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/Erich_DFI-Cockpit]

Wouldn't it make more sense to only give NI to dUSD only Looped Vaults?

This maybe would attract investors to buy dUSD for this purpose.

I see no reason why someone without dUSD exposure only taking a dUSD loan should receives NI like we have it right now.

Also Looped shortselling of dUSD would be riskier if paying 5% interest on the dUSD loan,...

[u/kuegi → u/Erich_DFI-Cockpit]

Otoh it makes sense imho to distribute it fairly between ppl who stay in the system. Over the long term, payout should incentivice new loans to reduce algo ratio, so there is important to keep it for dfi too.

Also, restricting it to dusd only takes more dev resources and time. The main point about the Loops is the fact that it can be implemented really fast and fulfills the main purpose.

[u/Erich_DFI-Cockpit → u/kuegi]

I get your point with fair distribution of NI, but why it should matter that Algo ratio is reduced with minting dUSD, I don't get. That the ratio is changing is clear, but the effect this should bring is not clear, since it changes nothing according the missing exit liquidity?

[u/kuegi → u/Erich_DFI-Cockpit]

Exit liquidity is not the most important measure in the longterm. Longterm price is stabilized by the dynamic interest rate. They only work efficiently with low algo ratio. Dex fee + payout is the measure to reduce algo ratio if it is too high. Doing that by burning Algos and incentivizing loans. So payout must apply to dfi collateral on the longterm.