OPTIM Token Utility

Optim Labs
4 min readOct 6, 2023

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The OPTIM token is the native governance and utility token of the Optim Finance ecosystem. It is designed to bring decentralization, empowerment, and utility to its holders. By powering Optim Finance, the OPTIM token ensures holders an active say in the ecosystem’s evolution, control over development and decision-making, and meaningful utility within the protocol.

Governance

The OPTIM token, first and foremost, enables holders to participate in Optim’s ODAO to drive decision making and decentralization of the protocol. More information about proposals, voting, and the general governance structure of the ODAO can be found in an upcoming Medium article as well as in our Gitbook documentation.

OPTIM token holders will be able to propose and enact changes related to everything from new product development to parameter changes of live products. Additionally, the management of the current and future structure of protocol incentives such as protocol fees and the allocation of Optim DAO treasury assets are within the purview of ODAO participants.

While initial governance decisions will be driven by OPTIM token holders, the protocol is targeting a transition to governance through 80/20 OPTIM/ADA LP Tokens within 6 months.This shift is aligned with ensuring the stability and security of Cardano’s first 80/20 pools and orienting governance tokens, liquidity, and incentives between DAO members and the protocol.

Staking

Staking the OPTIM token will be used to enhance the economic security of future Optim products as well as give users the option to participate in providing protocol protections.

As Optim diversifies its products to include real world assets via tranche-structured vaults, the OPTIM token will be able to be staked to provide additional insurance and downside protection to senior tranche depositors. This will be parameterized to right-size the market for and liquidity of OPTIM with the amount of value at risk for a given vault.

There will also be utility designed around OADA, Optim’s ADA yield boosted staking derivative. As native staking yield continues to fall and governance plays a larger role during the fast approaching age of Voltaire, an augmented staking model with enhanced yields and governance capabilities will become an increasingly attractive value proposition. The OPTIM token will be a component of the system.

Optim Treasury

OPTIM holders will have control over the Optim treasury via on-chain voting. The Optim Treasury will have two primary revenue streams in the near-term, with more coming online as the protocol grows and continues to release additional products over time.

The first revenue stream, which is currently active, are fees accrued from Liquidity Bonds. These fees are a percentage of interest paid on all issued bonds depending on type. This revenue stream has seen steady growth as more participants issue high interest bonds to participate in ISPOs.

The second revenue stream is Protocol Owned Liquidity (POL), which could come online as soon as the completion of our token generation event. The POL would be achieved via a Liquidity Bootstrapping Event, contingent on ODAO vote approval. The POL would consist of an OPTIM/ADA LP position on a prominent Cardano DEX. These positions would generate ADA and the associated DEX governance token from trading fees and farming. An overview of the proposed Liquidity Bootstrapping event that will be up for ODAO vote will be released in the coming weeks.

Premium Features & Discounts

Enhanced features will be added to Optim’s products over time, some of which might be token gated initially or permanently for OPTIM holders. Individuals who regularly participate in the protocol are the ideal group to help provide feedback on and refine new features.

The first available utility in this category will be rebates on fees for issuing Optim Liquidity Bonds. This feature will be implemented in early Q1 of 2024 and enable holders to realize a substantial reduction in the spread between borrower and lender rates. The spread is the protocol fee, a variable percentage of interest paid into bonds by borrowers depending on duration.

Other examples of premium features being considered by the team and proposed by ODAO members are enhanced Bond Token notifications for early closures and issuances that meet predefined parameters. Also under consideration are gated RWA vaults with deposit limits and DAO enhanced junior tranche coverage.

veOPTIM

It is likely that in 2024 ODAO governance, along with transitioning to 80/20 LP tokens, will implement veOPTIM. Inspired by Curve’s approach, locking OPTIM to mint veOPTIM provides governance rights, with extended lockup periods offering more significant weight in decisions and potential reward distributions. Gauges can be used to prioritize and distribute rewards based on locked durations and amounts. While early in its design and consideration, veOPTIM will be a likely extension of OPTIM token governance to further align and incentivize long-term holders.

Future-proofing and expansion

The OPTIM token is not limited to current utilities. Its structure allows it to adapt and integrate with upcoming DeFi products and services, ensuring sustained relevance in a rapidly changing environment as new products are released and the protocol grows.

The above tokenomics aims to craft a robust, adaptive, and user-centric environment, making the OPTIM token not just another token but a gateway to a decentralized financial future on Cardano.

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