Going from CEX speculator to DeFi degen to earn >8000% APY with Olympus DAO or: How I learned to stop worrying and love the OHM
Everyday brings more ways to use cryptocurrencies in decentralised finance (DeFi). This article serves as a beginners tutorial on how to move your cryptocurrency out of a centralised exchange (CEX) to start using it in the manner it was intended, contributing to its value rather than simply speculating on it. It will take you step-by-step through moving your funds from a CEX account into a web3 wallet, making a swap on a decentralised exchange (DEX) and interacting with a decentralised application (dApp).
Edit 25/11/21: Olympus DAO has just instituted OlyZaps, which simplifies the process of buying and staking OHM. I’ve updated this article to explain how to use it. I’ve included instructions to make it easy to skip to the sections you wish as you read. To learn how to make swaps on a DEX and interact with dApps, follow the full tutorial.
I’ve chosen Olympus DAO’s dApp for the purposes of the tutorial in response to multiple requests from friends and family I’ve onboarded to crypto asking how to buy OHM, when they can’t find it for sale on a CEX. It’s important to make informed decisions when investing, like anything in life, so we can take responsibility for the outcome of our decisions. I hope explaining the reasons why I have invested in OHM also allows you to make an informed decision about whether you also wish to invest in it.
Whether you decide to become an OHMie or not, the lessons learned by following the steps in this article will show you how to invest in tokens before they get listed on a CEX, and to begin your journey down the DeFi rabbit hole.
If you are already convinced on the merits of buying and staking OHM and just want to ape in, jump ahead to section 3.
1. It pays to be early
The vast majority of retail investors in crypto buy and hold their assets on centralised exchanges like Coinbase or Binance. Most wouldn’t know what a web3 wallet is, let alone how to use one. As such they are missing out on much of the life changing wealth transfer that is happening for early adopters of blockchain and cryptocurrency technology. Technology such a DeFi, non-fungible tokens (NFTs) and blockchain based play-to-earn games. If that describes you, take the red pill and read on.
One of the barriers to adoption is the fact that the process of using dApps is not intuitive. As the industry is still in early development the user experiences are still in their early iterations. Think of it like using DOS in the early days of personal computers. Knowing how to use a web3 wallet will be required knowledge for anything that requires online verification in web 3.0, such as online banking and signing in to your email account. It’s not that using a web3 wallet is difficult, but simply something you need to learn how to do. Learning this will open a whole world of dApps up to you.
In 2017 there were few actual real world uses for cryptocurrencies other than simply price speculation. Many of the tokens that launched during the ICO boom of 2017–2018 never had any real development and have completely disappeared. Today there are thousands of working products, and the number of things you can do on-chain is growing everyday. This means you have much more information on which to gauge your investment decisions, and many more ways to use your crypto for profit. From earning interest by lending like a bank, to making a living playing video games (or getting others to do it for you), to taking out self-repaying loans. Blockchain and cryptocurrencies will change the world dramatically, making many of the business models we take for granted today completely obsolete.
Some of the protocols being developed today will replace the world’s largest banks, dominate online gaming and (forcibly) retiring many a useless financial intermediary. As a result, there is massive profits to be made for early adopters who take the time to navigate the early versions of a technology that will eventually be used by everyone on earth.
2. Why Olympus DAO?
Olympus DAO is crypto to the core. I don’t know what Satoshi Nakamoto would think of fiat pegged stablecoins, but I’m guessing it would not be positive. They’re still subject to the same eroding purchasing power and central bank monetary policies (known colloquially as “brrrr”) that have turned many to crypto and away from the fiat inflationcoins they’re pegged to.
Olympus DAO is a Decentralised Autonomous Organisation (DAO) controlling the supply of OHM, an unpegged crypto-native reserve asset, backed by an ever growing treasury that is owned and governed by its users. A decentralised Federal Reserve if you will.
Olympus DAO has amassed over $750 million USD worth of treasury owned crypto assets in its first 8 months of existence, much of this occurring through a downturn in the crypto market. These crypto assets are currently made up predominantly of stablecoins DAI, FRAX and LUSD, but increasingly other crypto assets including ETH and xSUSHI. The treasury is in turn invested in DeFi in order to grow it further.
This growing basket of assets backs the value of every circulating OHM.
Olympus DAO has amassed this treasure trove by changing the way protocols manage liquidity, designing a model that is already being forked and integrated into other protocols. The method of paying out liquidity mining rewards in a protocols’ native token in order to incentivise users to provide liquidity, effectively renting liquidity, has proven unsustainable. It has resulted in reward tokens, backed by nothing but speculation, that can only maintain their value so long as adoption (demand) outpaces emissions (supply). Maintaining long term liquidity has become an increasingly difficult issue faced by most DeFi protocols, as farmers take their liquidity and reward tokens and dump them before moving on to the next yield farm.
The big brains who conceived Olympus came up with the idea of protocol owned liquidity which it amasses through the sale of bonds. Using this method Olympus DAO now owns >99.5% of all OHM/DAI and OHM/FRAX liquidity on Sushiswap. This has multiple positive effects. First, it means that whenever someone is buying from or selling to this pool, the treasury captures almost all of the trading fees. Secondly, as so much of the circulating supply is owned by the treasury, there is always exit liquidity for sellers, while there is less risk of a terminal bank run resulting in an unrecoverable price crash.
Olympus currently prioritises growth over price stability and pays out dividends to OHM stakers by way of rebases each 8 hour epoch. Currently these staking rewards are 0.404% every 8 hours. This equates to 1.217% a day, 6.236% every 5 days, or 8174.5% APY! Since emissions are provided by way of a rebase of your staked OHM (sOHM), they automatically compound each epoch, which is how 1.2% a day ends up being over 8000% a year. What’s important to note is that the number of OHM emitted each epoch is fixed and distributed proportionally to all stakers, meaning if people unstake to sell, the price of OHM will fall but the APY for the remaining stakers will go up. For example, in mid-October the price of OHM fell from around $1,200 to $1,000 in a day, which resulted in an APY increase for remaining stakers of over 1,000%.
As your bag of sOHM grows in your wallet, the average purchase price you paid for it decreases. If you pay $1000 for 1 OHM and stake it until it is 10 OHM, your average purchase price becomes $100 per OHM. The Risk Free Value (RFV) of OHM, being the treasury reserves of all non-liquidity assets divided by circulating supply, acts as an increasing price floor. Once the RFV overtakes your average purchase price your investment becomes risk free, and the only real way you can end up losing money on your investment would be through some type of smart contract hack.
OHM also acts as the governance token for OlympusDAO, allowing holders to put forth proposals and vote on proposals put forth by other community members. In coming months Olympus will transition to Olympus 2.0, which will migrate all governance on-chain, making it fully decentralised.
By distributing governance tokens via rebases, stakers maintain their ownership share of total supply. This is why market cap (MC) is more important than price, and the reason MC is shown instead of price when you look at the chart on crypto tracking websites like CoinGecko. If the MC of OHM doubles, the value of staked OHM will be worth twice as much. The popular meme ‘3,3', which many OHMies display proudly as part of their Twitter handles, arises from game theory, as illustrated in the below chart. It suggests staking is the most profitable OHM investment strategy.
If you need any further convincing of the merits of 3,3 or are still sceptical that such an APY (the >8k% mentioned above) is not a scam, check out this Twitter thread by community member @sh4dowlegend, who maintains the Olympus Dune dashboard (from which the above charts have been taken), as well as the community newsletter Olympus Agora.
Olympus DAO is generating millions of dollars in revenue a day, through trading fees and the sale of bonds. Current APY can be sustained without any further treasury investment for a further 397 days. As the treasury grows, the runway that emissions can be sustained for grows longer.
Now that you understand my investment thesis for staking OHM, which has seen my investment increase by around 1800% since the end of June, let’s move on to how you invest in it without any prior knowledge of web3 wallets and dApps.
3. Goodbye CEX, hello DEX
In order to start interacting with dApps like Olympus DAOs, you’ll need to fund a web3 wallet with the coin of the chain you’re interacting with. The difference between a coin (like BTC and ETH) and a token (like OHM) is that the former run and function as gas on their own blockchain, while the latter are everything else. Since Olympus DAO runs on Etherium, we’ll need to fund a web3 wallet with ETH.
Probably the most widely used web3 wallet for interacting with Etherium Virtual Machine (EVM) compatible blockchains (including Etherium) is MetaMask. For the purpose of today’s tutorial we’ll be setting up a MetaMask wallet. Best practice involves keeping large amounts of funds in a hardware wallet, such as Trezor or Ledger, however you should not interact with dApps using your hardware wallet as any malicious contract may then have access to the funds in it. I would recommend using a software ‘hot wallet’ to confirm transactions in MetaMask, before transferring any large amounts to a hardware ‘cold wallet’ for storage. Read on, we’ll come back to this once we’re finished installing and setting up MetaMask.
3a. Download and install MetaMask extension
This can be done for your chosen browser by going to the official website at https://metamask.io/download or clicking the links below:
3b. Set up a MetaMask web3 wallet
The MetaMask setup is rather straightforward and self explanatory. We’ll go through the steps with you.
Click on ‘Get Started’, then ‘Create a Wallet’.
Agree or disagree to anonymised data collection, it’s totally voluntary.
Create a strong password.
When you get to the part where you back up your Secret Backup Phrase (seed phrase), make sure you copy these 12 words down offline only. Despite the tips given by MetaMask itself I would recommend against making a digital copy of them, either as a photo or screenshot, or writing them into a document or password manager on any device that’s not permanently air-gapped (disabled from accessing any network).
The seed phrase enables anyone who has it to restore access to the wallet. Cryptocurrencies are stored on the blockchain. The private key, as represented by the human readable seed phrase, allows the holder to move those crypto assets out of the wallet (ie. spend them). The password simply unlocks an encrypted file stored on your device that contains the private key. If you lose your password, or the device MetaMask is installed on, you can restore the wallet using the seed phrase and you will be asked to create a new password. Most crypto phishing scams involve tricking users to type in their seed phrase, which effectively hands control of the wallet to the scammer. Never, ever give your seed phrase to anyone else, under any circumstances, unless it’s someone you trust with everything in your wallet. Using a hardware wallet keeps private keys hidden in a secret element on the device, and requires you to physically press a button to approve transactions. However, even hardware wallets need a seed phrase to restore them in the event of loss or damage.
Once you’ve recorded your seed phrase and verified that you’ve copied it down correctly, make sure you keep it safe, its worth as much as all the crypto assets on your wallet.
Congratulations, you’ve set up a software (hot) web3 wallet. To access it you click on the MetaMask extension fox icon. In Chromium based browsers this can be made to show next to your address bar by clicking the puzzle extension icon and then the pin icon next to MetaMask.
You can read a more in-depth tutorial on setting up MetaMask here.
If you already own a Trezor or Ledger hardware wallet, or get one in the future, you can connect it to MetaMask by clicking the colourful circle in MetaMask and selecting ‘Connect Hardware Wallet’. This creates another account in MetaMask that requires the hardware wallet to be connected to confirm transactions. I would only use this functionality for viewing the contents of your hardware (cold) wallet, and strongly recommend against using any hardware wallets for interacting with dApps. When you interact with a dApp you give permission for its smart contract to access the funds in your wallet. Giving smart contracts access to your hardware wallet defeats the purpose of keeping funds in a hardware wallet to begin with. Instead use your software wallet to interact with dApps, and then transfer any tokens you wish to keep secure to your hardware wallet for safe keeping.
3c. Fund your MetaMask wallet with ETH
Now you need to fund your newly created wallet with some ETH. Gas fees on Etherium fluctuate but can get relatively expensive when lots of transactions are occurring on the network, which is another reason I’ve chosen Olympus DAO for today’s tutorial. Since the rewards are paid out by way of a rebase, increasing the amount of sOHM in your wallet automatically every 8 hours, you do not need to pay gas to claim and compound your rewards. You only need to pay gas when you stake and unstake.
You can buy ETH directly through MetaMask using a credit or debit card, however I wouldn’t recommend doing this as the fees are quite high and the limit on how much you can purchase at any one time is fairly small. To buy directly through MetaMask simply click ‘Buy’ under your ETH balance and choose either Wyre or Transak. If you do hold some crypto on a CEX, you can transfer this to MetaMask to use. To do this you’ll need to either exchange some crypto for ETH, or buy some ETH. I’ll go through the steps involved in getting funds off a CEX, since buying through MetaMask is self explanatory.
Log in to your CEX of choice, swap some crypto for ETH or buy some spot ETH, and navigate to your Spot wallet. Next to ETH click on ‘Withdraw’.
You’ll now need to copy the address of the MetaMask wallet you just created. Under the wallet name you’ll notice a string of characters starting with 0x. This is your wallet’s public address which can be used to send crypto assets to it. You do not need to keep this secret as it cannot be used to spend, only receive. Clicking on it will copy it to your clipboard.
In the CEX withdrawal page paste this under ‘Address’ and double check that it’s the same as the one in your MetaMask. If you put in the wrong address your funds will be lost. Select ‘Etherium (ERC20)’ under Network, enter the amount you wish to withdraw and hit ‘Transfer’.
After a few minutes your ETH should arrive in your MetaMask wallet. If you ever want to check on the status of a transaction you can search for your wallet address in Etherscan at https://etherscan.io/, which will list every transaction ever made by that wallet. I’d recommend bookmarking Etherscan for later use.
Edit 25/11/21: In the past day, Olympus DAO has introduced OlyZaps, which enables you to ‘zap’ any token into sOHM using the dApp itself. This essentially bundles a few steps (detailed in part 4 and 5 below) into one. It significantly simplifies the process of buying and staking OHM, while also reducing the gas cost. For these reasons I would recommend using OlyZaps for swapping ETH to sOHM, and have detailed how in part 6 below. However, if you wish to learn how to make swaps on a DEX and interact with dApps, continue through parts 4 and 5 below.
4. Swap ETH for OHM using a DEX
Now that you have some ETH in you MetaMask wallet, let’s buy some OHM. The simplest way to do this is to go to a decentralised exchange (DEX) and simply swap it with ETH. As Sushiswap is the DEX with the deepest OHM liquidity we will be buying from there. You can buy OHM with bonds at a discount, however your OHM is then vested linearly over 5 days, so while it can be cheaper, you don’t get the full rebases immediately, and need to pay additional gas to claim your rewards, so I’ll just be covering how to buy and stake.
Go to Sushiswap at https://ww.sushi.com/ and click on ‘Enter App’, which will take you to the swap page. Click on ‘Connect Wallet’ in the top right, and then choose MetaMask. MetaMask will now ask you to confirm that you wish to connect to the Sushiswap dApp. You should only have the one MetaMask wallet which should automatically be selected. Click ‘Confirm’ to connect.
Now you’ve connected, ETH should automatically populate the ‘Swap From’ field. Click on ‘Select Token’ under ‘Swap To (est.):’ and type in and select ‘OHM’. Enter an amount next to ETH you wish to swap, leaving at least 0.1 ETH in your wallet to pay for gas. Click ‘Approve ETH’, which gives Sushiswap the right to spend your ETH.
4b. Setting a Custom Spend Limit
By default most dApps request permission to spend virtually an unlimited amount of a token the first time you attempt to swap it. This saves you having to pay gas again prior to any future swaps of that token using that dApp. This might be okay for larger audited dApps like Sushiswap if you’re doing frequent swaps, but is generally bad practice as it gives malicious or compromised dApps the ability to remove tokens from your wallet at any time in the future. You can revoke these permissions using Etherscan, but that will also cost gas. I’ll show you how to change this. Skip the next paragraph if you wish to set an unlimited spend limit.
In the Metamask window that pops up click on ‘View full transaction details’ and then ‘Edit‘ next to Permission. Enter a Custom Spend Limit to the amount of ETH you are spending (or slightly more). Hit ‘Save’ and then ‘Confirm’. Wait a few minutes for the transaction to be confirmed on the blockchain which will enable you to swap ETH for OHM. Click ‘Swap’ and approve the transaction in MetaMask when it pops up.
You will be asked if you want to add OHM to MetaMask, click yes to see your balance once the swap has completed, which should take no more than a few minutes.
OHM should show up automatically when you searched for it on Sushiswap as it’s in the default token list. Should you wish to purchase a token that is not in that list, you can go to the token page on CoinGecko, search for the token you want and click on the copy icon next to the contract address under ‘Info’. Pasting this address into the token search field will allow you to import that token to swap in the DEX, so long as there is sufficient liquidity on that DEX. The ‘Markets’ tab will tell you where tokens can be bought and sold. More on this below.
You can also add a token to MetaMask by clicking on ‘import tokens’ and pasting the contract address into the relevant field under ‘Custom Token’, or by simply clicking the MetaMask icon on the token’s CoinGecko page. We’ll do this shortly.
5. Staking your OHM with Olympus DAO
Go to the Olympus DAO dApp at https://www.olympusdao.finance/ and click ‘Enter App’ in the top right. The Dashboard shows protocol metrics taken from the official Dune Analytics page.
Click ‘Connect’ in the top right and agree within MetaMask when it pops up.
Now that you’re connected to the Olympus DAO dApp you want to go to ‘Stake’ in the column to the left. As it’s the first time you’re staking OHM you first need to approve the Olympus DAO dApp to spend your OHM. If you wish to only approve the amount you’re staking each time, follow the steps outlined above to set a Custom Spending Limit.
Once the approval has been processed, hit ‘Max’ and ‘Stake OHM’ to stake all the OHM in your wallet. Approve this transaction in MetaMask and wait for it to be confirmed on the blockchain. Your wallet will be credited an equal amount of staked OHM (sOHM) in exchange for the amount of OHM you staked. Proceed to part 7 to learn how to add this token to MetaMask.
6. OlyZaps — Swap ETH for sOHM in one step
With ETH in your MetaMask account, proceed to the Olympus DAO dApp at https://www.olympusdao.finance/ and click ‘Open App’ in the top right. Connect to MetaMask by clicking ‘Connect’, selecting your wallet and agreeing within MetaMask when it pops-up.
Find ‘OlyZaps’ in the left hand column under ‘Stake’. Click ‘Select token’ and choose ETH. Enter the amount of ETH you wish to convert to OHM and stake, leaving at least 0.1 ETH in your wallet to pay for gas. Click ‘Approve’ to allow Olympus DAO to spend you ETH, and agree within MetaMask when it pops-up. To set a Custom Spend Limit, follow the steps outlined in part 4b above. Once the approval has been processed on-chain, click ‘Zap-Stake OHM’ and approve the transaction in MetaMask. When this transaction has finished processing you will now have sOHM in your wallet. In order to be able to see you balance, let’s add sOHM to MetaMask.
7. Add sOHM to MetaMask
Navigate to CoinGecko at https://www.coingecko.com/ and search for ‘Staked Olympus (SOHM)’. Once on the SOHM page, on the right under ‘Info’, click on the MetaMask icon to the right of the Contract address.
Click ‘Add Token’ in the pop-up that appears to approve importing SOHM and your balance will now show under ‘Assets’ in your MetaMask account.
If you ever restore your MetaMask wallet to another device using your seed phrase, any tokens other than ETH will not automatically be visible. The tokens haven’t gone anywhere, you just can’t see your balance of them until you re-import the token.
Your sOHM balance will increase in your wallet each 8 hour epoch without you needing to do anything further. Should you wish to move sOHM to another wallet, there’s no need to unstake it back to OHM. Simply send sOHM and it’ll continue compounding in the new wallet.
For future reference, if you’re ever unsure where to buy a cryptocurrency, clicking the ‘Markets’ tab on that tokens CoinGecko page will tell you. You can find this in the lower left of the above picture next to ‘Overview’.
8. Taking profits
To unstake and convert your OHM to another token, simply go back to the Olympus DAO dApp staking page, click on ‘Unstake’, enter the amount of sOHM you wish to convert back into OHM and click ‘Unstake OHM’. Once approved and confirmed on the blockchain, you can go back to Sushiswap to swap your OHM for whichever cryptocurrency you like. While you can technically swap sOHM directly without unstaking it, the liquidity is nowhere near as deep as it is for OHM, so is more likely to have a larger price impact (reducing the amount you receive in exchange).
Congratulations and welcome OHMie! You are now a member of Olympus DAO and can have a say on the future of the protocol by creating or voting on proposals at the Olympus forum linked below. Using the lessons learned in this tutorial you now know how to interact with dApps, including purchasing cryptocurrencies from a DEX to profit from the pumps that frequently occur when those tokens get listed on a CEX. Your journey down the DeFi rabbit hole has begun.
Links
In-depth MetaMask tutorial by Dappgrid.
How to connect a Trezor or Ledger Hardware Wallet to MetaMask.
How to transfer your MetaMask account to a Trezor hardware wallet.
How to transfer your MetaMask account to a Ledger hardware wallet.
Olympus Agora, an official community newsletter.
Olympus forum, where proposals are made, discussed and voted on.
Disclaimer: All views expressed in this article are the opinion of the author and do not constitute financial advice. Crypto is extremely fast moving and any information above is only current at the time of original publication.
