Premia

Summary Implement protocol-owned liquidity mining through Olympus DAO’s bond program, Olympus Pro.

Motivation: Incentivizing liquidity provisioning is a balancing act for protocols seeking to distribute their native token, between high inflation and low liquidity depth. The re-addition of liquidity mining incentives will be an excellent tool to decentralize the supply of PREMIA to community members providing liquidity to the options pools. However, the emissions rate may cause supply dilution as liquidity providers compound their rewards. By implementing an Olympus Pro bond program for PREMIA-ETH liquidity, Premia can distribute its native tokens to loyal protocol users, while accumulating meaningful liquidity for the protocol.

Abstract: Currently, PREMIA has approximately $12 million in liquidity on Sushiswap in the PREMIA-ETH pool and could benefit greatly from having deeper liquidity. The proposed bond program would exchange PREMIA at a discount in return for PREMIA/ETH LP tokens through the Olympus Pro protocol. Current liquidity mining programs reward liquidity providers with tokens like PREMIA in exchange for temporary liquidity, which exposes those providers to impermanent loss from fluctuations in the underlying assets. Bonds allow active users to stack PREMIA tokens at a discount while removing the exposure to IL. The discount rate on bonds is achieved by a novel pricing mechanism that allows the market to set the discount. Essentially, bond prices are decreased until a bond is purchased, which then pushes up the price of the next bond. For reference, here is the average discount of Olympus’ bonds with their extremely high APY: https://dune.xyz/queries/74112/147618

Olympus Pro Olympus is offering to provide its expertise in bond contract management to support other protocols interested in owning their own liquidity. This will include providing the UI for bonds and maintaining bond control variables to balance emissions with liquidity accumulation. In exchange for the implementation and community engagement, Olympus would take a fee on all PREMIA bonds sold. Olympus will use the PREMIA earned as backing for the intrinsic value of OHM, which would act as a supply sink for PREMIA.

Proposed Bond Program: PREMIA bonds would be offered with a week-long vesting period, which helps prevent immediate price impact from discounted tokens. This aligns the goals of the protocol with those of bond participants. Typically, higher bond volume is seen when users expect the price of the token to increase during the vesting period.

Proposal Gauge community support for the allocation of $250k worth of Premia towards one month of optional bonds via Olympus Pro, beginning November 8th. If the program is a success and the community would like to continue the bonding liquidity program past the ending of this, a new proposal would be published for voting.

Success criteria

• Average discount rate < 8% on bonded PREMIA
• Minimal impact on PREMIA price

Benefits

• Permanent liquidity source
• Increased treasury value from liquidity that also earns trading fees
• Exposure to paired asset in liquidity pool (ETH)
• Premia can stake its LP tokens to provide additional runway for incentive programs

Risks

• Additional PREMIA emissions via bonds will increase supply dilution.