OVL is the proposed native token of Overlay Protocol. It is an ERC-20 token on the Arbitrum Mainnet. OVL serves a dual purpose and will be used to participate in trading and DAO governance after launch.
OVL may be used by holders to:
- vote on governance proposals of the DAO governing Overlay Protocol
- open positions on the markets offered on Overlay by using OVL as collateral
To enter a position, a user of Overlay Protocol will lock OVL into the Overlay smart contract as collateral/margin. A user could leverage this collateral on either side of any market offered by Overlay.
On closing a position, the position could either be profitable, unprofitable or at a break even. If the position is profitable, the protocol will mint OVL tokens equivalent to the delta difference of the market between build and unwind. These tokens are added to the circulating supply of OVL.
If the position is unprofitable, the protocol burns OVL tokens of a value equivalent to the loss sustained. These tokens are removed from the circulating supply of OVL. No tokens are minted or burned in case a position is closed at a break even.
Currently, Overlay Protocol is governed by Planck Cat DAO. Members of Planck Cat DAO are issued ERC-721 tokens/NFTs depending on their contribution to the protocol. For more details on the structure of Overlay governance at this time and how one can start contributing to Planck Cat Dao, please click here.
In the future, OVL will be the governance token of Overlay Protocol and may be used by holders to vote on governance proposals made by the community.
This is similar to other existing DAOs like Maker DAO, Yearn Finance, etc. that also use their respective native tokens for voting on governance proposals for functioning and decision making.
There were 8 million OVL tokens when the token was first deployed. The OVL supply, by function, is dynamic. OVL will be dynamically minted and burned by the smart contracts when positions are unwound by users.
Last updated on Oct 18, 2022