoven X and how interested users can participate moving forward.
Without further ado, let’s begin…
What is Olympus Pro & How does it Help?
Olympus Pro is a service for protocols looking to integrate bonds into their emissions programs as an effective means to acquire Protocol Owned Liquidity (POL). They provide the infrastructure needed for bonding, the necessary expertise associated with implementing bonds as a service and exposure for bonds through their marketplace.
So, why is bonding through Olympus Pro superior to traditional liquidity retention approaches?
For the protocol:
1. The most obvious benefit is that protocol owned liquidity bypasses the need for external liquidity providers. This means that a protocol no longer needs to “rent” its liquidity to incentivise other users and can now make use of the owned assets.
2. The treasury can then put those acquired assets to work to help generate sustainable yield for the protocol. By acting as liquidity providers, protocols can capture liquidity fees as well as deploy assets into other revenue generating models.
3. As more liquidity is accumulated, protocols can support larger trades and offer a more stable, efficient trading environment for users.
4. On top of the financial stability, bonds also provide a great way for the protocol to diversify its asset holdings with bluechip liquidity and develop a more robust treasury.
For the community:
1. Through bonds long term holders can exchange LP tokens for native tokens at a discounted rate.
2.The community can be assured that the liquidity will permanently reside within the protocol and that there will always be ample liquidity for users to trade. This further strengthens the bond between community and protocol.
3. The more liquidity owned by a protocol the more sustainable its treasury should be. This is favourable for the protocol and the community as profitable investment decisions can be made by the protocol and as a result more sustainable incentives can be offered to the community exchange.
The graphic shows the circular flow of capital between the bonders and the protocols treasury
Bonding presents an alternative pathway for protocols to provide sustainable liquidity for its users. Furthermore, the acquisition of POL has benefits not only for the protocol but for the community as whole. As the treasury for the protocol becomes more established, the better positioned it will be to serve the community.
Why bond in the first place?
To gain some clarity on why bonds came about let’s take a quick look at some of the shortcomings of the more conventional methods of liquidity provision.
The quote below from Nansen.ai sums up the issue with traditional liquidity provision nicely — mercenary capital:
“42% of yield farmers that enter a farm on the day it launches exit within 24 hours. Around 16% leave within 48 hours, and by the third day, 70% of these users would have withdrawn from the contract.“
In the scenario where liquidity providers are motivated by high rewards, rather than a strong belief in the success of a protocol, liquidity providers are more likely to leave a protocol when rewards start to diminish. This creates an unfavourable dynamic for the protocol. As liquidity providers leave in search for the next pool to farm, so does the associated capital. On top of this, the tokens that have been farmed are often sold off into the markets as soon as they have been earned, increasing the sell pressure experienced by the protocol.
During a market crash or in times of uncertainty, liquidity providers tend to remove their liquidity from a given liquidity pool as they become wary of the market state. It’s at these moments, however, that the protocol needs liquidity the most.
Bonds provide an alternative pathway for protocols to incentivise liquidity providers and as such help to mitigate some of the issues associated with mercenary liquidity described above. Rather than rent liquidity, protocols can instead acquire their own. Through the accumulation of POL, the protocol becomes more resilient and better situated to provide a stable environment for its users.
With some of the music theory behind us let’s take a look at how bonding with Olympus Pro has benefited Beethoven X.
The bonding begins.
In January, the first governance proposal to initiate the bonding program with Olympus Dao was passed. The first month of the bonding program saw 527K worth of BEETS exchanged for 2383 Late Quartet BPTs, which at the time was worth roughly $297K.
The data collected from the first month pointed towards the success of the initiative:
1.The treasury gained POL
2.The treasury diversified its holdings with bluechip liquidity
3. As a protocol we could offer discounted BEETS for longer term holders.
Following this success, the bond program was extended for another 2 months. As of now we have seen a total of 1 649 999 BEETS exchanged for 9 206 Late Quartet BPTs. At the time of bonding, this totalled roughly $1 116 554 of total liquidity gained in bluechip assets for the treasury. Over the 3 months the implied discount rate of BEETS worked out to be around 8.05% for users in the bonding program.
What has this meant for the treasury?
The bonding program has served as a great catalyst for the diversification and development our treasury. As the bonding program continues, our treasury becomes less tied to the price of BEETS and evolves into a significant liquidity provider for Beethoven X. At the time of writing, the treasury is a top 20 liquidity provider. This is liquidity that the community owns, liquidity that will always be there.
In light of the success of the program,
We are excited to embark into another 3 month round of bonding with Olympus Dao. The proposal for the continuation of the initiative was recently put to community vote and passed with majority in favour of continuation. As the total amount of BEETS emissions is slowly decreasing over time, the number of BEETS allocated for the bonding program has been reduced to reflect this change. The number of BEETS supplied for bonding has decreased by roughly 16.44% to 460K BEETS per month instead of 550K BEETS per month.
In summary, bonding has provided the protocol with an alternative avenue to providing longer term, sustainable liquidity as well as diversify treasury assets enabling the long term prosperity of the treasury / protocol.
Now you’re up to speed with the whats and whys of bonding, the question that remains is how?
How to get involved.
Bonding at first can seem to be a little daunting but the process is actually pretty simple. We will break down the basic steps below:
- To start, head over to the bond marketplace on OlympusPro and search for the Late Quartet liquidity pool (BPT QUARTET).
- Click on Bond to get more detailed information on the transaction. Users need to own Late Quartet BPTs in order to bond which can be bought on Beethoven X. The UI on Olympus Pro should direct users automatically to the Late Quartet liquidity pool.
- Once acquired, exchange Late quartet BPTs for BEETS at the given exchange rate. This exchange will happen linearly over a period of 7days during which you can harvest your BEETS either in batches or all together at the end of the process.
4. Bonding is now complete!
Some friendly advice, The ROI on the value for BEETS is subject to change in response to demand. When the ROI is negative you might want to wait until this returns to a positive value before bonding.
You can always check on the status of your bond through the “my bonds” tab on the Olympus Pro webpage.
It’s really as simple as that. Olympus Pro has created a seamless experience for users to easily purchase and monitor their bonds.
For a more detailed breakdown of the process check out a previous thread here or check out this tutorial video from Olympus Pro here.
Conclusion
At the heart of the bonding program lies the motivation for the protocol to move into a future where both the community and the project can thrive. Protocol owned liquidity is essential to this vision and bonding has proven itself to be an effective method to this end. Through the development of a more stable, sustainable treasury, Beethoven X will be in position to better serve the community for the long run and continue to offer the best possible service for its users.
We look forward to the next round of bonding and the continued partnership with Olympus Pro.
We hope you found this article both insightful and helpful. For any further information, please reach out to our community on Discord or Twitter.
Disclaimer: The information in this article is for educational purposes only and is NOT intended as financial advice. Beethoven X is not liable for any investment/trading activity of users.
