DFIP-2208-A: payout 50% of DEX-fee to DUSD loans & introduce real negative interest rates #195
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Where will the additional DUSD from negative interest rate on step 2 come from . (should be capped to the max of the burned ones?) |
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This is absolutely crucial and timely. Thanks again for the initiative @kuegi @DanielZirkel |
negative interest is created from the blockchain. Can be seen as newly created algorithmic DUSD. IMHO it must not be capped. In reality it is capped by the created DUSD and won't create extreme amounts. (specially compared to the corresponding DUSD loans.) |
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Lets do it! When is the next voting round and could be be implemented straight after that? |
Wouldn't it be better to shorten the loan? Consider both dangerous. More inflation to combat the effects of inflation. |
its not more inflation fighting inflation. its inflation if the demand is higher than the supply (DUSD premium). so inflation to fight deflation. and the interest reduces the needed payback and it can't go above the size of the loan. once the accumulated negative interest reaches the size of the loan, the loan is gone and no more negative interest accumulates. |
Agree. My misstake. I had the current (inflated) situation in mind. Your solution would maybee lead to dUSD premium. |
kynkong91
changed the title
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mnstate_validate.log |
and others
DFIP Overview
Describe your proposal
For details please follow the provided reddit posts.
We propose 2 improvements for a long term stabilization of the DUSD price. Point 1 (DEX fee payout) also provides a possible short term solution to the DEX fee and massive positive price impact on DFI:
Payout 50% of the DEX-stabilization-fee to holders of DUSD loans
The main reason for the DUSD discount is an imbalance between the circulating DUSD and the DFI price. There are too many DUSD in the system, so to stabilize the price, we need to change that imbalance.
The payout of 50% of the DEX-fee incentivizes the creation of DUSD loans. Since the creation of DUSD loans requires (at least) 150% collateral, more loans actually take liquidity out of the market. 50% of this liquidity must be DUSD/DFI, but numbers show that it will likely be far more than that.
This leads to 2 positive effects: due to the increased amount of DUSD loans, the high DEX-stabilization-fee will be reduced. And due to the reduced DUSD and DFI liquidity in the system, there will be a strong positive impact on the DUSD and DFI price. A rising DFI price also leads to more DUSD being locked in the DUSD-DFI pool which takes even more DUSD out of circulation.
Since this is not yet implemented, we propose the following process until it can be implemented in the consensus:
The payout should be "simulated" via negative interest rates on DUSD loans (possible in v3). With
DEXFee30being the paid DEX-stabilization-fee from the last 30 days andDUSDLoansbeing the maximum amount of DUSD loans in the last 24 hours, the negative interest should be calculated asnegInterest = (DEXFee30 * 0.5 * 12.16) / DUSDLoansThe negInterest should be updated every day at the same block as the DEXFee is updated right now. Also the same procedure as the DEX-fee (announcing one day in advance of the new value)
For the first 7 days after activation the used DEXFee30 should be set to
max(3 500 000, DEXFee30). This is because we burned 3.5 mio DUSD in the 30 days before August 12th and this makes the effects in the first week after activation predictable.For day 8-14 after activation the used DEXFee30 should be set to
max(DEXFee30, 3500000 * (14-day)/6 + DEXFee30*(day-8)/6)to smooth out the transition between the initial payout and the actual DEXFee in case the first weeks effects already lead to a strongly reduced DEXFee and/or DUSD burn.As a reference: 3.5 mio DEXFee30 with 10 mio DUSD loans (current amount of DUSD loans) would result in 212% APR paid out to those loans. With 100 mio DUSD loans it would still be 21% APR.
The new formula for the DEX-stabilization-fee should start at 30% algo ratio and be calculated as
DEXFee = (2 ^ ((AlgoRatio - 30)/10) - 1) / 4Introduce real negative interest rates on DUSD
In case of a DUSD premium, the interest rate of DUSD should become negative and not be capped at 0. The DUSD interest rate should be calculated as
interestRate = - ((2 ^ (DUSDPremium/10) - 1)*20). Since this is increasing strongly above 5% premium it should provide a strong enough incentive to create more DUSD loans and sell them at a profit.Therefore the FutureSwap (DFI->DUSD) should no longer be needed and can be permanently deactivated. This also reduces the risk of getting too many algo DUSD into the system again.
How does this DFIP benefit the DeFiChain community?
More collateral locked up in the vaults provides positive price pressure on both DFI and DUSD, benefiting the whole community in increased prices and a strengthened DUSD.
Negative interest rates instead of the DUSD FutureSwap provide a more stable and less attackable DUSD-peg by providing a healthier algo ratio.
Non-obligation
I understand that vote of confidence for DFIP carries no obligations by any developers to implement the proposals. DeFiChain is a community projects. Pull requests can be submitted by community and reserved to be evaluated for safety and general community acceptance.
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