Summary
The goal of this proposal is to provide exit liquidity to USTC holders via a Reverse Auction (also known as a Dutch Auction). In a best case scenario, USTC holders can redeem 1 USTC for $0.50 (a 50% haircut from $1)
What is a Reverse Auction?
A reverse auction is a type of an auction where the roles of buyers and sellers are reversed. For one buyer, there exist many sellers.
The USTC reverse auction will start with a target price of 1 USTC = $0.50 and will decrease as sellers underbid each other.
How will the Reverse Auction be implemented?
4 core things are needed in order to execute the reverse auction:
An external Liquidity Provider - potentially Binance
A Terra Classic stable coin other than USTC - letâs say, EUTC
A market for EUTC<>BUSD on a DEX - potentially Terraswap
Increasing the burn tax for USTC on-chain swaps to 50% (currently Burn Tax on MsgSwap transactions are excluded)
Here is how it would work:
We leverage the partnership with Binance and ask them to use their trading fees to provide liquidity for EUTC<>BUSD on Terraswap. The target rate for EUTC will be 1 EUTC = 1.09 BUSD
We raise the burn tax for USTC on-chain swaps to 50%. Anyone wanting to procure EUTC for exit will need to swap their USTC for EUTC, albeit with a 50% haircut. The 50% of USTC during the swap shall get burned. If everyone swaps from USTC to EUTC, we could potentially look at burning a supply of 4.9B USTC.
Once USTC holders have procured the EUTC after swapping from USTC and taking a 50% haircut, they can proceed to Terraswap to take part in the Reverse Auction where they could potentially exit their 1 EUTC @ 1.09 BUSD.
It is likely that the liquidity in the EUTC<>BUSD pool will dry up very fast. Sellers can sell at the prevalent spot price on Terraswap or wait for Binance to replenish the Liquidity Pool from trading fees in the subsequent month at the rate of 1 EUTC = 1.09 BUSD.
Pros of this Proposal:
Fairly easily to implement - no complex coding necessary (MsgSwap will need to come under the gambit of Burn Tax which can be managed by the L1TF @ek826 )
Exit Liquidity to USTC holders at a price potentially closer to $0.50 per USTC
Potentially burning billions of USTC (via Burn Tax on swaps)
Cons of this Proposal:
The money used for burning LUNC from Binance trading fees would be diverted to providing exit liquidity for USTC holders
Dependency on Binance to execute this or another external liquidity provider
Long drawn exit due to limited liquidity
Quick Note regarding Front Running:
The âEUTCâ used in the above scenario is for demonstrative purposes only. In order to avoid front running, one of the many Terra stables will be used at random for achieving this, which will be revealed only once a 50% burn tax has been implemented on USTC on-chain swaps.
Another thing to note is that this does not conflict with the USTC re-peg proposal by @wrapped_dday but it may conflict with the USTC re-peg proposal by @RedlineDrifter
It looks good.But one question:Does your team already have an arrangement with Binance and Terraswap?Or you already communicate with them and do they already have the intention to do this?
Terraswap shouldnât be an issue - there is already a LUNC<>BUSD market on Terraswap (BUSD via Wormhole), so I donât see creating a Terra Stable like EUTC<>BUSD market on Terraswap as a huge challenge.
As far as Binance is concerned - their past patterns seem to indicate that they are willing to use their trading fees in a manner that the community wants - so this would largely depend on the continued Binance support and community approval.
Just because you are the man of action,so we always have full of confidence with you.Thatâs why I guess you already have an arrangement with this plan and It seems you indicated something in your expression : )
As you are saying " As far as Binance is concerned - their past patterns seem to indicate that they are willing to use their trading fees in a manner that the community ". But according to binance last announcement about lunc they are not happy with the proposal 10983 which was filling community pools and this proposal was passed and binance against of this proposal. So as mentioned in the binance announcement that they are in touch with TGF. So first you will take review of binance on this with TGF and move forward as you are including binance.
Looks interesting dude. If you like I can send you on total Binance trading fees accrued for the last quarter on USTC/BUSD trading pair. Youâll get an indication of if this is feasible/how much liquidity would be readily available.
If youâre just using Binances 0.02% trading fees it dont think itâll conflict with my proposal.
Absolutely not! We need to repeg USTC and bring back the algostable functionality to LUNC.
Just because no oneâs managed to do it yet doesnât mean itâs impossible. Weâll get there, eventually.
But incentivizing the dismemberment of the token means LUNC loses its leading edge, and becomes just another Cosmos chain (may as well rename it Luna 3 at that point). Also, most of the small holders who lost their life savings in the crash wonât be made whole with this, not even nearly. Youâre basically giving TFL and other giga-whale wallets the ability to cash out at the expense of everyone else.
USTCâs fall represents the fall of the entire Terra Luna ecosystem - bringing it back is vital!
And LUNC needs USTC, not just for the swaps but for a symbolic victory thatâll re-ignite interest in it.
Yeah actually I was just referring to the trading fee (which I believe is 0.1%(?)).
If it doesnât clash with your prop - I would like love to combine the two props (although Iâm highly sceptical of binance introducing a âtaxâ on their trading, as they have never done it before)
Yeah and the intention of this prop is in the direction of re-pegging UST. By giving an exit option to those who donât want to wait very long we are serving 2 needs:
Offering liquidity to USTC holders at a lower Capex
Reducing the supply overhang of USTC to enable USTC to re-peg faster (relatively)
This prop aims to be in net benefit to USTC holders (and LUNC too as it causes no LUNC minting - unlike other USTC re-peg proposals )
Sorry but I will be a No on this one dfunk even though i valued your gas hike prop and end of the remint.
Enough of piggybacking of the burn tax and what it was originally itended to do. It is meant to burn LUNC. Binance buybacks are also meant to burn LUNC, not UST.
Stop trying to hjjack what original holders and Tera Rebels lead by Vegas achieved at that time. This is getting ridiculous.
USTC bagholders recieved a TUNA airdrop, they should work for their bags with Do Kwon. Im not gonna allow impoverishing LUNC holders for the benefit of USTC bagholders.
I disagree with that assumption. Enabling capital flight from USTC makes any hypothetical repeg attempt exponentially more difficult. The current liquidity trapped with USTC should be used as fuel for its (re)ascension, not be sent to a bazaar and drained like a pig carcass.
Youâre also missing out on the social aspect: going down this path is tantamount to admitting defeat.
LUNCâs main trump card right now is seizing the spotlight through a successful re-peg event that doesnât disenfranchise USTC holders (which the Dutch action will do, make no mistake about it). Engineering a repeg plan that lets everyone come out in the black (USTC + LUNC holders) will propel the chain to superstardom and international news. I think thatâs a prize worth fighting for, even if it takes us a while to figure how to claim it.
But that wonât happen. IMHO the prop is a net negative:
USTC holders sacrifice a massive portion of their investment (currently trapped as CF debt)
LUNC holders lose out on the phoenix/rebirth narrative and deflationary mechanics/swaps
Feel free to disagree, but I think itâs a really, really, REALLY bad idea.
Itâs difficult to see how this would benefit anyone other than those with large holdings in USTC. There are other more viable roads to a repeg that benefit the community more widely. Letâs be patient.
Yeah I would have to agree with you on this. I think we could just use the USTC/BUSD trading fee for this while keeping the LUNC/BUSD trading fee untouched (i.e for buying back and burning LUNC as it was meant to be).
Itâs not just enabling capital flight - 50% of USTC will get burned. It would make it easier to re-peg USTC with a supply of 4.9B vs a supply of 9.8B.
Thereâs functionally 0 difference between a 10B and 5B supply when most of its capital wants to flee.
And my friend, youâre missing a major point here: the only thing keeping present USTC holders (both retail and institutional) from selling is the hope that one day the token will reach $1 again. Thatâs it! Thatâs the only reason we havenât seen its complete devaluation. If you remove that hope, youâve taken everything from them⌠not to mention youâre signaling to the wider crypto community that weâre admitting defeat and auctioning off our remaining assets. And keep in mind retail got screwed the most during the crash, so youâd be screwing them over yet again by further kneecapping their exit potential.
You need to consider game theory when designing your systems.
Crypto isnât just ECON + TECH, thereâs a social aspect underpinning those two.
I do appreciate the work youâve put into this, but I think itâs fundamentally a bad idea.
But when most of the capital realises that they could potentially flee at $0.5, price could appreciate ~25x, making it easier to re-peg to $1 (from $0.5 rather than $0.02) for those who donât want to flee.
(although Iâm highly sceptical of binance introducing a âtaxâ on their trading, as they have never done it before)