[Proposal] Fork the network before the snapshot of the attack and remake UST Fees to grow in the missing percentage of its $1 peg

Fork the network before the snapshot of the attack and remake UST Fees to grow in the missing percentage of its $1 peg…

The network fees will be in parallel with the rate of a decline in the price of UST to automatically restore the peg.
If the UST peg drops 1%($0.99), the network transaction fees will be at 1%. If the UST peg drops 3%($0.97), the network transaction fees will be at 3%, and so on.
The fees can be burned to recover the percentage of the peg.
This will force every trader to transact UST close to its $1 peg and will penalize traders who trade UST under its $1 peg.
When converting UST to LUNA on-chain it can be free because it helps price recalibration and further protect the peg. Also, fees can be free if you buy UST for a $1 value using the on-chain AMM to further price recalibration.

I believe this is a Death Spiral Killer.
What do you guys think?

If you are trading 1 UST at $.95 the network will charge you 5% to regain the peg. Also, this will incentivize people to sell UST close to $1. I don’t understand how you don’t see that this will force UST to be stable.

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When you say transaction fees, do you:

H1: Mean transaction fees charged on exchange.
H2: When I try to to convert UST to LUNA

I assume for now that it is later, meaning when I am charged for converting UST to LUNA.

Lets assume the former, Hypothesis H1.

Suppose I have 1 USD, and UST price on exchange is 0.95
I spend 1 USD, get 0.95 worth of UST and rest 0.05 goes to exchange.

If I try to sell it back, I can only do it at 0.95 which is current market price.

As such, why would I do the transaction in the first place.

Higher transaction fees of exchange causes trading halt and not price recalibration.

Sounds good, I have a similar idea with an airdrop that could given to small cap users [Proposal] Revive LUNA (RUNA) with new Airdrop, with the focus to heal grassroot investors and to regain trust for Algorithmic Stablecoin ecosystem

Both scenarios H1 and H2 you made are wrong. If the price of UST drops to 95% the network will charge you 5% to transact not the exchange. Also if it’s on an exchange, the seller may get charged, not the buyer. A halt is necessary when a Death Spiral is happening. When converting UST to LUNA on-chain it can be free because it helps price recalibration and further protect the peg. Also, it can be free if you buy UST for $1 using on-chain AMM to further price recalibration.

Sounds interesting.

Yes it will prevent a death spiral by halting the transaction.

But even when death spiral is not happening, lets say depeg is only 10%, it can cause a halt.

Without the network fees, I am giving huge incentive to people to do arbitrage, make use of the price difference, earn profit and recover the peg.

With the network fees involved, that arbitrage incentive is nullified. And recovery would be weak due to halt.

The system designed by you would be slow recoverable, death spiral prone. And many may argue it to be better than current system.

But as per me, better would be to make it fast recoverable (not using fees) and introduce halt when spiral situation is forming.

Why would someone in their sober mind not dump anything terra-related we airdrop them?

You must not understand this Proposal. This will discourage traders to not sell UST under $1

I understand that introducing fees will discourage traders to sell under 1 $. Else they would have to pay the fees and get losses.

But assume that due to some reasons, the price is 1.1 Let’s say whale attack or crypto pump. Or a good news situation. Or the system is depeg.

Charging sellers would not help. Whether they sell for 1.1, 1.2 or 1. They get 1 dollar out of it. Rest goes to fees.

For lower part (less than 1 $), I am clear.

For higher part, how will you make sure they sell it near to 1 ?

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The arbitrage situation when price is above 1$ assumes:

You buy LUNA (variant coin), covert it on chain to UST. Sell it at higher price (1.1)

Increased selling pressure will cause the price to come down.

But in this case, I am not making any profits. As even if I sell for 1.1, I make 1 USD.

So incentive to arbitrage (in case of higher price) is not there.

For eg. UST price is 1.1
I have 1 USD, I buy LUNA worth 1 USD. Convert it on chain to 1 UST.
And sell it in exchange for 1.1 USD and make profit. (Arbitrage opportunity incentive)

When fees is there, I would be able to sell it for 1 USD only as rest (0.1) goes as a fees.

So there will be no incentive to arbitrage. And recovery would be slow in case of small deviations.

Nope you are wrong sir. IF a death spiral happens people will buy UST from exchanges for cheap to sell it on-chain with a profit with no fees.

I don’t think arbitrage trading will be nullified. The price is never perfect. Even with a 1:1 backing like USDC, the price still at least fluctuate by 1%. So there will be arbitrage opportunities.