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OATH Foundation: Building a Robust, Liquidity-Rich DeFi Ecosystem 

February 6, 2024

In conclusion

You’re probably tired of how much we’ve mentioned that the products that win, long-term, are the ones that have taken the pain to build an ecosystem of products guided by a unique vision. Are we going to keep reminding you when we come across these types of protocols? Definitely, non-stop.

An example we’ve brought to you this year is that of the HXRO ecosystem on Solana, and another obvious example of a multi-product ecosystem is  ███ Redacted cartel with multiple products, such as Hidden Hand and Pirex, centered around the $BTRFLY token. There are more examples, but for the sake of time and the holidays, we’ll go right into it.

Today’s focus is on another group of developers that make up the “OATH Foundation” doing the same thing— building a product suite of DeFi protocols governed by a single token. The Developers at ByteMasons are not a bunch of randoms or new-to-the-scene folks; they’re experienced in this game, having developed the successful LP compounder Reaper Farm, which has since evolved into the backbone of so much more. 

The same team is now rolling its sleeves up to develop a robust, liquidity-rich DeFi ecosystem governed by a single token, the OATH token. 

However, the problem teams building an ecosystem or suite of products often face is that of effective communication, i.e., relaying the value chain of the products within the ecosystem in order for users to grasp the potential benefits of taking advantage of such an ecosystem.  

In the next few paragraphs, we will attempt to solve this problem by examining how this all comes together: the unique products, the OATH Foundation, the OATH token, and why they’re worth your attention.  

The OATH ecosystem 

The ecosystem is driven by a vision to create financial inclusion across different frontiers such as protocols, networks, yield farmers, hedge funds, and even institutional players under one umbrella. The ecosystem is guided by predefined values such as security, decentralization, trust, and fairness.

It is on this foundation that the OATH ecosystem is built and managed with the responsibility to provide the necessary support for the development of the ecosystem (products), with an end goal to usher in the epoch of decentralized governance, finally leading to the achievement of the shared vision.

Ecosystem products

The OATH ecosystem has developed three main products, Reaper Farm, Digit, and Ethos Reserve, that are financially synergized and bound by a common token, OATH. We’ll start with the glue that makes everything else stick: Reaper Farm. 

Reaper Farm

DeFi thrives on competitive yield opportunities. To build out a sustainable liquidity-rich ecosystem leverageable by multiple stakeholders within DeFi, you’ve gotta put in quite some thought and effort in developing a highly sought-after asset management layer as the bedrock for other products. 

This is exactly what the OATH Foundation has done with Reaper Farm. Reaper Farm auto-compounds yields by automating compound interest through automated strategies (Vaults). Users simply deposit into a vault that executes a strategy with the deployed asset. This is done through a Harvest-bot, with a primary function to harvest yield across protocols and put them back to work. 

Reaper has a diverse range of vaults, with specific features, functions, and execution. After noticing the short-lived nature of LP farming, Reaper pivoted to unique, proprietary multi-strategy vaults that automatically redirect and rebalance user funds to a selection of single-asset strategies to maximize yield across the board. 

Multi-strategy vaults demand a 10% fee on harvested profits. More importantly, there is no withdrawal or deposit fee on multi-strategy vaults. As strategies are developed for new markets and opportunities, they are safely tested, implemented, and progressively allocated without users needing to withdraw and redeposit.

All strategies are communicated openly and transparently, and contracts are available for review.

If you want to enter a vault and you hold the assets. Just zap in. If you don't have the assets, you must go to a third-party DEX to create the LP before depositing.

Ethos Reserve 

Ethos Reserve is a decentralized stablecoin protocol and the flagship product in the OATH Ecosystem. It builds on Reaper Farm's vaults and allows users to take out interest-free loans against their collateral. Users get to deposit ETH, BTC, and wsTETH as collateral and take out an interest-free loan in the form of a stablecoin: the Ethos Reserve note or ERN ($ERN). There is a 0.50% issuance fee when minting ERN and no fees when repaying loans. 

It doesn’t end there, Ethos Reserve puts the underlying assets of collateral debt positions to work by taking advantage of Reaper Farm vaults to generate yield that eventually goes to $ERN Stakers. This feels exactly like two-way traffic in terms of use. The Ethos Reserve can be used to procure interest-free loans on volatile assets, as well as to access stable low-risk yield and additional earnings from liquidation fees. As such, Ethos Reserve can generate yield for the ERN stablecoin without relying on emissions, making it extremely resilient and sustainable. Due to a recently passed proposal on the OATH forum, the OATH Foundation will be adding support for Yearn Vaults, allowing Ethos to use Reaper vaults and Yearn’s. 

Users who stake their $ERN tokens in the protocol’s stability pool receive a liquid staked receipt in the form of stERN, which is composable across DeFi protocols. stERN holders will continuously receive yield generated on Reaper Farm’s stERN vault as well as liquidation fees, as we’ve mentioned above. 

Now, you might be tempted to say that deploying user collateral to yield strategies can be risky business, and you will be right. However, Ethos Reserve implements block-by-block monitoring and management of the risks involved to keep tabs on the loan-to-value ratio for each position. The strategies used to generate yield on the underlying collateral can be found on the analytics page of the app. 

Another feature of the protocol is that it manages multi-collateral debt using complex data structures that allow the protocol to isolate and liquidate multiple collateral types efficiently. 

How does the OATH token come into play? Well, users who acquire and deposit the OATH token in the OATH 80/20 pool (OATH/ETH) available on Beethovenx will receive a receipt token in the form of bOATH (bonded OATH). In turn, bOATH Stakers will earn platform fees (issuance and redemption) from Ethos Reserve as well as receive trading fees generated by Ethos’ incentive buyback and distribution strategies, thereby driving up demand for the OATH token, with more yield sources coming soon. 

The structure of the Ethos Reserve allows for high LTV with a minimum collateral ratio of 108% on ETH assets and 120% on BTC assets. What this means is that users can deposit their collateral, and for every $1.08 provided as ETH collateral (for example), users can borrow $1. The protocol operates multiple layers of debt risk management, including Total Collateral Ratios, Critical Collateral Ratios, and robust liquidation mechanisms. You can read more about the Ethos Reserve design and security in the docs here

Digit

Digit is the third protocol in the OATH ecosystem, powered by Reliquary smart contracts. Essentially, Digit rewards liquidity providers through a maturation process that incentivizes sustainable liquidity provisioning as opposed to the regular MasterChef liquidity mining process. 

Digit uses a time-weighted approach to distribute incentives based on the deposit's size and the position's length of time, calculated by the number of seconds since the deposit was made. The longer users maintain their Digit position, the more rewards they receive. 

Depositors into Digit are issued what’s called a “Relic” (an ERC1155NFT) against their positions on the protocol. When users make a deposit, a timestamp is attached to the NFT that calculates the length of time a position has been held.  This unlocks a market for mature positions, as holders can trade their Relics anytime they want. 

Again, you might ask how Digit synergizes with the other protocols. Well, Reaper boasts some of the best delta-neutral stablecoin yields on the market and powers up Digit positions with compounding interest. On the other hand, the OATH token is responsible for the emissions on Digit. In other words, while Reaper’s engine does the compounding work, Digit provides the front-end Vaults for users to make deposits into the ecosystem. However, users can supply more than $ERN, as other boosted stablecoin vaults are available on Digit, such as the USDC, DAI, and USDT vaults — all eligible to receive OATH emissions on a time-weighted basis. 

The OATH token 

Across the three aforementioned products, the OATH token plays a significant role in providing value to its holders. It’s at the center of activities in the OATH ecosystem. 

The OATH token is also the gateway to the OATH ecosystem, and holders are eligible to participate in governance to help steer the ecosystem in the right direction. 

The OATH community put some careful thought into the OATH token, analyzing its strengths and weaknesses and acting on the results of this analysis to continuously improve on the tokenomics. This took the form of concentrating liquidity on Optimism as well as introducing the bOATH pool on Beethoven

The OATH community has designed the tokenomics so that those who stake their OATH for bOATH will receive platform fees from all products in the suite — a more product-centric approach to providing value for OATH holders. What this unlocks is a sustainable flow of incentives to the OATH stakers, as seen below. 

The OATH community will also soon be taking the options token approach by introducing the oToken model into the ecosystem using oOATH (options OATH), wherein holders of the options token will be able to get 50% discounts on their purchases of OATH in the open market. All revenue from the exercising of options will go directly to bOATH stakers!

Migration to OATHv2

The OATH Foundation has decided to take a proactive approach to the recent multichain exploitation by migrating the OATH token from OATHv1 to v2. With the exception of the Fantom network, the old OATH token has been deprecated on every other network and is redeemable for a new version of the token on a 1:1 basis. 

The team has also made it easy to spot both versions of the OATH token by labeling token graphics with a red dot for the older version and a green dot for the newer version. 

Here’s how to go about the redemption process: 

  • Access the migration portal
  • Authorize the OATHv1 spend by clicking “Approve”
  • Swap the OATHv1 for v2
  • Proceed to interact with the ecosystem with your OATHv2 tokens. You can decide to deposit into any of the following pools. 

View pools here. You can also read more about the migration process in this previously published article

OATH chapters 

Like MakerDAO is doing with SubDAOs, OATH is allowing for the expansion of its ecosystem and adoption of the OATH token through OATH chapters, which are projects implementing the OATH tech stack to build distinct DeFi projects. 

The initiative takes advantage of the size of ByteMason’s team to create branches within the larger team focused on specific deliverables. New chapters are formed based on governance or the decision of the larger forum. 

Will OATH chapters have their own token? Yes, they will be able to make their own token and act completely autonomously, yet connected in terms of value to the OATH ecosystem. Each chapter will be headed by a senior engineer. 

Moreover, OATH holders (also called “Governors” because of their role in governance of the OATH ecosystem) will be able to benefit from Chapters in the form of staking rewards allocated to pools. Through OATH governance, each chapter’s tokenomics will be designed to direct value back to bOATH and the OATH ecosystem, be it airdrops, LP incentives, shared revenue, etc.

Governance 

Finally, as mentioned earlier, the OATH token governs the ecosystem. The foundation, however, lays the ground for better governance through two phases of governance: 

  • Phase I involves the Governance Proposal Review Committee, the OATH Governance Forum, and the Snapshot voting platform.
  • Phase II introduces a mandatory Community Delegate Election, an increase in the Minimum Implementation Threshold, and a minimum number of OATH/bOATH holding wallets required to participate in a proposal vote.

At the moment, two important proposals draw our attention, one of which has passed Quorum: 

  • sfrxETH is currently in snapshot, has passed quorum, and will likely be added as collateral

These are but the bits. For a more detailed perspective on how the OATH Foundation views and structures the governance of the OATH ecosystem, refer to this article

Thoughts

There’s no reason to doubt that in the long term, the OATH ecosystem will blow many things in DeFi out of the water. Like we’ve said many times over, ecosystem tokens and projects are something to watch out for.

Moreso, from an observatory point of view, the OATH ecosystem adopts more sustainable approaches to the products in the ecosystem with the implementation of practices such as time-weighted incentive distribution, chapters, etc. 

While we look forward to more products and chapters, we recommend trying out the protocols for yourself to test their efficiency and get involved with governance. 

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