Innovations are the ultimate key to success in the quick-moving realm of decentralized finance (DeFi). The Boosted Liquidity Vaults is one such ground-breaking invention of a prominent protocol of Ethereum blockchain Olympus DAO.
This needful tool intends to make OHM pairings away too more stable and establish the roots of OHM as a liquidity router for the key DeFi pillars. This protocol aims to enhance liquidity and mitigate volatility by incentivizing the provision of liquidity with legit counter assets.
We'll discuss Boosted Liquidity Vaults in this write-up further in detail, including what they are, how they operate, and how to deposit and withdraw money from them. Let’s hover over the read.
Boosted Liquidity Vaults: Stability and Liquidity Amplified
Olympus DAO has unveiled a revolutionary tool called the Boosted Liquidity Vault. Its main goal is to upsurge OHM pair liquidity and stabilize their exchange rate in comparison to high-quality legit counter assets. This intact process is accomplished with a self-regulating mechanism that dynamically amends the OHM circulating supply depending on variations in both its own value and the value of the counter-asset.
How Boosted Liquidity Vaults Work?
A part of the previously supplied OHM in the liquidity pool is put back into circulation when the price of OHM escalates relative to the counter-asset. The price of OHM is forced back down, reestablishing equilibrium, by expanding the amount of OHM in circulation. In the event that the price of OHM falls in relation to the counter-asset, on the other hand, previously circulating OHM joins the liquidity pool and the protocol acquires a claim on it. As a result, less OHM is in circulation, which raises the price of OHM once again. The OHM pairings are kept stable by this self-regulating system, which also prevents wildly fluctuating prices.
Operational Mechanisms: Deposit and Withdrawal
The process of depositing assets into the Boosted Liquidity Vaults is straightforward and accessible to both individual users and decentralized autonomous organizations (DAOs). We will first take the complete mechanism of the depositing assets on Boosted Liquidity Vault and we will proceed by discussing the withdrawal process. Let’s begin.
Here's a breakdown of the deposit process
- The user deposits the counter-asset into the vault.
- The value of the counter-asset is determined using oracles, and OHM is minted at a 1:1 ratio based on the deposited counter-asset’s dollar value.
- The newly minted OHM and the deposited counter-asset are then deployed into a liquidity pool.
- The vault holds custody of LP receipt tokens.
The user's claim on the LP receipt tokens is recorded by the protocol, although users will not receive a standard receipt of the LP tokens in return, as this implementation differs from the ERC20 or ERC1155 standards.
The process to Withdraw:
Withdrawal from the Boosted Liquidity Vaults is designed to be seamless and flexible. Users can withdraw their assets at their convenience, by following these steps:
- The user specifies the desired quantity of LP receipt tokens they wish to withdraw.
- OHM and the counter-asset are withdrawn from the liquidity pool in exchange for the LP receipt tokens.
- All the OHM received by the vault during the withdrawal process is burned.
- The received counter-asset and reward tokens are sent back to the user.
Conclusion
Olympus DAO's Boosted Liquidity Vault is a groundbreaking utility that aims to strengthen the stability and liquidity of OHM pairs in the DeFi space. By leveraging a self-regulating system and incentivizing liquidity provision with high-quality counter assets, the protocol creates an environment that minimizes volatility and fosters sustainable growth. Through simple deposit and withdrawal mechanisms, users and DAOs can actively participate in providing single-sided liquidity and earning farming rewards. As DeFi continues to evolve, Olympus DAO remains at the forefront of innovation, driving the industry toward a more robust and reliable future.