If you’ve been alive for the past few weeks and have opened twitter at least two times you will have seen the recent hype and success of a ponzi (or is it) called Olympus Dao. While I personally have done barely any research into the project, we can all marvel at the recent success it has had and all the doubters it has proven wrong in that it is not just another rebasing algo “stablecoin” at all. It is something completely different.
So if you don’t already have a well-versed education around Olympus (like me), and haven’t really done your due diligence on TEMPLE yet (also like me) then let’s go ahead and get a complete overview on exactly how TEMPLE Dao works, and what it aims to achieve.
Please note: This will not be an article comparing it to OHM. Some helper pictures may come from the templeDAO discord or medium.
Taken from the very first medium post from TEMPLE Dao it states: “$TEMPLE is a safe haven when you want to shelter from risk”. Okay… but how? Quoting again they say: “$TEMPLE aims to maintain lower volatility than bluechip crypto tokens, while delivering yield to staking temple dwellers”. So we can already gather from first glance it aims to be a way for you to maintain value, without having to be in fiat where the real yields are actually negative in terms of purchasing power. Let’s explore the methods in which they aim to achieve this.
$TEMPLE offers two solutions to protect or hedge you from downside risk:
- You can simply stake your $TEMPLE tokens in the temple, and during downside volatility the yields will be boosted, thus helping you maintain your value during these times. This will reduce the circulating supply, and put more positive pressure on price.
- Protocol Controlled Buying: The Temple will directly buy these $TEMPLE tokens from weak-handed beta males who are ngmi and who simply want to hfsp. These tokens will be bought at a slight premium in downturns with the money that the treasury has acquired beforehand. During times of plenty and when the prices are rising, the treasury will gain in PCV (Protocol Controlled Value), meaning the higher the reserves of the treasury, the better protected we are when a downturn occurs.
This is only a broad and simple overview of the $TEMPLE token and the incentives for it to hold and gain in value over time compared to the negative yield fiat tokens we all hold so grim to our hearts. TEMPLE Dao actually aims to do far more than just this. TEMPLE aims to create an ecosystem where you have a safe exposure to growth coins with a very small amount of downside risk with higher upside returns. All of this made possible by utilizing the TEMPLE Protocol.
There are three principles the TEMPLE team have outlined for the $TEMPLE token:
- $TEMPLE holders benefit from the ecosystem growth directly
- The features of the protocol reduce volatility while increasing long-term value accrual for long-term holders (think 3,3).
- $TEMPLE’s intrinsic value always increases and is not diluted away like most yield tokens. Coins are not simply minted from thin air. There is a representative value transfer occurring with each token created.
Now there are 4 main mechanics that we will go over.
These 4 mechanics consist of:
1. Safe Return & Intrinsic Value
2. Safe Premium
3. Bonus Offers
4. Unstake Queue & Price Defend
These may get a little more lengthy than a simple quick overview so grab some coffee and get your sips ready.
Mechanic 1: Safe Return & Intrinsic Value.
There are two ways you can enter the Temple:
1. Using an AMM
2. Using the Temple Dapp
In the essence of simplicity, use the Temple Dapp. It’s just better. By buying through the Temple, the Temple can use the money to generate yield, furthering the growth of the protocol and reserves, thus benefiting the entire $TEMPLE ecosystem and offering increased yield for stakers. This is what helps increase the intrinsic value of the $TEMPLE token, because like stated earlier it is the protocol reserves that further the yield, and these $TEMPLE tokens do not just get minted out of thin air. They are a representative value transfer.
Simply put, intrinsic value is the total amount of money safely tucked away in the reserves of the protocol, divided by the circulating amount of tokens. So if there are $100 in reserves, and only 10 tokens, each tokens would have an intrinsic value of $10.
Mechanic 2: Safe Premium.
The team over at Temple see two big problems that suck in defi for stakeholders which are:
1. Infinite/finite mint inflation (TITAN, GAIA, and almost every single farm that got dumped to zero)
2. AMM Pump & Dump
The Safe Harvest mechanic was created to prevent the infinite mint & dump problem, but the Safe Premium mechanic is created the prevent the AMM Pump & Dump problem. Let’s explore.
The method of Safe Premium that prevents the P&D problem, is that it quite literally puts a price ceiling on the token. Yes, that’s right. It’s literally a price ceiling. The theory here is that due to limiting the potential price of the token (on a relative basis) it further incentivizes staking because it gives the value back to stakers, NOT people who want to pump and dump the token on uniswap.
So… how exactly does this work? Let’s dig in.
While you can always buy/sell with an AMM, the templeDAO protocol sells the $TEMPLE token at a relative multiple of the intrinsic value (3–6x). This is called the Safe Premium, because the protocol will kick in and start selling $TEMPLE tokens if the price of the token gets too high relative to the intrinsic value. The theory here is that due to this protocol controlled price ceiling, nobody on the AMM will want to buy once it reaches a certain threshold because they can get it cheaper from the protocol, and there is also an arbitrage opportunity for bots. These $TEMPLE tokens the protocol sells go straight into the reserves.
So what does this mean, realistically speaking? It means that because of this Safe Premium concept, the price can never go up 10x if the intrinsic value did not also go up. There is a ‘soft-peg” of the token price to the PCV/IV (Protocol Controlled Value/Intrinsic Value) at all times. This way we will never actually see the price go from 1.1 to 100.1 unless there is a portion of ACTUAL VALUE being added to represent the price of the token. Like I stated, the $TEMPLE token price & yield is a form of representational value. So let’s move on.
Mechanic 3: Bonus Rewards (mmmm yes the good shit)
Whenever the Temple has accumulated much more value than expected, there will be short slots of time where the Temple can offer higher than usual rewards. Because rewards are controlled by the intrinsic value, these bonus rewards will not last for long periods of time. But when they do occur, the Temple will grant access to a Special Offer which is a special side entrance that allows increased APY. Basically, you just stake into the side entrance, collect the increased APY, and go back into the main entrance to stake (either automatically or manually) and resume your normal programmatic increase of wealth. No big deal.
Mechanic 4: Unstake Queue & Temple Defend
Unstake Queue: Simply put, when you unstake your $TEMPLE you will be put into a queue. This way it may help prevent a Temple Run (RIP Temple Run my childhood), prevent unnecessary volatility, and help maintain order and fairness.
There will be a specified amount of $TEMPLE processed per block, which means that if there are 10 $TEMPLE processed per block, and you unstake 50 $TEMPLE, it will take you at least 5 blocks to receive all 100% of your $TEMPLE tokens back.
Temple Defend: The team calls this “Buy low, Stake High” but I like to call this one the criss-cross double-handed jibby-jabber for short. Dont even ask me what the long version of this is, you don’t want to know.
Remember how the Safe Premium worked in how it set a price ceiling so that it would prevent a huge influx in price if it didn’t maintain a certain ratio with the intrinsic value? Well this is kind of like that, but in the edge cases where people want to dump the absolute shit out of the token. See, Temple Defend allows ANYONE to sell their $TEMPLE tokens to the protocol at a fix price. So for example, if the IV (Intrinsic Value) is $10 per token, the Temple Defend price is also $10 and the price on uniswap or another AMM is at $9 then you could actually buy as much $TEMPLE that you wanted from that AMM and sell it to the protocol at $10. This would book you a nice profit and is a healthy way to maintain order within the temple.
This is also the equivalent of the good ole “Sell me all you want at the Temple Defend price, and then fuck off” meme brought to you by SBF (and coinmamba).
Normally in this scenario, you make 1$ per every $9 spent, but if you already were a $TEMPLE holder then the real winner here is the protocol because you just sold your $TEMPLE at the lowest possible price, and when the token goes back above the intrinsic value (say 3x the IV) you’re going to be left holding those pesky fiat-stablecoins that the protocol is trying to help you fight against. Well i’m proud to say that Temple Dao is saying fuck that, no more. They do not give you the obligation to sell at the Defend price, they give you the option. This means if the price goes back up and you didn’t sell, you win. If the price does not go back up and you also didn’t sell, you can still sell back into stables for the Defend Price and you have protected yourself from further downside. It’s a win-win for you.
These are the core beliefs and mechanics of how the Temple will work, but believe it or not, this is only one aspect of the Temple.
Temple Dao not only wants you to have long term wealth creation from being a staking templar who makes their mother proud, but they also will offer investment strategies akin to risk-tranching and others. Temple aims to offer automated risk management options where you can pool with other Templars to save gas, swap between vaults/strategies where you can choose based upon your own risk profiles, and (this is just theory) competitions and rewards for those who create the best strategies. Temple Dao is not just a yield-generating staking platform, it’s a multi-faceted DeFi investment platform aimed at long-term wealth creation.
This is all for now, and I hope you enjoyed the read! Majority of this information was all taken from the medium posts from the Temple Dao themselves but rehashed a little and condensed into one single medium post because I thought it might be a little easier to read an article all the way through instead of hopping through multiple of them where information can get spliced and jumbled sometimes.
Links:
My Twitter: https://twitter.com/Buhlaque
TempleDAO Twitter: https://twitter.com/templedao
TempleDAO Discord: http://discord.gg/frCbCrGv2U
TempleDAO Medium: https://templedao.medium.com/
As always: none of this is investment advice and is purely educational and informational.
