MX24C
commented
2 years ago The short term solution DFIP 2112 does include
- every dUSD loan should be repayable with DFI (at oracle price + 1% penalty).
- dUSD can be used as collateral at a fixed rate of 0.99 USD for every loan, providing additional utility for dUSD
A. Question about what does happen with DFI used for payback loan? Do these DFIs get burnt? - Missing statement in the proposal
B. Remark concerning effect on DUSD-DFI LP: The proposal does allow to all that have minted DUSD and bought DFI with discount - to realize their arbitrage gain "fast" and pay back their loan. But how big is the chance to bring the DUSD in the LP pool to 1 USD as long as loan scheme is 150% and for that you need a collateral of min. 250%? - The incentive to mint DUSD and go to the LP-pool has to get set opposite to alternative investment options you have - a simplified calculation: LP1 DUSD-DFI (100+100) interest LP1 > interest LP2 (e.g. USDT-DFI) (250+100)interest LP2. - If LP2 is at 60% you need on LP1 > 105%. (interest on loan not considered). So we will have in best case some months the incentive to mint DUSD over a loan. We need a final solution based on other mechanisms to create parity of DUSD to USD. Easy to realize solutions that do help to reduce the cost of holding a Vault are - considering LP tokens (crypto coins) and a loan scheme of 125% or less. But this will not be enough. The effects of a funding rate has to be investigated too as well as other ideas. There are now some concepts live in the crypto space that are based on mechanisms to reproduce a stable coin,
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Emergency DFIP bringing dUSD to $1
Overview Requestor: @BalthasarBecker Proposal fee: 01db41727f2092148d328b946a3ca0c4eb8faf82d393488ab65466eb81c26976
After a successful launch of the Fort Canning, hard fork incentives for dToken liquidity providers went live on the 6th of December. Every true DeFiChain hodler started earning sweet rewards via minting or buying dTokens providing them as liquidity for the DEXs. Unfortunately, with the demand of dTokens exceeding supply all dTokens trade at a premium ever since. Taking into account that we - the DeFiChain community - rely on accurate prices, especially regarding the dUSD price, I herewith propose the following solution to guarantee the dUSD USD peg. Furthermore, I advocate for a fast and efficient solution, ensuring we can fully focus on getting more people to participate in the amazing features DeFiChain offers.
The proposed idea is a composition out of multiple ideas that were thoroughly discussed, edited and further improved by several community members therefor representing a true community effort:
Every dUSD loan should be repayable with DFI (at oracle price + 1% penalty). dUSD can be used as collateral at a fixed rate of 0.99 USD for every loan, providing additional utility for dUSD
The proposal is straight forward and easy to implement, but not perfect; it will directly arbitrage the dUSD premium, but many concerns of the community, including myself have been raised whether this proposal will devalue dUSD causing its price to fall below $1. As this risk still persists - there is no free lunch and solving the dUSD premium will always come at a cost - I would like to bring forward a couple of reasons why, at least on the short run, chances are rather low that dUSD will end up trading at a discount causing a default on the USD peg. First, currently we face more demand than supply causing the dUSD premium, hence buying pressure will continuously hold up dUSD prices until liquidity mining incentives reach unattractive levels. Moreover, once buying pressure fades and dUSD starts trading at a discount, people with open dUSD loans will buy back dUSD at a discount to close their loan. Currently, we have 70,000,000 dUSD minted, hence a fairly high buffer to mediate curtain price drops. Last but not least, I highly want to stress the point that this is a short term solution arising from the need of solving the problem fast and efficiently, and I strongly advocate for several long term changes providing additional support for the dUSD price: Implementation of a DEX fee for every transaction of about 0,05% for both the taker and maker, resulting in a total of 0.1% burn fee, which reduces any dToken over time Including additional sources for collateral such as liquidity mining tokens such as BTC-DFI or others to further incentivize minting of dTokens Introducing decentralized futures (like the road map suggests) to stabilize prices.
Finally, let me say again, that this is not a perfect solution without any risks or any cost. But, as we have all agreed during two Twitter Spaces allowing anyone to voice their opinion and hearing out other proposals, we are all aware that we need a working solution with minimal risk that can be implemented in a fast and efficient way.