A partner-project of the Hundred Finance platform
Hundred Finance launched part of its multi-chain bond program through a partnership with Olympus Pro, the industry-leading platform in building protocol-held liquidity. This partnership allowed for the bonding of Beethoven X’s HND-USDC-FTM liquidity tokens on Fantom and DODO’s HND-ETH liquidity tokens on Arbitrum. This initiative meant the public could acquire a stake in the Hundred Finance protocol by buying HND tokens at a cheaper-than-market price. It also marked an evolution in the project by helping it overcome prevailing issues that impact DeFi bootstrapping programs more broadly.
- A Significant Reduction in Sell Pressure: Protocol-owned liquidity reduces the impact of mercenary liquidity providers carrying out short-term farming practices. No longer competing solely with other LPs, the sell pressure of these actors is reduced and the ability of a protocol to expand organically increased.
- Absorption of Impermanent Loss (IL): The success of a protocol inevitably causes price appreciation in its native token, potentially leading to significant impermanent loss for liquidity providers. Protocol-held liquidity shifts IL to the largest holder of the native token, the protocol itself.
- Goal Alignment between Protocol and Hodlers: As the protocol acquires more permanently locked liquidity, the liquidity pools can support larger trades and achieve greater price stability when large sells occur. This better incentivizes hodlers as they no longer need to fear the removal of their ability to reduce or exit a position. This better aligns hodlers with the long-term vision of the project, encouraging them to participate in the community and contribute to its growth.
- Generation of a Protocol Revenue Source: Every swap transaction in a pool contributes a fee to the liquidity providers. As liquidity is permanently locked in the project treasury, these fees provide a constant source of revenue for the protocol. Furthermore, project-owned liquidity could hypothetically be used to farm in and of itself, generating further income.
Olympus Pro is an extension of the popular Olympus DAO Finance model, whereby protocols sell bonds in order to acquire their own liquidity. Those who hold qualifying liquidity pool tokens can use them to buy a protocol’s native token for a reduced price on the platform, receiving the asset after the completion of a bonding period. The bond price is determined by the supply and demand for bonds, with it trending higher when there is greater demand. As a result, Olympus Pro bonding is a very competitive space, with bonders competing to grab the largest discount. In short, Olympus Pro allows any project to sell bonds in order to acquire liquidity for their DAO or protocol, a major shift in the way liquidity mining works.