OptimADA (OADA)
Overview
The oADA model separates concerns between two different synthetics, each serving a different purpose and working in unison to facilitate enhanced yield and governance. As native staking yields fall, the DeFi ecosystem rises, and Cardano governance advances, the opportunity arises to create more dynamic, versatile, and potent forms of ADA.
The system is composed of trading and staking exposed synthetics.
OADA is the ADA stablecoin. Cheaper than ADA, but pegged to ADA
sOADA is a yield bearing token. Higher yielding than ADA, but always redeemable for ADA
OADA is stripped of staking yield and can be thought of as the trading vehicle of the system. It is nimble and provides a variety of composability and usability advantages when integrated in DeFi protocols. sOADA is the staked version that provides enhanced yield over the base staking rate through natural system leverage and algorithmic market operations (AMOs)
Basic Mechanics
The system allows anyone to mint OADA 1:1 for ADA
The system allows anyone to deposit OADA in the staking vault, swapping it for sOADA
The exchange between OADA and sOADA is always at a current sOADA/OADA exchange rate. This rate is based on total accrued yield into sOADA since genesis.
The system also enforces the peg in the case of a depeg by over 1% to the downside.
Yield Distribution
sOADA is a yield accruing module that initially utilizes a base of staking yield for the majority of its yield. In its first iteration, sOADA accumulates yield above the base staking rate by accruing the staking rewards from all OADA. The more outstanding OADA in the system that is not converted into sOADA, the higher the natural leverage factor on sOADA yield. sOADA also accumulates additional yield from being utilized in catalyst voting.
The APY for sOADA can be derived by using the simple formula (100/(%sOADA) * staking rate)
Example: ((100/60)* 3.2) = 5.3% APY. This example assumes that 40% of OADA in the system will not be converted to sOADA and will be used throughout the ecosystem in other ways.
To a degree, the DAO controls and subsidizes the demand for OADA through future gauges, OPTIM distribution, etc. The higher the intrinsic merit of holding OADA, through things like DEX stableswap farming and broader DeFi adoption, the more demand will manifest for both OADA and sOADA.
After its initial release, sOADA will integrate other yield strategies to accumulate ADA on behalf of holders. These algorithmic market operations or AMOs will be strictly parameterized once evaluated and approved by the ODAO on the basis of liquidity, returns, protocol risk, and other criteria. In the near future, as we share more details on the OADA release timeline and features, we’ll further expand on initial AMOs and how the OADA system plans on integration.
We look forward to engaging with the ODAO and broader Cardano community as we further iterate, build, then release OADA in early to mid 2024.
