Proposed by Tamashi ( @tamashi_papa )
Overview
This is a summary of two ideas I recently proposed: “Repeg idea: Flexible Delegation to reduce USTC supply” and “Repeg assist idea: Undelegation lock period selection system”. Both ideas are ways to reduce USTC supply and achieve repeg. We will submit a proposal and start voting on them.
The summary of these two proposals has been submitted to L1 Task Force Manager LuncBurnArmy.
Repeg idea: Flexible Delegation to reduce USTC supply
previously submitted page
https://classic-agora.terra.money/t/repeg-idea-flexible-delegation-to-reduce-ustc-supply/51641/4
Flexible Delegation can be delegated or undelegated at any time. There is no locking when undelegating. Rewards can be received according to the amount delegation in the same way as staking. No need for token funding. USTC supply will definitely decrease. There is no hyperinflation.
USTC Supply Reduction Concept
“””
if you have USTC, assume that you swap ①USTC → ②LUNC → ③USTC (assuming that sufficient time has been passed for the swap to ③)
② After swapping to LUNC, if only the USTC price doubles, the amount of ③ USTC will be half of the amount of ① USTC.
“””
It will reduce the supply of USTC by taking advantage of the phenomenon that the quantity is fluctuated by such repeated swaps. By giving rewards to users, we create the advantage of “flexible delegation” to cause this phenomenon through voluntary operation.
Structurally, the mechanism of converting to dedicated tokens by swapping and obtaining rewards may be similar to DEX liquidity farming. Liquidity farming may also be returned with less than the original amount when disassembling LP tokens, so it is the same as that situation.
Add a “liquidity farming-like structure” to the underlying structure of the chain like staking. By using Delegation, the origin of the reward can also be the Oracle Reward Pool, so it is simple.
Asset value if amount of USTC decreases
The asset value depends on the price of LUNC because USTC was swapped to ②LUNC. If there is no price fluctuation of LUNC, there will be no fluctuation of asset value.
new swap method
For normal swaps, the difference between ①USTC and ③USTC is accumulated in the liquidity pool. To prevent accumulation, burn USTC once and mint ncLUNC (Non-circulating LUNC). By delegating this ncLUNC, It will realize a swap that does not increase the selling pressure of LUNC.
The user just decides and inputs the amount of ncLUNC to delegata/undelegate.
USTC Supply Increase Countermeasures
“”"
if you have USTC, assume that you swap ①USTC → ②LUNC → ③USTC (assuming that sufficient time has been passed for the swap to ③)
② After swapping to LUNC, if only the price of LUNC doubles, the amount of ③USTC will double the amount of ①USTC.
“”"
In this situation, the supply of USTC will increase before the delegate. ncUSTC(Non-circulating USTC) is necessary as a tool to prevent it. USTC of excess value will not mint, instead mint LUNC and send it all to the Oracle Reward Pool.
Staking rewards will be replenished and the amount of USTC will always decrease.
Maintain peg (if over $1)
Re-activate the ‘USTC mint → LUNC burn’ algorithm that helped achieve the UST $1 peg before the LUNA crash. “USTC mint → LUNC burn” only (irreversible)
If this causes USTC to reach $1, it will burn LUNC at scale.
Delegation limit
The upper limit of ncLUNC that can be delegated with “Flexible Delegation” is the same amount as the LUNC being staking. As this can be expected that the more the demand for “Flexible Delegation” increases, the more the staking rate rises as well.
summary
The structure is similar to the liquidity farming of DEX, and it is an image that USTC is compressed by repeated Delegate and Undelegate.
Since ncLUNC is delegated, the asset value depends on the price of LUNC. Staking rewards will be replenished and the amount of USTC will always decrease.
Consequence of a YES vote
If we vote YES on this proposal, The simulation and testing of “Flexible Delegation” will be entrusted to the L1 Task Force, and work toward implementation will begin. These mean that we agree to “repeg USTC” and “replenish staking rewards”.
Consequence of a NO vote
If we vote NO on this proposal, The L1 Task Force does not do anything about “Flexible Delegation”. These mean that we oppose “repeg USTC” and “replenish staking rewards”.
Repeg assist idea: Undelegation lock period selection system
previously submitted page
https://classic-agora.terra.money/t/repeg-assist-idea-undelegation-lock-period-selection-system/52043
This “selection system” gives options for the LUNC return period after undelegation. At the same time, it is a mechanism for burning USTC.
If you undelegate LUNC you are currently staking, It will be locked for 21 days. This option provides you an extra choice other than 21 days. The options are “21 days, 14 days, 7 days”. The initial state is still locked for 21 days. steker pay USTC to choose 14 days or 7 days. All paid USTC will be burned.
USTC amount required for payment
Select 14 days: USTC amount required for payment is “equivalent to 3% of total LUNC entered for period change”
Select 7 days: USTC amount required for payment is “equivalent to 6% of total LUNC entered for period change”
If you want to reduce the lock period of $100 worth of LUNC to 14 days, you pay $3 worth of USTC.
If you want to reduce the lock period of $100 worth of LUNC to 7 days, you pay $6 worth of USTC
Consequence of a YES vote
If we vote YES on this proposal, The simulation and testing of the “selection system” will be entrusted to the L1 Task Force, and work toward implementation will begin. These mean that we agree to “repeg USTC” and “lock period option”.
Consequence of a NO vote
If we vote NO on this proposal, The L1 Task Force does not do anything about the “selection system”. These mean that we oppose “repeg USTC” and “lock period option”.