2025, despite the broader crypto tailwinds, has been a challenging year thus far for Optim.

While an unfortunate public relations stumble transpired, the protocol is stronger than ever. OADA has not only been live for an entire year with an average APY of 5.5%, but has maintained a strong peg and operated seamlessly under strong stress conditions.

We’ve seen maintained institutional interest in the product and a strong contingent of users drove the protocol to 20M ADA at its all time high, placing number six in Cardano DeFi. Recently, OADA experienced a pullback of around 25% down to 15M TVL. Throughout its deployment the ODAO has steadily accrued protocol fees amounting to nearly 200,00 ADA during year 1.

We expect OADA to grow even stronger and scale further with the release of V2 in upcoming months with the deployment of a lending AMO in collaboration with Fluid. This additional module will provide the capability for the underlying protocol to accept secure collateral and lend out reserves to the benefit of borrowers across Cardano and lenders who stake OADA. For the first few months after going live we’ll stress test the lending system, incrementally adding accepted assets and pushing LTVs to competitive but safe levels as we continually collect data. We see this as a strong next step in the evolution of OADA and its place in Cardano DeFi.

OUSD timelines have been pushed back as we assess rapidly unfolding US regulatory developments of bills advancing in Congress. The GENIUS Act is of particular interest with a strong regulatory framework for USD stablecoins. AML, OFAC, and other such considerations as well as enforcement for permitted issuers will likely change the landscape on Cardano with tokens such as iUSD in unclear territory. While the OUSD system is built, the final financial design choices for reserve assets are being assessed with an eye towards these developments.

Fortunately, liquidity for USDM and USDA have stabilized for a few months giving some clarity on the future of these assets within the ecosystem. OUSD — as a fully automated, autonomous system consisting of a basket of other stablecoins as backing — is ill-suited to disappearing and ever-shifting DEX pools that we’d seen for USDM and USDA. Cardano must have $20M+ of USD stablecoins with dependable liquidity available on-chain to feel confident moving forward. If this isn’t the case it might be possible to extend the design to enable redemptions directly from off-chain entities. This would require extensive off-chain systems and legal structuring that hasn’t yet been determined.

OSPLASH is ready for deployment though will be rolled out without the previously planned level of ODAO participation due to SPLASH divestment via proposal 0024. After extensive assessments of the Splash protocol, revenue allocations, and liquidity support from entities within the Cardano ecosystem the ODAO voted to take a different approach. We’re excited to observe the eventual rollout of the VESplash system and assess the best way to participate once rollout begins.

Other projects internally at Optim are the Yield Donation Platform built in collaboration with the UNHCR that enables anyone to deposit OADA, and other yield bearing tokens in the future, while donating just the yield to a charity wallet address and retaining the underlying principal asset. We’ve also picked up development of Leviathan as we keep a close eye on the layer 2 landscape on Cardano and gauge the demand for services that would be well suited to its deployment. The previous pause in development due to ecosystem underdevelopment proved correct as we’re just now seeing promising signs of a potential user base. An example of an invaluable services data point we’ve seen is Strike Finance’s numbers and their issues in dealing with a skewed, unbalanced perpetuals book due to the self-selection of users on-chain in Cardano DeFi.

We’re excited for the second half of 2025 as a rebuilding and growth period after the last few months of stabilization and reset. The growth of OADA, more clarity on the state of Cardano DeFi, and a maturing regulatory landscape will enable Optim to chart a new path and regain its position as a leader in Cardano DeFi. We appreciate everyone in the community sticking with us and are excited for what the future holds.

Overview

As Optim nears its 3-year anniversary, we stand at a transformative juncture in our journey. Having navigated the challenges of a historic bear market, we’ve emerged stronger than ever, with OADA — our first OToken — rising rapidly to approach top 5 TVL status on Cardano.

With the imminent launch of OUSD, lend/borrow modules for OTokens, and other exciting innovations slated for early 2025, we’ve reached a pivotal moment in our protocol’s evolution.

To scale further, drive innovation, and cement our position at the top of Cardano DeFi, we’re introducing comprehensive changes to the OPTIM token. These updates will realign incentives and unleash the next phase of our protocol’s growth.

A few important points that provide more context and insight into changes are as follows:
- Optim has never had to rely heavily on emissions to support protocol adoption and growth.
- Opportunities for more advanced staking and utility necessitate programmable tokens.
- Realignment of incentives for public holders that advance the sustainability of both governance and general protocol health force the deprecation of a failed VC vesting model.

New Tokenomics

The new token will have a 75% supply reduction, scaling down from 100M Tokens to 25M.

All circulating “Public Tokens” will be converted on a 1:1 basis with no change. Every 1 outstanding $OPTIM token will be converted to 1 $O token for individuals.

These are tokens held by all wallets of the token-holding “Public”, meaning not Team and VCs.
This will enable the $O price on DEXs to stay exactly the same upon migration with minimal disruption when the ODAO redeploys protocol owned liquidity.

All “Non-Public Tokens” will have overall cuts on a per category basis, with remaining allocations converted on a 4:1 basis. Every 4 $OPTIM will be converted to 1 $O token.

These consist of Team, VC, ODAO Treasury (POL merged into this category), and Listings.

VC’s will be on a 7 year linear vesting schedule beginning in January of 2025.

This more closely aligns with traditional VC fund schedules that enable investors to realize liquidity on investments approximately 7–10 years after initial investment.

The success of the protocol, correct alignment of incentives, and best interest of the public is top of mind when putting to vote an extension to VC vesting schedules. Our SAFTs allow for such actions with the exception of one VC that holds less than 10% of the total VC allocations.

Additional New Tokenomics

The 4M $OPTIM tokens allocated to $OPTIMiz conversion will also be converted on a 1:1 basis.
This is due to the 1:1 OPTIMiz to OPTIM conversion rate guaranteed during ILE. In the future, any unconverted $O tokens allocated to OPTIMiz conversion will eventually be migrated to the ODAO Treasury.

Following the token migration (if passed), new locks of Optimiz will be temporarily halted until a new proposal is created to address how locks will be handled moving forward.

The “Bonds Airdrop” is scaled down 4:1 and will be airdropped as a part of the public holders distribution.

Decreased Emissions , Increased Utility

While many DeFi protocols rely on emissions to bootstrap initial liquidity, Optim’s core functionality and user adoption have grown organically without significant token incentives.
As our new OToken system continues to expand we expect to realize healthy growth, as we have over the past 3 years, without any meaningful token emissions to our users as incentives. For this reason, a majority of tokens initially earmarked for emissions will be eliminated and not introduced into the tokenomics of the new token post migration.

Optim is also beginning to meaningfully scale its products and revenue as the protocol matures. As such, we must consider the possibility that the ODAO could vote on a fee switch directed towards token stakers. Migrating to a new programmable token unlocks more sophisticated staking mechanisms and utility features that weren’t possible before, enabling functions like automated compounding, delegation, and conditional staking parameters. These technical improvements, combined with a streamlined supply, position the protocol to better serve its existing use cases while opening doors for new applications that require more flexible token interactions.

A Note on VCs

When Optim raised venture capital funding in early 2022 we took the industry standard approach at the time regarding vesting terms, valuation, and general tokenomics.

We are proud to be one of the few teams that brought in much needed outside capital into the Cardano ecosystem. Most people agree that if Cardano is to remain competitive we must bring in outside capital to support top teams that have the ability to ship innovative protocols.

However, with 3–5 years of data available on tokens that were structured in a way that was once industry standard — lower float, higher FDV, 2–3 year VC unlocks — it is more or less universally acknowledged across the crypto industry to be an unsuccessful model for most protocols.

Token Categories

Public: Holders

Summary of Category:
Supply currently held in individual public wallets
+ Bond Airdrop

Current Public Holder Supply Converted 1:1 with no change — 7.5M

—

Bond Airdrop

- Original Bond Airdrop Tokenomics — 0.55% of 100M Total Supply

- Original Bond Airdrop Allocated Tokens — 0.55M → Converted 4:1

New Bond Airdrop Tokenomics — 0.55% of Total Supply
New Bond Airdrop Allocated Tokens — 0.1375M

–
Total Public Tokens (Public Holders + Bond Airdrop) — 7.64M

New Tokenomics — 31% of New Total Supply

New Total Tokens — 7.75M

**FULLY DISTRIBUTED**

*** 7.75M vs 7.64M is due to a buffer for $OPTIM tokens held in smart contracts prior to migration (dex, lending) as these tokens not be distributed automatically and will require manual distribution. Outstanding unallocated tokens in the public category will be used to cover those tokens. Any tokens not used for this purpose will be re-allocated to the ODAO Treasury***.

Public: OPTIMiz

- Original Tokenomics — 4M / 4% of 100M Total Supply
- Original Allocated Tokens — 4M → Converted 1:1

New Tokenomics — 16% of New Total Supply
New Allocated Tokens — 4M

VCs

- Original Tokenomics — 15M / 15% of 100M Total Supply
- Original Unallocated Tokens — 4.12M → BURNED
- Original Allocated Tokens — 10.8M → Converted 4:1

New Tokenomics — 10.8% of New Total Supply
New Allocated Tokens — 2.72M

7 Year Linear Vesting
(1 VC exception = 9.5% VC tokens on original schedule)

Team

- Original Tokenomics — 25M / 25% of 100M Total Supply
- Original Unallocated Tokens — 1M → BURNED
- Original Allocated Tokens — 24M → Converted 4:1

New Tokenomics — 24% of New Total Supply
New Allocated Tokens — 6M

Team Vesting Periods 1 & 2 per original tokenomics. All tokens accelerated into this

ODAO Treasury

Summary of category
POL (Protocol Owned Liquidity)
+ ODAO Treasury tokens

- Original Tokenomics (ODAO Treasury) — 5M / 5% of 100M Total Supply
- Original Tokenomics (POL) — 11M / 11% of 100M Total Supply
- Original Allocated Tokens — 16M → Converted 3.95:1

New Tokenomics — 16.2% of New Total Supply
New Allocated Tokens — 4.05M

$O tokens in the ODAO Treasury will be provided to new 50/50 liquidity pools in the same price ratio and with equivalent amounts of ADA as the previous $OPTIM liquidity pools. These pools require less token allocation and enable reduction of extraneous supply.

Listings

- Original Tokenomics — 4M / 4% of 100M Total Supply
- Original Unallocated Tokens — 4M → Burn 2M
- Original Allocated Tokens — 2M → Converted 4:1

New Tokenomics — 2% of New Total Supply
New Allocated Tokens — 0.5M

Optim Finance continues to push the boundaries of decentralized finance (DeFi) with its upcoming release of OUSD, a groundbreaking yield bearing stablecoin solution for the Cardano ecosystem. Built upon the success of OADA, OUSD continues the two-token system design to provide passive yield opportunities and peg stability, offering a flexible, high-performance stablecoin yield product for Cardano DeFi enthusiasts and newcomers alike.

A Two-Token System for Yield Generation

Similar to OADA, OUSD operates with a two-token structure:

1. OUSD — This token is pegged to USD and serves as the base asset in the system.
2. sOUSD — This staked version of OUSD is not pegged to USD but benefits from the system’s yield generating AMOs.

Users can deposit stablecoins to mint OUSD. Once minted, they have the option to stake OUSD in exchange for sOUSD, unlocking passive yield opportunities within the system. This staking mechanism mirrors the dynamics of OADA, where users stake their tokens to earn passive yield from the system.

Expanding Flexibility: Multi-Stablecoin Reserves

One of the standout features of OUSD is its flexible reserve system. Unlike OADA, which relies on a single asset pool, OUSD can be backed by multiple stablecoins, allowing for more dynamic reserves. This flexibility provides several benefits:

• Increased Market Access: by utilizing multiple stablecoins for reserves, OUSD will enable greater flexibility and capital efficiencies for users and other protocols. Users will not have to swap between stablecoins to take advantage of OUSD, and protocols will not need to rely on integrations of multiple stablecoins for various purposes.
• Expanded Yield Opportunities: Various stablecoins throughout the ecosystem will each have their own potential mechanisms for yield generation. As more stablecoins come to the ecosystem, OUSD has the opportunity to expand its yield potential with new integrations and abstract away the complexity of yield generation for dollar assets
• Risk Mitigation: Multiple stablecoins can be used to mint OUSD, offering greater risk distribution across multiple assets rather than relying upon a single token for its reserves.

OUSD’s multi-asset reserves enforces robust system parameters to capture the strengths of each stablecoin. Initially, the system will take a conservative approach, using only highly reliable stablecoins with minimal depegging risk. Strict collateralization and risk management protocols will be implemented from the start. As the system evolves and more data is collected, advanced risk models will enable the safe integration of stablecoins with diverse risk-reward profiles, enhancing yield opportunities without compromising stability. The system evolution will be controlled by ODAO vote as all asset deployments and integrations are executed via on-chain, autonomous smart contracts.

Yield Opportunities

The primary sources of yield for sOUSD holders will come from a range of Algorithmic Market Operations (AMOs) and capital-efficient strategies:

1. DEX AMOs

OUSD will feature AMM stableswap pools for each asset used to back it in reserve. For each stablecoin used to back OUSD, there will be a corresponding OUSD paired AMM pool that the protocol will arbitrage to ensure peg stability and generate yield. This is very similar to the OADA system and its OADA/ADA stableswap AMO on Splash — but with each reserve stablecoin asset having its own corresponding stableswap pool.

2. Borrowing AMO

An exciting addition to Optim Finance’s suite of products is the upcoming Borrowing Module. This protocol will allow users to deposit collateral assets such as qADA, OADA/ADA LP, and other tokens to mint OADA as a collateralized debt position (CDP). This module opens up new capital-efficient trading strategies, which have not yet been available on Cardano.

This module will be extended to OUSD minting via the deposit of stablecoin collateral assets, LP positions, and possibly other Cardano Native Tokens. As we have seen from recent market utilization on Liqwid and other lending platforms, borrow demand for stablecoins on Cardano has been very high, yielding a consistent 10–20% APY on deposits. OUSD Borrow will capitalize on this demand. The interest and fees paid to the system by borrowers represent a primary source of yield generation for the system.

3. Liqwid Lending Strategy

The OUSD system will also be able to deploy idle stablecoin reserves into Liqwid’s lending markets, depending on market demand and yield potential there. This integration with Liqwid enables OUSD to utilize its reserves for capital efficient yield generation, reinforcing the system’s overall yield potential.

Conclusion

OUSD seeks to capitalize and build on the success of OADA, and it represents a significant step forward for DeFi on Cardano, providing a stable, yield-bearing asset with flexible reserve backing. The integration with multiple stablecoins and yield sources makes OUSD a dynamic and versatile tool for DeFi participants as well as other protocols.

Stay tuned as Optim Finance prepares to release OUSD and unlock the future of stablecoins on Cardano.

Welcome to the launch of OADA on the Cardano Mainnet!

OADA is a fully backed ADA derivative token designed to provide yield opportunities while maintaining a strong peg to ADA. This walkthrough will guide you through the user interface, helping you mint, stake, and earn with OADA.

**Due to the system being brand new APYs will be missing as there isn’t historical data for trailing APY. Within 24–48 hours these figures will appear in the UI and can be referenced by users! **

Step 1: Access the Dashboard

First, head to the OADA Dashboard. Here, you can view important statistics about the OADA system, including:

• Total Value Locked (TVL)
• OADA supply
• sOADA supply
• Open positions
• Yield opportunities

Step 2: Mint OADA

Next, click on the Mint-Stake-Earn Tab. In the Mint section:

1. Enter the amount of ADA you want to mint into OADA.
2. Click the “Mint OADA” button.
3. Sign the transaction.
4. Wait for the transaction confirmation message.

Step 3: Stake OADA

Navigate to the Stake tab. Staking your OADA into sOADA allows you to receive yield from the underlying assets in the system:

1. Enter the amount of OADA you want to stake into sOADA.
2. Click the “Stake OADA” button.
3. Sign the transaction.
4. Wait for the confirmation message.

**User risk**
OADA Stakers incur the loss on any underlying yield strategies the system runs! System strategies are conservative — only OADA/ADA LP & staking auction to start. Smart contract risk of Splash (LP strategy) and soon Liqwid are the primary risks in addition to Optim smart contract risk .

Step 4: Unstake sOADA

If you want to convert your sOADA back into OADA, head to the Unstake tab:

1. Enter the amount of sOADA you want to unstake into OADA.
2. Click the “Unstake sOADA” button.
3. Sign the transaction.
4. Wait for the confirmation message.

**Stakers who mint sOADA realize their yield upon unstaking through the conversion rate. Each sOADA should be worth and converted into more OADA upon unstaking.**

Step 5: Swap OADA for ADA

To turn your OADA back into raw ADA, you need to swap it in the Splash stableswap DEX pool. Go to the Splash DEX pool:

1. Enter the amount of OADA you want to swap for ADA.
2. Click the “Swap OADA” button.
3. Sign the transaction.
4. Wait for the confirmation message.

By following these steps, you can effectively mint, stake, and earn with OADA on the Cardano Mainnet. The OADA system offers a seamless way to manage ADA assets and capitalize on yield opportunities. For more detailed information and to learn about the technicalities of the OADA system, check out the Optim Finance GitBook documentation. Enjoy exploring the benefits of OADA!

With the upcoming launch of Optim’s OADA, it’s time to harness the power of open-source to further enhance the security and reliability of the smart contracts that underpin the protocol. Optim Labs is proud to continue our commitment to building secure, reliable and trustworthy decentralized applications on Cardano by inviting fellow developers and security researchers across the ecosystem to participate in our upcoming bug bounty program.

While all of the contracts have already undergone extensive auditing by Anastasia Labs, bug bounties to incentivize code review by the many talented engineers within the larger Cardano community are a testament of our dedication to upholding the highest standard of smart contract security. By utilizing the collective experience of talented Aiken developers we can further increase the confidence in the safety of our upcoming platform and our mission to provide quality products to our users.

The bug bounty will be for the OADA (OTOKEN) Core system.

Bug Bounty

The code subject to the bug bounty: github.com/OptimFinance/clean-code

50,000 ADA is the total amount up for grabs. Vulnerabilities will be classified into the following categories, with the classification and exact payout amount subject to Optim Labs discretion. The classification and descriptions come directly from Anastasia Labs.

• Critical: This vulnerability has the potential to result in significant financial losses to the protocol. They often enable attackers to directly steal assets from contracts or users, or permanently lock funds within the contract.
• Major: Can lead to damage to the user or protocol, although the impact may be restricted to specific functionalities or temporal control. Attackers exploiting major vulnerabilities may cause harm or disrupt certain aspects of the protocol.

Policies

• Discover previously unreported vulnerabilities and report via a support ticket on our Discord server https://discord.gg/VZ329q7x69
• Findings will be reported by Optim Labs at a future date once the issue is resolved
• Include enough documentation to replicate the vulnerability. Provide a full description of the problem with at least a conceptual and accurate exploit mechanics given
• First reporter of an issue receives the bug bounty

Basic Design and Flow of User Funds

OUSD operates under the simple but extensible architecture whereby users mint new OUSD tokens by locking up certain accepted stablecoins as reserves. Once minted, these tokens can either be held, spent, or staked for earning additional returns through a staking mechanism where staked OUSD tokens are transformed into sOUSD. The conversion rate initially is 1:1, but as yield accumulates in the system, the value of sOUSD relative to OUSD grows, rewarding stakers. Redemption of OUSD for underlying stablecoins is straightforward: redemptions are handled through DEXs. OUSD trades against both ADA and other stablecoins with the system autonomously arbitraging selected pools to keep a tight OUSD peg.

System Reserves

For the initial reserves required to mint OUSD, partnerships will be formed with various entities minting stablecoins like USDM, USDA, and potentially others such as USDb by Butane. These partners help provide additional data to ensure robust reserve requirements are met. Moving forward, as more data becomes available on various stablecoins in the Cardano ecosystem, we expect that OUSD reserves will be able to be onboarded without any input or partnerships with issuers.

OUSD in the Stablecoin Ecosystem

OUSD is part of a larger family of stablecoins which includes others like Djed and iUSD. What sets OUSD apart is its multi-reserve approach and its continuous adjustment of reserves based on performance metrics like peg stability, market liquidity, and compliance scores. This dynamic system allows OUSD to adapt to market conditions more fluidly, maintaining its peg more consistently than some other stablecoins. The ability to stake OUSD for underlying yield is another unique feature of the system.

Use Cases for OUSD

OUSD is designed to be a versatile and scalable stablecoin for the Cardano ecosystem.

Here are some of its primary use cases:

1. Daily Transactions: OUSD’s stability makes it an ideal medium of exchange for everyday transactions, providing an option for payments that avoids the volatility typical of other cryptocurrencies.
2. Yield Generation: By staking OUSD, users can earn yields, which are generated from the reserves invested in various yield-bearing assets or through Automated Market Makers (AMM).
3. Hedging Against Volatility: Users can convert volatile assets into OUSD to preserve the value during turbulent market conditions.

Security and Compliance

The security of the reserves and the smart contracts on which OUSD operates is paramount. All reserves are required to pass rigorous compliance and security audits. The system itself undergoes continuous reserves management review along with a bug bounty program to ensure strong economic and smart contract security.

The deployment of OUSD also involves automated checks to prevent destabilizing redemption spikes and to ensure the system remains liquid and stable under stress.

More about reserves requirements and the ongoing evaluation of reserve assets can be found on Optim’s Gitbook in the subsections of: optim-finance.gitbook.io/optim-finance/ousd/ousd-reserves/reserve-criteria

Conclusion

OUSD’s innovative system architecture and its dynamic approach to managing reserves make it an important addition to Cardano’s stablecoin ecosystem. For users, whether you’re looking to make everyday transactions with, earn yields through staking, or find a haven from market volatility, OUSD will offer a robust and reliable solution. Understanding the mechanisms and use cases helps clarify how stablecoins like OUSD fit into the broader crypto landscape on Cardano and beyond.

OADA is more than a yield product. It’s a tool to advance DeFi and decentralization on Cardano

By improving both liquidity and network security as the ecosystem expands and evolves, OADA will help catalyze the next generation of Cardano DeFi and increase the resilience of the layer 1.

A key feature of the OADA system is superior yield above the base staking rate, as well as usability and composability advantages within the DeFi ecosystem. However, the largest benefits to Cardano go far beyond this.

Liquidity — A portion of the billions of passively staked ADA will come off the sidelines and into the DeFi ecosystem for the right product. However, there is a lack of innovative, passive ADA yield products that pay substantially more than the staking rate. This is one of the contributing factors to Cardano DeFi TVL seeing no increase for the past 5 months.The largest DeFi ecosystems such as Ethereum and Solana have a majority of TVL in synthetic staked ETH and SOL. While initially activated in DeFi to earn staking yield, once deployed this capital is more active, often rehypothecated, and put to more productive use.

OADA is an advanced passive ADA yield-product that will target 50%+ above the staking rate, likely bringing more liquidity into DeFi in the form of the most important ecosystem asset.

Security — The fast approaching drop in staking returns to the 2% range threatens active participation and stake management, potentially undermining decentralization and network performance. Active stake management, incentivized through meaningful staking returns, is the primary mechanism through which validators are punished for poor performance and/or malicious actions. Without strong economic incentives to motivate the movement of stake around the network it’s possible cracks could begin to emerge in the underpinnings of the network.

OADA provides economic incentive to delegate staking rights to an active ecosystem participant with a strong vested interests in ensuring honest, performant validator behavior. The Optim ODAO controls stake delegation and is functionally similarly to a dRep that controls stake.

Cardano, Consensus, and Decentralization

The development and evolution of Cardano have showcased true decentralization. Its unwavering commitment to principles has led to an ecosystem that stands as a testament to the values of web3. Security, accessibility and decentralization have been prioritized over speed and convenience. Cardano’s unique approach is being validated as censorship, hacks and high costs proliferate across many blockchain ecosystems.

At the heart of Cardano, as a proof-of-stake blockchain, lies its consensus protocol, known as Ouroboros. This protocol is responsible for ensuring the integrity and security of the network by enabling individual nodes to reach an agreement, or ‘consensus’, on various aspects of the blockchain’s operation.

One crucial function of the consensus protocol is to determine which blocks should be added to the blockchain. In a decentralized network like Cardano, there is no central authority that dictates which blocks are valid. Instead, the nodes in the network must collaborate to agree on which blocks should be included. The consensus protocol achieves this by defining a set of rules that the nodes must follow when validating and propagating blocks.

Another critical function of the consensus protocol is to resolve forks in the blockchain. A fork occurs when two or more blocks are proposed at the same time, leading to a temporary split in the network. The consensus protocol ensures that the network quickly converges to a single, consistent chain by providing a mechanism for the nodes to agree on which chain to adopt.

The Ouroboros consensus protocol is designed to be provably secure, meaning that it can be mathematically proven to be resilient against various attacks. It achieves this by utilizing a combination of cryptographic techniques and game theory to create a system where it is in the best interest of each node to follow the protocol and contribute to the security of the network.

The protocol is guaranteed to be secure in the so-called synchronous setting (that is, with strong guarantees on message delivery times) so long as more than 51% of the stake is controlled by honest participants (that is, those following the protocol).” -docs.cardano.org

While stake concentration to a degree that would enable a 51% attack is unlikely in the near-term, the longer-term trend towards fewer stake pools and decreased returns could meaningfully degrade the security threshold (Nakamoto Coefficient) of the network.

Performance, Penalties, and Incentives

Penalizing both suboptimal performance and malicious behavior on Cardano relies on the economic incentives of staking. The system relies on stakers being active participants who are responsive to validator behavior by moving ADA stake within the network.

Unlike Ethereum and some other proof-of-stake blockchains, Cardano does not rely on slashing, a common mechanism that penalizes validators for malicious behavior. While the slashing threshold of ‘malicious behavior’ is rarely met, the strong economic incentives of staking rewards are relied upon for optimizing network performance.

The possibility of a meaningful decrease in the staking rewards realized by a given Cardano validator helps ensure a performant network. “Stake pools must maintain high-availability, which means that they should always be online and available to validate and create new blocks” (docs.cardano.org)

Without meaningful staking rewards there is little economic incentive penalize a validator for poor performance by moving stake to a more reliable and performant node.

Liquidity and DeFi Activity

While Cardano has seen significant growth and advancements in its DeFi ecosystem since smart contracts debuted in late 2021, the amount of ADA on-chain has been stagnant for 5 months. During this period the rest of crypto and many other DeFi ecosystems have seen tremendous growth and an uptick in both user participation and liquidity.

To push Cardano forward teams and builders must innovate beyond incremental improvements to existing protocols. We must deploy completely new products and primitives that haven’t yet been offered. While launching a better DEX or an improved synthetics protocol is a valuable contribution, such protocols likely won’t attract a meaningful number of new users or liquidity.

As the lifeblood of any DeFi ecosystem, liquidity is an important driver of activity as it can be used as collateral to mint new assets and rehypothecated within the system to multiply its utility. This is a common feature of both traditional and decentralized finance.

By minting OADA, the underlying ADA is staked to participate in Cardano’s consensus, while its synthetic derivative is instantly available for use in DeFi protocols.

Whether it’s used to create trading pairs in decentralized exchanges, as collateral in lending markets, or to mint CDP stablecoins, OADA would meaningfully increase much needed liquidity in the ecosystem.

To put things in perspective, of the 22.75 billion ADA currently staked, it would only take low single digit percentage of to be minted into OADA to immediately double Cardano’s current Total Value Locked.

While that ambitious figure is only being used to illustrate a point, it is also entirely within the realm of possibility. While not an exact , Lido, a liquid staking derivative protocol on Ethereum single handedly accounts for roughly $20B of the network’s overall $55B of TVL. All LSD protocols together cumulatively make up about 54% of Ethereum’s Total Value Locked.

Simply put, OADA’s objective is to bring billions in liquidity to the Cardano DeFi ecosystem while helping secure the economic incentives that underpin Cardano’s consensus mechanism.

We’ve crystalized a cohesive vision for our future on Cardano.
And now our team is bringing it to life over the course of 2024.

If you’ve been around Cardano for a while, you will likely have come across our project. Terms such as ‘yield aggregator’, ‘yield products’, ‘Liquidity Bonds’, ‘OADA’, ‘Leviathan’, and others might sound familiar. Those who are into DeFi have probably seen our movement within the top 10 Cardano TVL on DeFi Llama. But what exactly is Optim?

Optim is an emerging ecosystem within Cardano with a focus on DeFi. We build both yield and scaling products. We’re currently building our next generation of interoperable yield products alongside our own L2-like infrastructure. OADA, our next yield product, will start on Cardano’s L1 then have its capabilities expanded when our L2 launches later in 2024. Liquidity Bonds, our first product, have provided a 50%+ increase over staking yield on 125M ADA in deposits since launch.

While we will remain focused on creating innovative DeFi products that enable people to earn yield on their digital assets, our next generation of yield products requires vastly improved infrastructure. We can’t wait or rely on others to provide this. As such, we’re building a faster, more interoperable execution layer that extends the capabilities of Cardano.

We’ve delivered innovation before, but this time we’ll do so on a more ambitious scale.

Optim’s Vision

We see Cardano as the most secure, decentralized settlement layer in all of crypto.

We envision it as the foundation of a performant modular stack that provides unmatched decentralization and security at the Layer 1, while allowing for fast execution within our Layer 2.

Combining a fast, DeFi focused execution layer with cutting edge data availability and the decentralization and security of Cardano’s deterministic environment will enable us to reach our full potential. Optim, along with other builders, will be able to release new DeFi primitives and capabilities that unlock the future of financial services in a secure and truly decentralized environment.

Upon this foundation Optim will deploy user friendly, advanced DeFi protocols with a focus on yield products. Our Liquidity Bonds have been a success and we’ll build upon that with the upcoming release of OADA in a few months. OADA will be a simpler, more scalable way to earn superior yield on ADA without having to hold or farm other tokens.

Yield Products

Our first yield product, Liquidity Bonds, is for lending and borrowing ADA staking rights. It runs entirely on Cardano’s main chain. Such a market for lending and borrowing of just staking rights was a product never before seen on Cardano or anywhere else in crypto. Since its inception, the staking rights to over 100M ADA have been lent at an average APY of 6%+. This ‘real yield’ is pure ADA, with no padded OPTIM token rewards. This is what we mean by creating new markets and opportunities for earning yield on digital assets.

Our second yield product, OADA, is a system for yield aggregation that enables users to earn passive ADA yield at scale. OADA will launch in mid Q2 of this year. We’re beginning our audit now and are looking forward to finally releasing non-custodial yield aggregation on Cardano. OADA will also serve as the gas token for our L2, as well as the trading pair denomination for our protocol owned liquidity. More information about OADA will be released soon, with an overview provided here: optim-labs.medium.com/optimada-oada-6dee65056ea4

Leviathan L2

The future is faster, more interoperable, and runs on Leviathan.

To build more advanced yield products and bring a better user experience to Cardano we need better infrastructure. We must build and deploy this ourselves if Optim and the Cardano ecosystem are to fully realize the next generation of DeFi products.

Without it we’ll continue to see iterative incremental improvements of already existing products, but are unlikely to see new primitives and a meaningful increase in ADA liquidity within the DeFi ecosystem which has not increased its TVL, as measured in ADA, for 6 months now.

With it we can power flash loans, perpetual futures, and more.

We expect others outside of Optim to use our innovative L2-like infrastructure to deploy applications of their own. For more information on Leviathan L2 check out the V1.0 of our whitepaper here: github.com/OptimFinance/public-documents/blob/main/leviathan_wp.pdf

In its current form, It’s a bit dense but worth a read. We’ll be updating it soon and plan to supplement it with explainer articles that delve deeper into its individual components, assumptions, and challenges.

An Exciting 2024

With renewed vigor, a clear direction, and a strong community behind us we will push the ecosystem forward together. True innovation in both Yield (OADA) and Scaling (Leviathan) will be realized in 2024. The time for DeFi 2.0 on Cardano is now. A New Era of Optim is here.

Since the simultaneous launch of the $OPTIM token and Optim ODAO in late October 2023, the team has been focused on developing its next generation of products and arriving at a coherent vision for the future of Optim. We’ve been busy researching, designing, and building as we make pivotal decisions that will determine our direction for the coming years.

We’ve admittedly been lacking on updates to the community that clearly communicate overarching plans, timelines, as well as better explaining new products and technical concepts.
We vow to do better now that we’ve brought our vision into focus and are scaling accordingly.

This update is intended to provide clarity on the timelines on deliverables for Optim over the first half of 2024. This will make sense to our community members familiar with the protocol. It will be a few more weeks until we fully articulate the New Era of Optim and release our refreshed brand identity and website along with it.

Technical Progress

At Optim, our commitment to advancing the Cardano ecosystem is reflected in our focused approach to development. We’ve been heads-down on our current endeavors: OADA, Leviathan, Optim Account. Each of these protocols are novel, innovative, and beyond the scope of which we can look to other chains for clear design clues. Each is a testament to our dedication to technical excellence and meaningful innovation in DeFi.

Beyond merely enhancing existing products and improving upon existing primitives, we recognize the need for more robust infrastructure and novel DeFi solutions if Cardano is to continue scaling its ecosystem. This understanding guides our work on Leviathan and OADA as we aim to offer practical and impactful improvements.

Here’s a snapshot of our key technical milestones for the first half of 2024:

*The development of Optim Account is proceeding in tandem with Leviathan, ensuring a cohesive and integrated system release. A continuous audit process and open source code will be the foundation of Leviathan security*

More information on OADA can be found here:
https://optim-labs.medium.com/optimada-oada-6dee65056ea4

More information on Leviathan L2 can be found here:
https://github.com/OptimFinance/public documents/blob/main/leviathan_wp.pdf

Education & Marketing

Our marketing strategy is pivoting towards more educational content. Expect to see detailed explainers, technical diagrams, and engaging discussions. We believe in keeping our community informed and prepared for our upcoming releases, focusing on clear and transparent communication.

We’ll resume regular community updates along with Twitter spaces where the community can engage in meaningful discussion and ask questions about upcoming products, concepts, the direction of Optim, and where it fits into where we see Cardano DeFi headed.

Product Development

We are paying close attention to the user experience for both Leviathan and OADA. Our aim is to design systems that are not only innovative but also user-friendly and efficient. This includes developing the first few OADA yield modules, ensuring incentive alignment for adequate system liquidity, and developing an intuitive UI.

Leviathan’s UI will need increased testing, feedback, and continual enhancements due to many Cardano natives not having interacted with account-based systems. Ensuring their awareness and understanding of gas, approvals, and other security measures built into the system will be paramount.

While we look to increase volume and executions for both the Leviathan and OADA systems, we’re in the exploratory stage for other Leviathan use cases that Optim or other teams might deploy in the near term. Other potential high-impact products we’re exploring include more efficient leverage protocols as well as an OUSD stablecoin.

The integration of user feedback is crucial in this process, ensuring that we stay aligned with the needs and expectations of our users.

ODAO Governance

We are enhancing the structure within the ODAO, aiming for greater transparency and community involvement. This involves establishing clearer workflows and governance policies, reinforcing our commitment to a collaborative and open development process.

The ODAO will continue to push votes on important topics and increase its output as the protocol ramps up our new ecosystem and scaling solutions.

While we are eager to share more about our upcoming projects, we also believe in the value of measured and thoughtful reveals. We are on a path of continuous improvement and innovation, and we are grateful for the support and involvement of our community in this journey.

Thank you for your continued support and engagement as we navigate these exciting developments together.

Progress, Perspective, and Innovation

Many things can be said of crypto in 2023: Uncertain, challenging, exciting, and ultimately fruitful for both Optim and the entire industry. The year began on the heels of the most tumultuous and difficult time in recent memory, with the FTX collapse in late 2022 coupled with surging inflation and aggressive monetary tightening. The year ends with a renewed vigor as builders, investors, and the general public advance web3 forward with resolve.

The depths of the bear market during the first half of 2023 forced a reckoning across the entire industry. Many companies and projects dissolved, some pivoted, and others such as Optim strategically scaled down then came back with a vengeance during the second half of the year as a clear path emerged. Adaptability, resilience, and innovation were key themes.

Cardano Ecosystem Growth

Cardano’s DeFi ecosystem matured and grew tremendously. While 2023 was only the second full year of smart contracts on Cardano, countless advancements and achievements were realized. Development costs fell, tooling improved, liquidity increased, new protocols launched, and many teams across the ecosystem enhanced existing protocols. Nearly half of Cardano’s top 10 DeFi protocols launched in 2023 with TVL growing from 200m to 700m ADA, placing the DeFi ecosystem firmly in the Top 10.

The widespread adoption and advancement of Aiken language dramatically reduced development timelines and costs. We foresee this as a catalyst for accelerating innovation, iteration and deployment in the coming year. New tools and emergent design patterns such as transaction chaining saw growing adoption and improvements as ecosystem-wide contributions accelerated innovation.

Increased liquidity and activity across Cardano DeFi enabled the progression of interoperability due to better data availability for financial modeling and parameterization. One such example is secondary market data for Optim Bonds on the Danogo trading platform. Better understanding the market clearing rates and volumes of Optim Bonds post-issuance allows a lending platform like Liqwid to set the appropriate parameters for using Optim Bonds as collateral. Understanding the dynamics of collateral liquidation is crucial for ensuring a well-functioning and resilient lending protocol.

Progress made this past year lays the groundwork for the deployment of more advanced products and protocols as market data, liquidity, interoperability, and tooling continually improve. Much of 2022 and 2023 were spent establishing a strong foundation for the ecosystem. Core DeFi protocols launched, various best practices were established, design patterns were discovered, and security was enhanced.

Optim Liquidity Bonds

Optim Liquidity Bonds, our first product, launched in December 2022. We supported and made incremental improvements to the protocol throughout 2023. While first targeted at SPOs as a way to bootstrap new pools with additional delegation, Liquidity Bonds have primarily been used to gain leverage in ISPOs. Borrowers have been eager to support ecosystem projects and participate in ISPOs with more ADA than they own or are able to borrow through overcollateralized lending. Lenders have been happy to earn what’s typically around double the base staking yield by selling their ADA staking rights for a fixed duration.

Optim’s TVL peaked at nearly 50m ADA during the ISPO boom that occurred mid-year during Cardano’s ‘DeFi summer’. Throughout the year Liquidity Bonds achieved a total volume of approximately 80m ADA and have stabilized at 20m-30m TVL. The average APY earned by lenders throughout the year was around 6.5%. As the Liquidity Bond market has moved towards frequent issuance of higher yield, smaller, shorter duration ISPO Bonds the fees generated for the Optim DAO have increased. December saw 27,000 ADA in fees accrue to the Optim DAO.

We’re proud to have developed a sustainable market that generates ‘real yield’ for lenders without relying on token subsidies in the form of emissions. Millions of ADA in interest has been paid to lenders over the course of 2023. While OPTIM tokens were allocated to liquidity providers during the first half of the year, these emissions were suspended with little to no impact on the market. Liquidity is still strong, with over 3.5MM ADA lent last epoch (456).

While volume can be sporadic and is largely dependent upon a stream of quality ISPOs, the protocol is feature complete and can continue to function with minimal maintenance from Optim Labs. We expect Liquidity Bonds to continue experiencing strong demand throughout 2024 as building on Cardano proliferates and the ISPO remains a popular tool for token distribution.

Optim Token and DAO

In October of this year both the $OPTIM token and Optim ODAO launched. This pivotal step towards decentralization was successful on many measures. There are currently over 1500 $OPTIM holders, with that number set to increase as airdrops to protocol participants occur in the coming months. Four ODAO votes have occurred thus far, with one currently active, on a range of important issues. From further formalizing the governance structure to managing protocol owned liquidity parameters, the ODAO has been active in proposing, debating, and directing the future of Optim.

The initial ODAO votes have seen the participation of over 10% of all $OPTIM in circulation. This activity is community driven and led as no team members or investors have tokens for voting. Continuing this trend of a truly decentralized ODAO will be a focus throughout 2024 as more tokens unlock and measures are considered to prevent concentrated voting blocks, a common issue with many DAOs.

As Optim continues to innovate and enters a new era of building and growth on Cardano it will be crucial for the ODAO to scale accordingly. We look forward to helping further streamline and formalize governance that can grow alongside the protocol as more decisions are made in a decentralized manner.

Optim To Date

Optim’s initial Liquidity Bond product was a pivot away from our original goal of ‘yield aggregation’ for Cardano. Strictly building on top of other projects wasn’t a viable option during 2022 and 2023. The ecosystem’s slower than expected rollout of DeFi primitives due to technical hurdles coupled with a deep bear market forced us to rethink our strategy.

Our new direction of building standalone products with a focus on facilitating yield opportunities resulted in the launch of Liquidity Bonds, which has been a resounding success.

However, the demand for Liquidity Bonds is dependent on a steady stream of quality ISPOs on Cardano. We believe that ISPOs as a viable and common fundraising method will die out in 18–24 months as staking yield falls into the mid to low 2% range. While projects may still use ISPOs for marketing and token distribution, the percentage of supply distributed will likely decrease, resulting in taking leverage via borrowed stake less popular. Liquidity Bonds are currently feature complete and can continue to run with little input from the Optim team.

Throughout the second quarter and early third quarter of 2023 Optim built a tranched lending platform similar to Maple Finance to enable compliant real world assets (RWAs) on Cardano. This emergent area of crypto is expected to see tremendous growth over the next 5–10 years, with EVM chains onboarding about $4 Billion in RWAs in 2023. A majority of these assets are backed by US Treasury bills in the form of sDAI (MakerDAO) and stUSDT (Tron).

We finished a majority of the protocol design and back-end smart contract code, but decided to put the project on hold as it became clear native fiat-backed stablecoins wouldn’t materialize. A majority of RWAs are facilitated by and require inputs of reliable fiat-backed stablecoins. Seeing two promising candidates in USDA (Emurgo) and USDM (Mehen) gave us hope that we could soon deploy and bring this important aspect of DeFi to Cardano.

The remainder of Q3 and all Q4 of 2023 were spent launching the $OPTIM token, getting the ODAO on firm footing, and designing the next protocols that will define the future of Optim.

Optim’s New Era

While facilitating yield through innovative protocols built on Cardano will always be the core of our mission, circumstances have forced Optim to think more boldly about how to best execute on our vision.

Maximally leveraging Cardano’s unique properties has always been a priority when designing products at Optim. Native liquid staking was the basis for our Liquidity Bonds, which aren’t found on any other blockchain. Continuing with this theme in a more ambitious context has led us to design an L2 — Leviathan. This critical infrastructure will enable us to deploy more ambitious yield protocols as well as help the DeFi ecosystem overcome many limitations. Speed, composability, and interoperability must be improved if we are to advance DeFi in a meaningful way in the coming years.

Leviathan leverages Cardano’s unique deterministic transactions as well as its exceptional liveness property resulting from true decentralization. While the term ‘L2’ means different things to different people, and some might say Leviathan is an ‘L1.5’ , we don’t care to get caught up in semantics. Hyperspeed, composability, and interoperability in a practical way that actually ships is our goal. We’ll continuously improve, iterate, and advance the system as time goes on and more contributors come into the fold. Some of the basic ideas behind Leviathan can be found in this article, with the whitepaper V1.1 release expected in the coming weeks. Significant progress has already been made on Leviathan, with the design and code well underway.

Optim is also developing a number of yield products designed specifically for deployment on Leviathan, the first of which will be OADA. Information on OADA can be found here, with more documentation prepared for release in January. Additional products from Optim as well as other teams will deploy on Leviathan as we build out the protocol, overcome technical constraints, and expand what’s possible on Cardano. We’re excited to bring a unique and practical scaling solution to market and continue to contribute to the growth of our DeFi ecosystem.

As development progresses on both Leviathan and OADA we’ll be better able to provide accurate timelines and a release roadmap for the community. We expect to have enough clarity for such projections by mid Q1 of 2024. Taking charge of our own destiny, moving forward with a bold vision, and creating innovative protocols that enable scaling, speed, and yield will be the theme of 2024 and beyond.