I was thinking to let ustc be pegged at a dollar and above. What do you all think of this idea
Yes my end and my validator. Just waiting on Orion and all nodes then itâs a goâŚfingers crossed for you redline
2 Likes
@RedlineDrifter
I am concerned that this proposal relies not only on CEX to implement, but also trading volumes below the stated peg to accumulate the required funds to collateralize USTC.
There is a flawed assumption for calculation for how much dynamic fee divergence protocol can pull-in, it assumed people will be willing to sell below peg, and the volume below peg, although assumed to have 90% drastic reduction, is too optimistic. Majority of volume on CEXs are by liquidity providers, if stated peg provided a âfloor priceâ for USTC, whoâs the one going to sell below peg?
Will liquidity providers? No, they are going to anywhere they can make money.
Will you / retail investors? Most likely not as everyone knows they gonna get cut.
Then, yes you held the price up, but at what cost? Killing the trading volume and not able to generate required funds to collateralize USTC through trading volume below peg. Whatâs next?
A low trading volume pair will risk getting de listed on CEX and this is a much larger risk when we already have so limited liquidity on / off chain.
1 Like
Hereâs another argument for you to be used in the CEXs dialog:
The proposed algorithm is not only about restoring the LUNC/USTC peg but also the core algorithmic logic for the long-term stability of the USTC stablecoin itself (with a liquidity fallback using collateral pools).
Put it simply: This is the updated LUNC/USTC seigniorage machine peg supporting algorithm, that we would like them to support.
P.S. Maybe they can keep 50% of the divergence fee processed off-chain as an incentive for supporting the algorithmic stablecoin peg mechanism!
5 Likes
I honestly think this would work fine as an exchange mechanism enforced across the blockchain (universal Dapp), and doesnât necessarily need to be enforced on off-chain exchanges imo. With high liquidity and steadily reducing supply, a USTC marketcap of ~$300m could be sustained with confidence. You also likely need some methods to raise funds for the initial pool ($50 million is a decent starting point).
1 Like
Divergence Protocol is a groundbreaking innovation designed to restore and maintain the peg of the USTC stablecoin to $1. With its unique approach and underlying mechanisms, the Divergence Protocol aims to bring stability and confidence back to the USTC ecosystem. Here are some critical aspects of the Divergence Protocol that showcase its potential to achieve this goal
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Adaptive Fee Mechanism: The Divergence Protocol introduces an adaptive fee system that responds to fluctuations in the USTC price. The protocol discourages selling pressure by imposing higher fees on transactions below the peg and incentivizes holding or buying USTC. This targeted approach ensures that the impact of the fees is only those contributing to the price deviation.
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Recapitalization and Repegging: The Divergence Protocol aims to gradually recapitalize USTC and restore its peg to $1 without relying on minting, forking, or external capital injections. This is achieved through automatic buybacks and the accumulation of collateral as a basket or index of tokens.
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Incentivized Holding: The adaptive fee mechanism employed by the Divergence Protocol encourages users to hold or buy USTC when its price is below the $1 peg. This helps create a positive feedback loop, fostering price stability and contributing to the reestablishment of the peg.
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Reduction of Circulating Supply: The introduction of USTC Staking/Savings Vault and unidirectional swaps for LUNC help reduce the circulating supply of both tokens, further stabilizing the ecosystem and potentially increasing the value of both tokens in the long run.
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Strengthened CEX Relationships: The Divergence Protocol offers a win-win scenario for USTC and centralized exchanges (CEXs). By compensating CEXs more than they would earn from regular trading fees, the protocol encourages their cooperation, which is essential for its success.
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Community Empowerment: The Divergence Protocol emphasizes the importance of the USTC communityâs involvement in decision-making. Allowing the community to vote on and adjust the protocolâs parameters ensures that the ecosystem remains adaptive and responsive to the needs of its users.
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Long-term Solution: Unlike temporary fixes, such as minting or reverse splits, the Divergence Protocol offers a sustainable, long-term solution to the USTC stablecoinâs pegging issue, setting the stage for a more resilient and stable ecosystem.
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Automatic Buyback Mechanism: The protocol replaces manual buybacks with an automatic buyback system, which ensures a more consistent and efficient process of restoring the USTC peg. This system operates in tandem with the Divergence Fee, which gradually increases collateral, strengthening the peg over time.
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Oracle and Community Pool Funding: The Divergence Protocol helps restore USTCâs peg and funds essential ecosystem components, such as the Oracle Pool and the Community Pool. This support fosters a more robust and self-sustaining infrastructure for the stablecoin.
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Adaptive Governance: The protocolâs governance model allows for ongoing adjustments to the fee and distribution parameters, making it a flexible and adaptive system. This adaptability enables the community to respond to changing market conditions effectively.
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Precedent for Innovation: The successful implementation of the Divergence Protocol could set a precedent for other stablecoin ecosystems facing similar challenges. It demonstrates the potential for creative solutions to tackle complex problems within the crypto space, inspiring further innovation and growth.
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Collaborative Approach: The Divergence Protocol encourages collaboration between the USTC community, LUNC holders, and centralized exchanges (CEXs). This cooperative spirit is essential for successfully implementing the proposed changes and fosters an environment where stakeholders work together for the common good.
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Positive Network Effects: By introducing USTC Staking/Savings Vault and Unidirectional Swaps, the Divergence Protocol aims to increase network traffic and create additional use cases for USTC and LUNC tokens. This increased activity can lead to a virtuous cycle of growth and adoption, benefiting the entire ecosystem.
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Scalability: The Divergence Protocol is designed to scale with the ecosystemâs growth. As the protocol gradually recapitalizes USTC and builds collateral, it becomes better equipped to maintain the peg in the face of market fluctuations. This scalability ensures that the Divergence Protocol remains relevant and practical even as the USTC ecosystem expands.
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A Learning Opportunity: Implementing and monitoring the Divergence Protocol will provide valuable insights into the dynamics of stablecoin ecosystems and their resilience to market pressures. These learnings can then be applied to improve and refine the protocol or inspire new solutions for other stablecoin projects.
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Risk Mitigation: The proposal emphasizes a cautious and measured approach by carefully outlining the potential risks and challenges of implementing the Divergence Protocol. This awareness of potential pitfalls helps minimize unforeseen consequences and increases the likelihood of a successful outcome.
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Encouraging Long-term Holding: By imposing fees on those who sell below the peg, the Divergence Protocol incentivizes users to hold onto their USTC tokens, thus reducing selling pressure and promoting stability. This targeted approach ensures that the burden of fees falls primarily on those contributing to the pegâs instability.
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Market Manipulation Deterrence: The Divergence Protocol is a defense mechanism against market manipulation by imposing fees on trades below the peg. This discourages malicious actors from attempting to artificially suppress the price of USTC, contributing to a more stable and resilient ecosystem.
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Building Relationships with CEXs: The successful implementation of the Divergence Protocol relies on solid relationships with centralized exchanges. By working together and demonstrating the benefits of the protocol, the USTC community can strengthen these relationships and establish a more significant presence within the broader cryptocurrency ecosystem.
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Restoring Confidence: The successful implementation and gradual effectiveness of the Divergence Protocol could help restore confidence in the USTC ecosystem. As the peg is progressively re-established, trust in the project will likely increase, attracting new users and fostering renewed growth.
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Enhanced Liquidity: The Divergence Protocol aims to provide increased liquidity at peg levels, reducing the risk of significant price swings and improving overall stability. The increased liquidity could make it easier for traders to enter or exit positions without significantly impacting the price, promoting a healthier market.
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Continuous Improvement: As the Divergence Protocol is implemented and refined over time, the USTC community will have the opportunity to learn from experience and make necessary adjustments to improve its effectiveness. This iterative process can help the protocol better adapt to changing market conditions and contribute to the long-term stability of USTC.
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Financial Incentives: The Divergence Protocol seeks to align the financial incentives of USTC holders and centralized exchanges by offering potentially higher compensation than regular trading fees, which could encourage broader adoption of the protocol and support the goal of restoring the peg.
10 Likes
IdeaâŚ
With comming 5% minimum validator fee implementation. Community could vote to tax this fee so 20% of those 5% would go into building USTC reserves.
Validators are happily running at 0% fee at the moment so taxing that future 5% fee would not harm them!
Bruh. You are so happy to take from everyone elses pockets - how do yours look?
Truly canât believe the amount of validators who havenât voted yes. This has gotta pass folks smh
2 Likes
i think there should be Peg value dashbord which redefine peg value at every 30 minute. peg should be change every 30 minute or less time.
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now those who abstain⌠those who voted no have to explain why they voted no.
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As Allnodes mentioned, this is an idea from utopia. The proposed trading rule violates the basic principle of free trade, so it is unlikely that exchanges will agree to it. Although many of us can guess the outcome, I still strongly support this proposal.
This is because the community lacks people who are willing to take practical actions. Many people are used to and good at criticizing othersâ ideas, but when it comes to coming up with a better solution, they remain silent and are unwilling to take the initiative to implement it.
As long as it does not harm the chain, anyone who dares to think and take practical actions should be supported. What could be worse than the current situation? So, letâs go and do it. I support you.
5 Likes
Thank you for this proposal. This one is best till today I have ever read. If we wonât succeed that does not matter but at least we can try instead sitting idle. No harm or death spiral thingy there. So we should attempt it. If we succeed then this will create the history in the Crypto world!! Letâs try this ! Can you also elaborate that how it will help to Burn the supply of LUNC through example? That will be helpful. Thank you for your time and efforts.
3 Likes
Allnodes raised the issue of black markets popping up. Thereâs a function for this already. Black markets get blacklists. This allows funds to exits the black market but prevents additional assets moving there.
EG. A market that only allows people leave and no assets to enter isnât going to last very long.
This is addressed in my proposal already
5 Likes
when burning a LUNC, it will be via a unidirectional exchange, that is, you exchange 200000 of lunc for ustc, at that moment you burn the 200000 , and the best thing is you still have the money $ only now in USTC , which can be exchanged anywhere you want accept USTC for USD. Instead of using this burn mechanism with tax, that is, buy $100.00 in LUNC and burn it and thatâs it, in case of exchange and different, you burn LUNC and still keep the $100.00.
you mean If i swap 100 Dollar value LUNC with USTC it will burn all 100 Dollar value LUNC and I will still receive the USTC with value of 100 dollar? Sorry if I understood wrong.
OK for example : price is pegged to 1USD
USTC price rises to $1.10 USD
The swap pool opens and you can swap $1USD worth of LUNC for $1.10 worth of USTC.
Sell the USTC to market, pocket the $0.10 profit.
Rinse repeat till the swap pool shuts.
Your getting paid here as a LUNC holder to reduce the supply essentially
7 Likes
Amazing Job. We gonna succeed in this. CZ supports LUNC and he will surely support USTC revitalization as he has better vision that how we can change the future. Thank you and everyone who is involve in this. I wish community stay focus on positive side and stay away from fudders. There is nothing we will achieve by focusing our energy in wrong direction.
4 Likes
Thanks for spending the time breaking it down like this, I might use it as a TLDR for my prop
1 Like
Passing with good reason. As soon as its a goer youâll need to hit the CEXs hardâŚI hope the team can talk a few round. Sorry if this has been answered but what happens if say Binance, Kraken and another say yes but Ku or whatever say no?
You interviewed really well the other day pal good job.