 So nowadays, all the rage has been these DeFi platforms with out of this world APYs that sound just way too good to be true. Oh, it brings back those good old memories of BitConnect when they were giving out 1% per day returns. Except now, these new DAOs are offering even better returns and better than that, there's no lockup periods or referral systems, which is usually the obvious scam red flags. So of course, I decided to dive head first down the rabbit hole to figure out exactly how legit these are and how they work so that you don't have to, but you probably should do your own research either way. So today we are breaking down Olympus DAO, which is currently boasting an APY in the range of 6,000%, 6,000. So is this a Ponzi or is this legit? I'm going to cover exactly what Olympus DAO entails, how it works, how much I've made using it for a month so far and if it's worth you investing in. So with that said, let's dive in. So before you guys all start spamming the comment section with it's a Ponzi scheme, bro. Let's first understand exactly what a Ponzi scheme is and the history behind it. So Ponzi schemes have been around for a very long time. The name comes from Charles Ponzi who ran one of the biggest Ponzi's in the United States history in the 1920s. Nowadays Ponzi schemes have evolved and market themselves as network marketing, aka multi-level marketing, aka pyramid schemes, which is another form of a Ponzi scheme. However, it would be lazy to immediately write off Olympus DAO as a Ponzi scheme just because of its ridiculously high APYs. So please guys do a little bit of legwork before the typical, it's a Ponzi scheme, bro. Comment on the video that provides zero value. Don't be that guy. So with that out of the way, the way that Ponzi schemes work is that they pay existing investors with funds collected from new investors. The main red flags that Ponzi schemes seem to share are high returns with little or no risk, overly consistent returns, unregistered investments, secretive and complex strategies, difficulty receiving payments, and referral systems are a big one. All right, so now that we know what to look for, let's go ahead and break down what Olympus DAO is and see if it flags any of these common characteristics of a Ponzi scheme. So the way I like to start my research into any project is figure out what problem it is trying to solve. So this is the problem. Crypto is highly dependent on stablecoins due to their low volatility in a highly volatile space. Stablecoins are susceptible to central governance and for the most part, aren't actually stable and are a poor store of value. So DeFi needs a decentralized unit of value where all decisions about monetary policies is discussed in the open and has the people's interests in mind. So Olympus DAO was created in response to the problem of lack of a true sustainable store of value in the cryptocurrency world. Olympus DAO is able to do this by having each ohm token backed by a basket of assets in the treasury, which gives ohm an intrinsic value that it cannot ever fall below. So the idea is for Olympus to beat the reserve currency protocol and operate similar to how central banks manage their currencies using reserve assets. But Olympus DAO will manage their currency ohm using crypto reserved assets instead. Now the big difference between Olympus and central banks is that in a central bank decisions are made by a select few. All changes to the Olympus protocol will be voted on by the community who are ohm holders through the DAO. So the way it works is this, the DAO basically has rules that it must follow. The protocol uses its treasury to back every ohm token with DAI and FRAX, which are stable coins. The way the protocol stabilizes ohms value is rather simple. When ohm trades at a value above its backed assets, the protocol mints and sells new ohm, increasing supply. When ohm trades below its backed assets, the protocol then buys back and burns ohm in order to decrease the supply. Very similar to how companies buy back stocks in order to increase their stocks value. This allows ohm to have a stabilized floating value never falling below its back assets value. Currently the backing per ohm sits at around $102. So that means if the price of ohm were to ever fall below $102, then ohm would start buying back the tokens and burning them in order to decrease the supply and make the price go back up. Okay, so now we have an idea of how ohm operates, what the problem that they're looking to solve is, how they're planning to solve it. Now the question is, how do they make money? How do they generate income and revenue? So ohm expands its treasury through selling bonds. So there's three ways that Olympus Dow makes money and generates revenue. Bonds, providing liquidity, and of course, yield farming. Ohm expands its treasury through selling bonds. Basically you can trade die and fracks for ohm at a discounted price. This allows the protocol to control the supply of ohm and continue to grow its treasury. The profits made from bonding are also used to back up the new ohm that is distributed to stakers. So here's how they make their profit. Every ohm costs one die or $1 to mint. That is its intrinsic value. So if it costs them $1 to mint and they're selling it to you for $400, they're making $399 profit. So they're selling it to you at a premium depending on what the market decides that it's worth. However, its value is whatever amount it's backed up by. So when someone buys a bond, which is they're buying ohm at a discount, they receive that bond over a five day period. This mechanic was put in place in order to reduce sell pressure for people trying to arbitrage. Bond prices are determined by market demand. So if there's more demand, then the bond prices are higher. If there's less demand, then the bond prices are lower. The Dow is smart enough to figure all of this out on its own. So let's look at a bonding example. Let's say that ohm is selling at $310. So the bond price is at $300 flat. The user buys bonds for $3,000 instead of buying it on the market for $3,100. So they save $100. So then what happens is Olympus mints 10 ohm for the user and exercises 10 P ohm to fund Dow expenses. So P ohm is just a derivative of an ohm. So 10 P ohm would just be 10 die or $10. The Dow basically uses this for operating expenses. So let's see what the totals look like now. It's the $3,000 that the user paid for their ohm minus the $10 that it costs to mint the ohm minus the $10 for the Dow expenses. That's a $2,980 profit or a 14,900% return. So I should start to click in your head now as to how it is that they're sustaining these APYs and rewards. Now that's just one of the ways that they make money. Let's move on to the next one. So the key innovation behind Olympus Dow that has drawn the attention of and birth, multiple other protocols is the idea of protocol-owned liquidity. Olympus Dow owns 99.99% of its own liquidity. Liquidity is the ease in which an asset can be bought or sold. At a high level, this is an improvement because when traditional DeFi projects lower their rewards, people would move their assets and liquidity away into other projects causing prices to crash. This is why liquidity is so important. Most protocols have to pay for liquidity with incentives, which of course eventually they have to decrease causing people to stop providing liquidity for them and causing prices to crash. Olympus actually generates revenue because they're the basically only liquidity provider. So whether you buy or sell, Olympus makes a 0.3% fee on that trade. Now the final way that Olympus makes money is through their treasury assets. Any assets in the treasury that are not being used as a backing for each home in the risk-free value can be used to generate more income. They do farming in places like AIV, Compound, Frax, Curve, Convex. They're only looking to farm in safe, low yield places for some passive income. So for example, their risk-free value of treasure assets is currently sitting at $202 million. However, the market value of the treasury assets is at $698 million. That means that that difference that they have, which is over $400 million, they can use it to make some safe, low yield passive income every single month. And of course, just like the other two ways of generating some income and revenue, all the profits that they make here is how they reward the stakers. Let's talk about staking. Olympus uses the revenue it generates to reward those who use the protocol. All you gotta do is put your own in the pool and every eight hours it rebases, which means it increases supply by small percentage. The percentage is determined by the percentage of people staking relative to the total supply. Less people in the pool means that the reward rate is higher. More people in the pool means that the reward rate is lower. So the idea is that because it rebases and automatically compounds on itself, your supply of the token will grow exponentially, whereas the price may trend down over time as supply goes up, but your index adjusted return should be positive. So the interesting thing about this project is that the price of Ohm actually becomes irrelevant in the long term. So remember that your own balance grows exponentially over time due to compounding. So let's say that you buy one Ohm now for $400, assuming a 2% reward rate in one year and you would have 1,377 Ohm. If in that time span Ohm's price were to fall from $400 to $2, you would still make a profit of $2,354. If you don't believe me, do the math for yourself. So again, let's say you bought one at $400, right? And you held for one year. And let's say that in that one year, the price fell by 99.5%, which would mean that the value of one Ohm is now $2. Now, because of the compounding effect and the rewards, you were rewarded 1,377 Ohms during that one year. So 1,377 times $2, which is now the current value of the Ohm is $2,754. Take away your initial investment of $400. That's $2,354 profit. So the other thing to know is that the reward yield non-compounded is very different from the reward yield when compounded. So the majority of other protocols do not compound your rewards automatically. If this same 8,036% APY was not compounded, then that APY would only be 540% APY, right? But because it is compounded every single day, three times a day, when you compound that 540% three times a day every day, the reward yield compounded is 8,036%. So that's how you get these outrageous numbers. That is the power of compounding. Your balance increases exponentially. You can see here on this graph here, APR versus APY. So how sustainable is that high APY? So you could actually see here, their schedule on how they're going to be reducing the APY once they hit certain tiers, because staking rewards emissions form the majority of the supply growth. They have to, when they hit a certain milestone, they have to decrease the APYs. So they've already decreased it before from between 10,000 to 100,000 to where we currently are right now, which is between 1,000% to 10,000%. Now we're expected to hit tier one here at the end of January, which will send the APY between 500 to 1,000%. And then it's not projected to hit that next tier until 2023. So they do have an emissions schedule already in order to be sustainable and be able to continue to grow for the long term. So should you stake or should you bond? Well, there's kind of pros and cons of both. Staking is a passive long-term strategy while bonding is a active short-term strategy. Staking, you will get the consistent rewards from the staking APY. There's no hassle, you just stake and chill. You can stake with any amount. I don't know about low gas fees, but you're not paying so much gas fees. Bonding is a more active and short-term strategy. You can potentially outperform staking, but there's many factors to determine its profitability. You have to take into account the bond discount, the bond size, the slippage, the extra gas fees coming in and out. It's also very competitive and you need a significant starting capital because if not, the gas fees will eat up any difference in the percentages. So for me personally, I'm only sticking to staking. So now we're going to talk about game theory. You might have seen the three comma threes in crypto Twitter and maybe Instagram and other places. It has become somewhat of a meme and it's just a big part of what's helped this community grow and stick together. So three comma three means that if we all stake, we will have the most beneficial outcome. Doing anything else is not the most optimal strategy. So what exactly is game theory? Game theory basically means the set of outcomes that can occur given a set of options for two different players. This is also known as the prisoner's dilemma. So for Olympus, you have three actions that you can take, staking, bonding and selling. So neutral has a value of one, staking has a value of plus two, bonding has a value of plus one and selling has a negative value of negative two. Selling is obviously the worst action because if you sell, price goes down. If price goes down, then bonds prices goes down. If bonds prices go down, then profits to the treasury go down. Bonding is a neutral action because although you're getting assets into the treasury, you're also exhibiting sell pressure. Now staking, yeah, now that's the best possible action. It removes all selling pressure, you get rewarded and all the new minted home supply gets removed from the market, which of course makes a price of home appreciate. And if home's price appreciates, then it generates more revenue when it sells bonds. If home generates more revenue, then the value per backing of each home grows higher. So everything ties in together, hence three comma three. Unlike the prisoner's dilemma, the best outcome for you in this instance is the best outcome for everybody. You can see in the prisoner's dilemma, it doesn't work out that way because if you confess, then that's the best outcome for you. But if you both stay quiet, it's the best outcome for the both of you. If one confesses and the others remain silent, one gets out, the other is in prison, and so forth. So in the prisoner's dilemma, the best outcome for both of you is not the best outcome for you. However, in three comma three, the best outcome for everybody also happens to be the best outcome for you. This is a screenshot from today, and you can see that over 91% of the home in circulation is currently being staked. So let's summarize everything that we've gone over. I know it's been a lot of information. You might need to watch it again, but I'm gonna summarize it for you. The problem is that crypto is highly dependent on stablecoins, but stablecoins are centralized and a poor store of value. The solution is a defy reserve currency backed by a basket of assets, which gives it intrinsic value that it cannot fall below. How does Olympus make money through bonding, providing liquidity, and yield farming? With staking, users are rewarded every eight hours for staking home from the revenue generated. Because of the rewards, price of home becomes irrelevant long-term. And then finally, game theory, three comma three. It simply means that if we all staked, we will have the most beneficial outcome, and doing anything else is not the most optimal strategy. So is it a Ponzi or is it legit? Let's bring back up the red flags that we spoke about in the beginning of the video. Now let's go ahead and go over each one of them and see whether Olympus Dow checks the box or not. So does Olympus Dow offer high returns with little or no risk? It kind of does, yeah. Does Olympus Dow offer overly consistent returns? Yes, it definitely does. Now, unregistered investment, we're gonna cross this one out because we're in crypto guys, so this doesn't really relate. Basically nothing in crypto is a registered investment. We're in the defy space, decentralized being the keyword. If it were registered, it would have to be centralized. So the next one, is it secretive? Does it have complex strategies? And I think we've gone over enough to say that no, there's nothing secretive about Olympus Dow. Everything is very transparent, including the amount of money that it has in the treasury and its risk-free value. And we know the exact strategies that they're using to generate income and revenue. Do you have difficulty receiving payments? And I could say from personal experience, no. You can easily get payments out of there. It's as easy as unstaking your own and selling it back for whatever it is that you want. And then finally, does it have a referral system? No, it does not. There's no such thing as referral systems in Olympus Dow. You don't get money for referring people. You don't get, there's no incentive to recruit people or anything like that. So that one is definite no. So from our count here on our end, it is a three to two on whether or not it's a Ponzi or not, right? So three of them are saying, no, it's not a Ponzi, it's legit. Two of them are saying, eh, possibly a Ponzi. So at the end of the day, I don't think that this is a Ponzi. I do think this is sustainable long-term. And I don't think this is what you call a rug pool where they're just gonna take off with the money and run. Of course, you guys will have your own opinions. I would love to hear your arguments in the comments if you have any other reasons why to think that any of these are differently, why you see them in a different way. We have to be able to have these honest conversations with each other so that we can all get to the bottom of it and get to the truth. Because at the end of the day, we all want the same thing. We want the same result. We all wanna make money. I gain nothing from you losing money. You gain nothing from me losing money. So why would we make each other lose money, right? I myself am invested in this project. You can see here, I currently have 32.4-ohm state, which is currently worth about $11,404. If everything were to remain the same, you can see here that I am making a return of 1.1% per day, 7.94% per week and 38.72% per month. And at its current APY of 5,200, if it stayed exactly the same for the next 12 months and the price stayed exactly the same, which we know these things won't happen because they're always changing. In 12 months, my $11,000 would turn into $600,000. Now, I did buy in at the wrong time when I first started this experiment. I bought in literally towards the top. I bought at $822 my first investment. I put in 7,000. Then within a few days, it dropped down almost $100. So I put in another 2,000. Then by day 12 here, you'll see that it dropped all the way down to 5,89. So again, I dollar cost average. This is the same way I've done with like Bitcoin and Ethereum and stuff like that when I first entered. And this is what I tell you guys all the time to do, dollar cost averaging. So I dollar cost averaged again. Day 21, it went even lower. I dollar cost averaged yet again. And here we are on day 35. Price is even lower right now. It's at 373, so I dollar cost averaged again. Bringing my total investment to $15,190. So I'm currently down about 3,200. Now, interest gained since I've been staking is currently at $2,260. So that means that if I did not earn this interest, I'd be down even more. So the plan here is just to let this sit and let it continue building. And eventually as time passes on, the interest that I gain from it compounding is going to outweigh the price decrease. Thank you guys so much for watching this video. I appreciate it. If you guys enjoyed it, if you're new to the channel, make sure to smash the like button and subscribe to the channel. Turn on the notifications. I will be doing more and more videos like this one showing you guys different ways that I am investing passively in the DeFi space, the different projects that I come across and experiment with and what my results end up being. I will also be doing some update videos on my investments in OM as well as strong block and some of the others that I will be showcasing soon. If you guys have any questions, make sure to drop it in the comments. I'll be doing a tutorial on how to get started in OM, maybe in about a week or so. So if it's been over a week, just check the passive income playlist and that's where those tutorial will be. This video's been long enough. So I'll see you on the next one. As always, peace and love.