USTC Re-Peg Proposal: "Ziggurat" (Discussion #2)

0. Disclaimers
I manage the Onyx validator with the assistance of PFC . I mostly work solo and self-study crypto ecosystems; therefore, I do not have any formal affiliation with Terraform Labs, or other major organizations like TerraCVita.

The final proposal will be put up on January 31st, 2023 for vote.

1. Preface
Please see the last discussion, Modify Luna Exchange Rate with Novel Fee Variable, to review the technical context behind this proposal.

2. Summary
This is a 2/5 discussion to propose a scalable method of encouraging arbitrage of Terra <> Luna at any price level, especially our deep-discount (“de-pegged”) levels. This discussion is focused on the financial feasibility of the “Ziggurat” proposal.

3. Motivation
Terra Classic is based on users’ willingness to take profitable trades known as arbitrage to maintain stability. If Luna trends >$1, there is an incentive to sell it for profit. If TerraUSD trends <$1, there is an incentive to buy it for under $1 and sell it at $1+. While this remains true when TerraUSD trends closely to $1, the deeper it goes, the more high-risk that trade becomes for an individual trader, and they are less able to recover value fully on an individual basis. We need to provide incentives for traders to buy a deeply-discounted TerraUSD, while also ensuring they don’t need to wait several centuries to execute this profitable trade.

4. Background
The “Ziggurat” re-peg proposal can be read in summary at this thread: Ziggurat Proposal

Ziggurats are stepped pyramids that were often made in Ancient Mespotamia. The Ziggurat served as places of worship, preserved privacy for priests and ritual at the top of the ziggurat, and in times of flooding, allowed said priests to flee to high-ground.

image

Like the Ziggurat, we need a flood of liquidity (capital), a private place for priests to perform rituals (a “quiet space” for devs to do their work), and most importantly, a step-wise approach to re-pegging USTC, and by extension, all of Terra.

The Soft Peg
There have been many suggestions to simply force the USTC peg to be at some “penny” of $1.00 – e.g., $0.01, $0.10, $0.25, etc. By doing this, an arbitrage opportunity is made, and stays fixed until we decide to flick that switch off.

This is the right idea, but it suffers from the question of who’s taking the trade?

Let’s take two examples.

Example 1: The over-peg premium
Ziggy Drawings

In this example, Terra pays $0.01 for every unit of USTC sold on-chain by pushing the value to LUNC. This is done by sending USTC from Binance to Terra Classic, then swapping it to LUNC, and sending the greater lot of LUNC back to Binance, closing it for greater profits in terms of BUSD. This means that LUNC sees sell pressure (negative price action), Terra Classic collects burn taxes on 5 instances and 1 instance spread fee. Binance pays the arbitrageur’s premium in BUSD, and Terra pays it in LUNC.

Example 2: The under-peg premium
Ziggy Drawings_2

In this example, Terra pays $0.01 for every unit of USTC sold on-chain by pushing the value to external USTC holdings. This is done by sending USTC from Terra Classic to Binance, then swapping it to LUNC (or immediately to BUSD). Then, the route can repeat by sending the greater lot of LUNC or USTC back to Terra Classic. Binance pays the arbitrageur’s premium in BUSD, and Terra pays it in LUNC.

Note on taxable events
It’s not guaranteed that full routes are used; these are “best case scenarios” for tax proponents.

Note on how LUNC sell pressure occurs on the under-peg
By soft-pegging to any given amount that deviates from the oracle, we force ourselves or another party to pay the premium. Repeating the arbitrage loop is more likely to happen on LUNC, while USTC arbitrage is closed cross-market. That is, the arbitrageur repeats the trade by sending LUNC to Terra and swapping it to USTC, then closes the USTC trade at the same time on Binance to secure the profit.

The Soft Peg, Part 2

The core symbology of Ziggurat’s steps lends to taking the ideas above and targeting “soft-pegs” that exist above or below whatever the current price of TerraUSD (USTC). We can consider each “soft-peg” target a “step” in any re-peg plan, as they more achievable in the short-term.

That’s to say, we’re going to try and peg USTC at $0.02, then $0.03, then $0.04…all the way up to $1.00, and beyond that if we’re feeling ambitious.

Approaching USTC re-peg in this manner will provide a larger suite of data to work with. What’s the best solution for pegging at each penny going up?

5. Proposal

Introduce a new arbitrageur fee lever, ArbitrageModifier(), that alters the Luna Exchange Rate at either a premium (higher price) or discount (lower price) after oracle-fed exchange rates are voted on and cast, starting with whitelisted denom currencies.

6. How it works

Terra uses a price-feeding system known as the Oracle module. In this process, each validator casts a Prevote for what they believe the best exchange rate is for the given currencies (usdr, uusd, ukrt) – a “price consensus” process.

This exchange rate is revealed in the Vote Procedure. The exchange rate cast by the validator during the Prevote is encrypted in a “salt,” or a kind of “password” in this case, and revealed alongside the exchange rates given in the Vote. This “password” ensures that the validator didn’t try and change the price between the Prevote and the Vote.

We then apply this new ArbitrageModifier() to either increase or decrease the price of USTC on-chain.

Ziggy Drawings_3

ArbitrageModifier() would first apply to the Luna Exchange Rate, or usdr, a.k.a. SDT/TerraSDR. This specific denom is pegged to the IMF’s SDR. (glossary definition)

In turn, this pushes every forex token up or down in the Luna basket. This can be considered a “global” lever for incentivizing “de-peg control.”

The wiser move is to override this global functionality for each forex token (denom) in accordance with each country. In this case, the only whitelisted denoms available for this modifier are uusd and ukrt, which is the US Dollar and Korean Won, respectively.

The following pseudo-code demonstrates such a functionality in C# syntax:

public static void ArbitrageModifier() {
   public float NewExchangeRate = ExchangeRateModified;

   // Create WhitelistDenoms Dictionary with KVP name:terra_denom
   var WhitelistDenoms = new Dictionary<string, string>
      {
         {"SDT", "usdr"},
         {"USD", "uusd"},
         {"KRW", "ukrt"},
      };

   // The amount to modify the ticker currency in %.
   private float ArbitrageModifierRate = 0.0015; // +0.15%

   // Pass the ArbitrageModifierRate as "modifier"
   private float ApplyArbitrageModifier(string ticker, float modifier)
      {
         float ExchangeRateModified = ticker * modifier;

         return ExchangeRateModified;
      }
}

In this case, the only thing the network needs to do is provide a Modifier Rate which will bump this number up or down by a given percentile.

In short, we take the exchange rate of Luna, and then provide a positive incentive for arbitrageurs to take the trade.

7. Caveats, Pros and Cons

Oracle security should not come into play here as mentioned in the first proposal, because the modified exchange rate is applied after the validators cast their vote. However, this is a direct manipulation of Terra prices, and if handled by LUNC governance (and not an automatic handler), the risk of manipulation errors are a governance burden. (i.e., voting for prices in the DAO’s favor)

With respect to the former, this also means that price action of LUNC is contingent on governance. This delivers a solid reason to increase tax rates, as a poorly constructed arbitrage modifier will punish LUNC constituents, and a well-constructed arbitrage modifier will reward them. Additionally, modifying the price in such a way also affects every other market in crypto, including, but not limited to, CEXs like Binance and DEXs like UniSwap (via wUST), in a similar manner.

Encouraging fluid arbitrage on-chain in the form LUNC <> USTC, beyond what we have, is the core of Terra. This allows us to determine whether swaps are viable again, and should contract the supply at a faster rate (i.e., burn a lot).

Fees taken from the ArbitrageModifier can be used to fund the oracle pool.

Lastly, the price may converge over time to match the market rates. This would require us to turn off this modifier – implicitly selling USTC at a discount (i.e., a negative rate). This has benefits and drawbacks. Ideally, we can turn this on until prices converge (soft-peg), then turn it off and allow the market to let LUNC price recover.

Pros
Higher trading activity on USTC pairs leading to burns and profitability
Greater fees from the premium may be used to fund oracle pool (via swap/tx fees)
Prices converge over time naturally – lever turns off, LUNC price recovers or improves (especially with discount purchasing)

Cons
Higher trading activity is not guaranteed, but more likely
Potential negative price action on LUNC (due to arbitrage with USTC)
Price converge over time naturally – lever turns off, USTC sells at discount

8. Personal Thoughts
Directly modifying the price via governance feels ethically grey to me. If we understand how Terra works at its core – unsecured, synthetic capital – then creating this kind of modifier makes sense to me. It would allow predictability (to some degree) of such synthetic capital, especially when Terra stablecoins re-peg.

I am concerned about giving this handler to governance over automated parameters, but seeing as Terra tokens are synthetic in the first place, we need people who are willing to be responsible for the commissioning and decommissioning of synthetic capital (“cryptocurrencies”).

The far greater concern on this latter point is eschewing decentralization for centralization. This inadvertently creates a “DeFi bank,” but run by people and not protocols. Once the data is acquired, we should consider automating this parameter to bolster decentralization.

From a price perspective, adding this lever pushes the Terra <> Luna arbitrage in one direction or the other. By adding a premium on-chain (over-peg), we can collect more taxes, so long as it is not too high. When we turn this off at market price convergence, an automatic, negative discount applies. This allows us to lower taxes, and then recover the price of LUNC, which is likely to take a hit with this lever, but external markets using Terra capital will pay a premium.

Hence, it is extremely important we create and maintain good relationships with CEXs and other protocols/L1s that are using Terra capital already. Creating a lever that directly impacts their markets is not ideal, and we should give them an opportunity to burn their capital back to the network (demurrage in banking) to avoid being locked into Terra’s capital. This also requires a degree of collateralization that does not exist on LUNC.

12 Likes

buena idea pero basicamente tiras todo a UDTC es un re-peg en el cual el precio de LUNC va a sufrir xq primero segun lei tienes q devaluar el precio de LUNC para incentivar la compra

1 Like

Good idea, but basically, you throw everything to USTC. It is a re-peg in which the price of LUNC will suffer because, first, according to the law [sic] you have to devalue the price of LUNC to encourage the purchase.

This is how the network operates. If nobody takes profits, you simply have to wait for more people to put money into the network.

Additionally, the arbitrage mechanism that existed in May works exactly as you described. “Taking profits” is what we might call it.

If you are keen on continuing to invest, you can hold as the price devalues in the short-term, or you can add to that position (putting more money into the network).

If everyone waits around for LUNC price to go up, sacrifices end up being made to the network to source money from other places, or the network dies from lack of liquidity.

3 Likes

I would agree on Automation.
The community is made up largely of individuals without much of an understanding to such complex details that have far reaching consequences.
Not to mention, Community is made up out of individuals with inherent tendency to overreact and have often than not emotionally fueled vindictive tendencies. Not to mention greed and lust for control.

Automation has none of that. It does what it’s been designed to do and does not care for today’s Twitter heroes or yesterdays news.

5 Likes

Do you mean a vote here on Agora or the Governance portal?

As far as I have understood, you require a AMM along with some core modules to enable such arb trading between LUNC and USTC.

Please provide us with the following details:

  1. Do you have a team to implement this or do you need a team of devs to implement it?

  2. What is the budget and timeline for this work? A budget and timeline breakdown would be preferable

  3. The code that you have given in C# - is that all the code that we need for the arb core module? You sure about it? Or is it a high level example?

  4. Considering this is an AMM, you need an initial capital to start the AMM. How much is that capital exactly?

  5. Have you considered applying for Binance’s IRI Fund? They still pretty much have $ 1 billion in their wallet. Maybe this is what they are looking for? What do you think about it?

4 Likes

We really need liquidity in ustc.
However, I’m not completely understand proposal. Excellent, if we will have capital for support lower peg (0.02 for example, rebuying).

I have been asked to provide a few clarifying points for people on other platforms, courtesy of @forexearly on Twitter. This post will be used to do so.

ELI5 how this works.

We make a “lever” that moves the prices of LUNC and Terra tokens like USTC up or down. (We do this by applying the lever on SDT or other tokens.)

This should encourage trading on our network. This means more taxes, profits for traders, and fees to the oracle pool. i.e. most everything that we’re looking for right now.

Simply put:

  1. We push the lever up.
  2. USTC on Terra is now a better price than cross-exchange.
  3. People move USTC on-chain and sell it to LUNC. They can stake or sell.
  4. When price corrects (USTC = USTC on all markets), turn off the lever. Immediate discount on USTC.

The discount happens because you remove the “bonus” off of selling USTC+. So if you were selling at a +0.15% bonus, when you remove it, you immediately have a -0.15% discount. If you taper the bonus to 0.05%, you immediately have a -0.10% discount.

When and why will this be turned on or off?

The basic idea is to simulate peg stability at any price. USTC is simple to do because “1 = 1,” and SDT allows us to make it more refined for individual countries.

The problem with UST, in the past, is when it went above $1.00, all of the exchanges were paying a premium for the arbitrageurs. So if it was selling at $1.04 on Gemini, Gemini would pay $0.04 to an arbitrageur to bring it back down to peg. Really sucks for their biz.

Now, this works in reverse for them, too. If UST was selling at $0.98, the arbitrageur could buy it and then earn $0.02 when (if) it re-pegs.

But it doesn’t always come back to peg. After all, people (like myself) have been buying de-pegged USTC for months, but it’s not $1.00 yet. How long will I need to wait to “cash out” this “arbitrage trade”? (Centuries is the correct answer.)

Turning it on: anytime Terra stablecoins are de-pegged.
Turning it off: anytime Terra stablecoins are over-pegged.

Generally speaking, it’s that simple. The only thing we need to be mindful of is how much money is in LUNC’s market cap. The uppermost limit of turning this mechanism on is equal to LUNC’s market-cap. So, if we wanted to drain the whole gas tank of LUNC, we’d turn it on and squeeze out $1.8b. That’s not enough to re-peg.

So, we take it one step (cent) at a time. Step up to $0.03, turn it off. See if it works. If it doesn’t, back to the drawing board. If it does, decide how to make the next push to $0.04.

Benefits vs. USTN (Alex Forshaw) or Partitioned Pools (Tobias Andersen/Zaradar)

vs. USTN

  • Doesn’t require issuing a completely new token using indexing. (userbase fragmentation)
  • We acknowledge the debt (allow for repurchasing) vs. retiring it. (burning USTC without consent)
  • CEX user opt-ins are simple. They may take advantage of an easy cross-market arbitrage if desired.
  • Doesn’t have a reserve, instead relying on the core mechanisms that created Terra’s wealth in the beginning.
  • Non-intensive overhaul; simple feature-add over complex, AMM tranche system.
  • Retains full undercollateralization. (unsecured/floating/faith-backed capital methodologies)

vs. Partitioned Pools

  • Not in inherent conflict with this proposal. USTC will, in fact, have more uses with it.
  • Doesn’t require intensive overhaul or feature adds. It’s a monetary lever control that we can automate with proper data collection and application.
  • Doesn’t require businesses to onboard to a dubious development environment, thus reducing overhead for solutions necessary to onboard capital. We work with what we have with the core demographic of the network. (arbitrageurs)
  • Burns “top-down” instead of “bottom-up.” (that is, in the way most people are used to by now.)
  • Takes a similar approach (bring value back in over time) with less capital costs upfront. (reliance on arbitrageurs instead of business developments)

vs. CommDex

  • Not in inherent conflict. In fact, this proposal would likely benefit from a solution such as the CommDex. (save using the Oracle pool directly.)
  • Not going to comment on anything related to the proposal including tri-arbs, please ask faffy himself.

What are the impacts on burns and mints?

Whenever someone trades on-chain, swaps and transaction fees are sent to the oracle pool (this is due to Columbus-5’s burning of all seigniorage).

Minting won’t happen unless our RewardPolicy is >0 (like it’s been since #5234). If swaps increase, it would be better to turn off RewardPolicy re-mints in my opinion. We’d be making money on the chain being used (i.e. higher staking rewards) which is the ideal scenario.

On that note, generally speaking, burns increase if the chain gets used, even if it’s a basic LUNC <> USTC swap. If the premium is turned “on,” then the LUNC <> USTC swap is less profitable – you’d rather be taking the USTC <> LUNC swap (i.e. you could buy more LUNC for USTC). This route burns USTC.

Now, the money has to get pulled from somewhere. This will most likely be LUNC, BUSD, or some other LUNC/{token} or USTC/{token} pair. Risk can be diffused across all market assets but it’s hard to say what trades people will take.

If the premium is turned “off,” then the LUNC <> USTC swap is more profitable. This would burn LUNC.

What will validators be voting on?

On January 31st, this will go up as a Text Proposal to signal for code changes. Just because it passes doesn’t mean the developers have to implement them. (We aren’t pharaohs building pyramids, despite our Ziggurat name.)

Passing such a proposal would mean that the community agrees we should move in the direction that’s outlined in the proposal, i.e., adding an ArbitrageModifier() to whitelisted denoms, starting with usdr, uusd, ukrt. This is not a trivial suggestion for validators, naturally, as they are the ones required to cast those votes in the first place.

However, this doesn’t make anyone beholden to anything except what’s outlined in the Terra Community Trust guidelines.

What data are you looking to collect?

This kind of lever, as it stands, wouldn’t soft-peg to any particular data point. We can automate it so that when the market “catches up” to the fee modifier we apply (e.g., +0.15%), it shuts off and goes on “discount mode” until we turn it back on again.

I wouldn’t recommend something higher than +0.15% to start. If not enough arbitrageurs take the trade, we can increase it. If we bleed too much value on LUNC, we lower the value. Since it’s an on/off switch and we can automate it on these kinds of parameters, or manually turn it on and off. (will discuss this more next week.)

Other kinds of data we’re looking to collect are what we should have been collecting to-date:

  • Swap fees generated
  • Volume on key currencies (LUNC, USTC)
  • Tax revenue (burns) generated after the implementation of such a proposal
  • Relate above data to one another
  • Volume around certain price points; relate this to standard deviation of those price points in a given timeframe (eg, pick $0.03: how long does this peg hold ±$0.xx?)

Doesn’t this pummel LUNC price?

Yes. Again, the money has to come from somewhere. However, just a small nudge can work both ways. It may provide an opportunity for people invested to LUNC to purchase in at a discount price or manage their risk, knowing that its implementation will come in advance.

6 Likes

Would you please explain what the advantage is here for LUNC holders?

This is outside my area of expertise, but from my casual understanding the proposal appears to be another attempt to transfer LUNC liquidity into USTC, similar to ideas Alex Forshaw previously put forth that were received with controversy by the community.

Would it be fair to characterize this proposal as primarily concerned with making whole UST investors who were harmed during the de-peg? If not, why not?

Thank you.

2 Likes

I would agree on Automation too. but what’s the cons&pros for LunC holder?

1 Like

This idea is very aggressive and groundbreaking. But here’s why community don’t respond well.

  • 80% of USTC holdings are owned by institutions, not individuals.

  • Currently, 80% of users in Agora have LUNC only or more LUNC than USTC.

  • The reason they focus on USTC $1 REPEG is because of LUNC’s value will be increase as well.

At this point, on the contrary, proposals to move USTC liquidity to LUNC may win more community support.

However, when that happens, LUNC’s confidence in outside investors will be destroyed, and the identity of the LUNC chain will also be lost.

Janus dilemma

4 Likes

Not bad. How much we need for realization?

Or instead of pitting LUNC and USTC against each other, we develop solutions that benefit the Terra Classic blockchain as a whole. Our preferred source of liquidity should come from attracting new investors, not from cannibalizing existing holders. Zaradar’s pool proposal is a good example of the wholistic solutions we should aim for.

2 Likes

Attract more investors and arbitrageurs,use market adjustment mechanism as a effective tool.

1 Like

@JCP.ESQ

Or instead of pitting LUNC and USTC against each other, we develop solutions that benefit the Terra Classic blockchain as a whole. Our preferred source of liquidity should come from attracting new investors, not from cannibalizing existing holders. Zaradar’s pool proposal is a good example of the wholistic solutions we should aim for.

Currently, LUNC attracts the following users:

  • arbitrageurs

What kind of outside investors you can attract with our given circumstances:

  • businesses who want to let their customers pay them in volatile, unstable magic internet dollars
  • people who like paying welfare taxes to LUNC spot holders/stakers
  • developers who work for free, because LUNC burn proponents would rather burn 100% of all of their welfare tax revenue
  • traders who want to pay the Ethereum Layer-2 premium with 5% of the available DeFi applications
  • speculators

LUNC is not “being pitted” against USTC. The entire reason you can buy LUNC for so cheap now is on the backs of people who previously bought it and got diluted to the trillions. The only reason it was worth so much beforehand was because we had billions of dollars of demand on chain. Their liquidations are paying for everyone’s staking rewards.

How expensive is it to pay Zaradar for 18 months of work? $12.5k/mo. was the last quoted rate. Who’s ready to spend or raise $225k?

@X-fileperseek

At this point, on the contrary, proposals to move USTC liquidity to LUNC may win more community support. However, when that happens, LUNC’s confidence in outside investors will be destroyed, and the identity of the LUNC chain will also be lost.

Few.

@arunadaybasu

Do you mean a vote here on Agora or the Governance portal?

Governance.

As far as I have understood, you require a AMM along with some core modules to enable such arb trading between LUNC and USTC.
Please provide us with the following details:
Do you have a team to implement this or do you need a team of devs to implement it?

I will be paying the Unity Development Team a few thousand dollars to launch an extremely stripped down version of Nova this month. You can already do arbitrage trading on LUNC, but in order to profit, you need to run an arb bot or pull capital from defunct tokens (MIR, ANC, ASTROC, etc) via the carrying costs they pay. i.e., all of those assets are racing to zero unless you hyperinflate them. The aforementioned are in a much better spot than LUNC so it works for now and is how Nova makes money.

What is the budget and timeline for this work? A budget and timeline breakdown would be preferable

Since Unity Dev Team is doing this, that is already taken care of. This proposal suggests implementation that an L1 dev would be suited for, unless I go in and make a PR myself.

The code that you have given in C# - is that all the code that we need for the arb core module? You sure about it? Or is it a high level example?

It is a high-level example.

Considering this is an AMM, you need an initial capital to start the AMM. How much is that capital exactly?

I am paying Unity $3k at a 40% discounted rate, which is insanely generous of them.

Have you considered applying for Binance’s IRI Fund? They still pretty much have $ 1 billion in their wallet. Maybe this is what they are looking for? What do you think about it?

Yes. Unity Dev Team and I spoke about applying for this, but it would be wise to have something to show for the money we’re asking for. If we translate borrow-lend market forks (eg Anchor, Aave, you name it) to Rust/CosmWasm stack, ie, LUNC, for people on here to use, that will be much more expensive than what the LUNC community pool has and likely TGF, meaning we would need Binance’s help here.

@JCP.ESQ, @joop

Would you please explain what the advantage is here for LUNC holders?
This is outside my area of expertise, but from my casual understanding the proposal appears to be another attempt to transfer LUNC liquidity into USTC, similar to ideas Alex Forshaw previously put forth that were received with controversy by the community.
Would it be fair to characterize this proposal as primarily concerned with making whole UST investors who were harmed during the de-peg? If not, why not?
Thank you.

Trading on-chain generates the tax revenue, i.e., burns that contract supply and contribute to the perceived supply crunch that would occur with a lot of burns. (Understand that 6.9 trillion is a very big number.)

Currently, trading on-chain is difficult. After staking was re-enabled, trading was strictly less profitable than staking. The only way to trade profitably on-chain is through volatility on LUNC-USTC and inflated APR on MIR-USTC. I do this trading daily on this wallet which is generating thousands of LUNC burns at no cost to spot holders.

This trading will not last forever and is 200,000 USTC worth of margin (roughly 28m LUNC). The only way to improve burns is to take on significantly more margin (already planned via Nova) or pray to the gods of volatility that one of these assets will pump while I sleep.

It would not be fair to characterize this proposal in skew of one party or the other. If USTC wins, LUNC wins. We re-peg, USTC can be used on chain. Staking LUNC would earn you cash in real time through yield – something fueled by swap fees since seigniorage is burned according to Columbus-5 (and forgoing random policies we’ve been making). USTC can be thought of as “LUNC’s use case” – without it, you are reliant on extracting your newfound friends for liquidity on the way out the door. The lackadaisical nature has concerned me for months.

Your advantage as a LUNC holder is that you get serious investors onboard who aren’t interested in gambling against the house, and I get to keep paying welfare taxes to LUNC while they sit and watch me burn my stack and everyone else’s stack under my purview.

Not bad. How much we need for realization?

How long are you willing to wait for implementation? You already paid for L1 devs. If passed, they may consider implementing such a feature.

@NN78

We really need liquidity in ustc.
However, I’m not completely understand proposal. Excellent, if we will have capital for support lower peg (0.02 for example, rebuying).

If we’re confident new investor money would come in on positive price movements for USTC (been bleeding at $0.02 for months), we could actually move USTC profits into LUNC and stake it. There is nothing stopping an arbitrageur from moving USTC back on-chain, buying LUNC, then staking it as part of profiting in this mechanism.

Does it make more sense to extract every penny out of everyone in the system for personal benefit? Maybe, but as we’ve seen since the dawn of man, failing to account for human irrationality is a failure to see why we succeed together in the first place.

4 Likes

Every case that help to repeg #USTC is wonderful. BUT if we divide current burn rate by 50/50 : 50% to burn LUNC and 50% to burn USTC . In this case we will be much near to repeg USTC therefore the USTC supply is much lower than LUNC so first we repeg USTC then we can easily and fastly burn LUNC supply.
In this scenario we will be able to repeg USTC under 1.5 year or soon

2 Likes

Basically,the ustc-lunc mechanism like a car engine.If we fixed everything,the engine will operate smoothly just like before.
But we still lack of a engine starter,something like Anchor,I saw your idea of new Anchor.
Hope the next proposal will be completed with the new engine starter.
Then we will pull the ustc,then affect lunc,instead of pull ustc by push lunc.

2 Likes

@wrapped_dday let me look at this purely from a business perspective now.

You did take Nova’s example but it’s not launched officially yet so we don’t know what the reception would be of such a product.

We know that approximately 14% of all coins are already staked (LUNC) and we know that 200 million is the daily volume. We also know that Binance is the one with the largest volume on the chain, which is approximately 50%. So we can safely consider that 14% (of total supply) and 50% (of total volume) of the coins are not accessible to us.

We are just talking about 50% of 200 million. So a total volume of 100 million. Let’s consider that you are able to capture about 1% of this market initially. Which is about 1 million.

Now can you give us a calculation of how much is being traded in both LUNC and USTC and how much burn do we get if 1 million is the volume, give or take? I do not see projections for that.

Without Binance and without a VC investment, I don’t see how this platform could become popular. Cause simply put, you guys are developers, not marketers.

So you might be able to make this eventually, but you won’t be able to make this popular. Cause popularity doesn’t depend on how good your product is, but how well you pitched it to the general investor.

This only a seasoned marketer would be able to do.

Your team does not currently have marketers.

You need significant liquidity for this, which you are planning to take from the not-so-popular coins, by using them for trading? How exactly, cause they are unpopular I thought? So there must be less trading volume on them.

Let me guess - you will trade them and seeing the rise in volume, investors are gonna invest in the coin?

There has to be an input from somewhere - you can’t consider that everyone is sitting with MIR in their wallets.

And why would they anyway? They would want trades between LUNC-USTC to be on the safe side.

I still don’t understand how YOU are making the money cause you haven’t outlined exactly what is the tax, what is the slippage, what is the burn rate, etc.

You are putting in the money currently for the development and you also have the liquidity since you just said you have 200,000 USTC and you are running Nova in testing.

Again, currently how are you making the money? Or, are you making no money and just using it for burning?

I am slightly confused with this part. Cause I don’t see any means of self-sustenance outlined in the proposal.

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Ok I re-read this part. As far as I understand now, you need to implement this first in order for you to collect this data so that you can implement the final product and then launch it?

This is a chicken and egg problem.

You need the chicken in order for you to get the egg. But in order for you get the chicken, we need to see the egg first.

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Well no this could be modelled and should be before we implement anything. Create a test net, create some arb bots. Let them rip and see what happens. In reality bots are going to make up most of the trading anyway.

This needs to be done BEFORE putting this to a vote so we can make an informed decision.

I personally think its going to drain the liquidity as its not really creating utility, but modelling will help prove or disprove the theory either way.

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By the way,Ziggurat structure is perfect!

Another opinion,should we use oracle pool to benefit the arbitrageurs?The refill of oracle pool can be done by tax or fees of the late come arbitrageurs.This mechanism is another kind of Anchor,but simple to apply.Just a opinion,FYI.

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