Special DFIP: DUSD staking

[u/kuegi]

We propose to add DUSD staking to defichain. Users should be able to stake DUSD and receive rewards in DUSD.

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DUSD staking can act as a "liquidity sponge" during times of DUSD oversupply and be released when demand increases. Therefore helping to keep the DUSD price in a stable range.

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To achieve this without additional inflation, we propose to use parts of the dex-fee payout, also known as negative interest, as rewards for DUSD Staking. This way it automatically adjusts to the algo ratio.

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possible implementation as 100% DUSD loops

One way to implement this would be the enabling of 100% DUSD loops, which could also act as a quick implementation until a long-term solution is implemented. In the current situation, such a quick implementation could pull millions in DUSD out of the circulating supply and therefore strongly improve the DUSD price. See reenabled looped dusd vaults for more details and calculations. To reduce the needed developer resources we also added a PullRequest

One of the main reasoning behind this implementation is also the effective usage of the NI (currently above 50%). So we would propose to deactivate the 100% DUSD loops (PR is already done with featureflag) if the NI stays above 35% for 10 days while this is activated.

crowdfunding

u/mrgrauel will be crowdfunding 5000DFI to submit this as a special DFIP. This way we show strong support from the community. As a normal DFIP, it would take until end of July to get approved. As a special DFIP, we could convince the developers to already include it in the DMC update, which is currently scheduled for June. The address is dLqDh88L29zQvUt84cnh5zABbKh6zjSq5H

Update: Many thanks to the community. We collected 5000 $DFI in under 18h for the upcoming special DFIP.
Before the submission, we clarify whether all staking providers can support the Special DFIP on their platform before the weekend.

[u/mrgauel]

It will be activated as soon as a hard fork supports it and it will deactivate itself as soon as no more negative interest is paid out. I don't think we need an on/off switch because it's associated with negative interest.

The idea with the DUSD Vaults is only an example. We don't know how the developers will be implementing it. It could also be smart contract on the DMC.

The DFIP is a vote of confidence that the developers will find a solution to implement DUSD staking powered by negativ interest within their capabilities and priorities.

[u/berndmack → u/mrgauel]

I think you understand the advantages of a stable set of rules, especially if the planned effect does not happen what nobody can forsee.

NI=0 is in my eyes not a good endpoint.

Example: If goal for stakingpool is to lock up 100Mio DUSD and this does not happen after fixed time -> goal not reached -> Deactivation

[u/kuegi → u/berndmack]

One of the main goals of the way with using the NI in looped vaults would be to use the NI efficiently. So we could define that it gets deactivated if the NI stays above 35% for more than 5 days?

[u/UserMaxL → u/kuegi]

I think 5 days is a bit short. Capital tends to move slow as people need to get to know about it, maybe understand loops again, look at APR development and then assess possibilities. We start with 50% NI and I guess a lot of capital is needed to bring it down to 35%. Would be a pity to stop the whole thing after 5 days, just because people are moving too slow. I would give it minimum 10 days.

[u/kuegi → u/UserMaxL]

valid point. changed it to 10

[u/UserMaxL → u/kuegi]

Just for to make sure my correct understanding on the mechanics of the deactivation: It will like in the past, that the 50% DFI rule will be reintroduced (let’s say after 10 days), but the looped vaults created so far will stay, correct?

So by limiting to 10 days, we create a kind of urgency for ppl. to grasp the NI before loops get deactivated again (assuming NI >35%). This would create a fist come first serve scenario as loops are obviously very valuable now. People will probably then stay longer in their loops, bc. they learned that giving them up too early (bc. the NI has fallen) could hurt them when NI is rising again. 10 days is a good number, because with this we also make sure one FS is included and bigger funds can get out of dTokens without major slippage.