How Does Cooler Loans Work?

Peer-to-treasury lending where Olympus Treasury is the lender; no price-based liquidations — loans persist indefinitely regardless of gOHM/USDS market price; default occurs only when unpaid interest exceeds governance-defined threshold

Eliminates price-based liquidation by anchoring LTV to treasury backing rather than market price. No major DeFi lending protocol at $100M+ TVL operates without price-triggered liquidations. The mechanism requires treasury solvency as the structural substitute for liquidation risk management.

0.5% APR fixed by OCG Proposal 8; no market rate adjustment, no loan maturity date; interest accrues continuously and is collected without expiry

Fixed-rate lending exists (Notional, Term Finance) but always with defined maturities. A perpetual loan at a governance-fixed rate with no expiration is structurally distinct — it creates unlimited-duration exposure for the treasury lender at a rate that may not reflect future market conditions.

LTV set by LTV Oracle contract controlled by governance (currently ~2,961 USDS per gOHM, increasing by 0.1 USDS/day as a deflationary 'drip'); no external price feed; no price-based margin calls

Using governance-defined LTV instead of oracle-sourced collateral pricing eliminates oracle attack vectors but introduces governance capture risk as the primary parameter control mechanism.

On interest-default, gOHM collateral is burned (permanently removed from supply) rather than liquidated via auction; 1% liquidation penalty; burning is deflationary for OHM supply

OHM burn on default is structurally unique to Olympus's monetary policy but mechanically is a deflationary collateral disposal — not a novel mechanism type.

DLGTE contract allows up to 10 wallet addresses to delegate to a single Cooler Loans position; enables multi-wallet borrowers to consolidate governance voting power into one on-chain loan

Multi-wallet delegation is a standard governance feature.

If OHM market price collapses below the governance-set LTV (~2,961 USDS/gOHM, implying gOHM ≥ ~$3,000 in USDS value), all borrowers have loans worth more than their collateral. No on-chain mechanism compels repayment or collateral top-up. The Olympus Treasury absorbs the full mark-to-market loss until either OHM price recovers or borrowers voluntarily default (triggering burn). A large sustained OHM price decline would leave the treasury with $127M+ in non-performingpositions and burned collateral with no recovery.

The Olympus Treasury is the sole lender for all $127M in outstanding loans at a perpetually fixed 0.5% APR. If USDS market rates rise significantly above 0.5%, the treasury is lending at below-market rates indefinitely, subsidizing borrowers. The perpetual structure means the treasury cannot exit or reprice existing loans — creating lasting underpayment exposure unless governance votes to change the rate (which would not apply retroactively to existing loans per current design).

All key parameters — LTV, interest rate, default thresholds — are controlled by OCG governance votes. A single successful governance proposal can set an unrealistically high LTV (enabling massively undercollateralized borrowing against the treasury), reduce the rate to 0% (eliminating treasury revenue), or adjust default thresholds to prevent any defaults regardless of non-payment. Governance capture by a large OHM holder or coordinated whale voting creates systemic parameter risk.

When interest defaults trigger gOHM burn, the burned supply creates deflation in OHM/gOHM outstanding. In a mass-default scenario (OHM price collapse driving simultaneous non-repayment across many borrowers), large-scale gOHM burning reduces the collateral base used for future Cooler Loans, potentially reducing the protocol's TVL capacity and treasury utility permanently.

The perpetual loan structure with no maturity means the treasury must maintain $127M+ in USDS liquidity indefinitely. If the treasury redeploys USDS into illiquid yield strategies, a sudden demand for loan repayment plus new borrowing drawdowns could create a USDS liquidity crunch. In the worst case, treasury USDS depletion could prevent new loans while existing borrowers cannot be forced to repay — freezing the system.