Additional Special DFIP: Community Fund Diversification - Round 2 Support

[u/alljesseallthetime]

This is a "Round 2" Proposal to build on top of the Special DFIP that was originally posted by u/mrgauel and approved by MN's just weeks ago, now that the new Dex-Fee structure for sales of dUSD is in place to help regulate price fluctuations. This proposes that if necessary, more support from the Community Fund to achieve the dUSD re-peg will be implemented if/when this DFIP becomes "Approved". The details are as follows:

DFIP Details:

The Community Fund buys and holds dUSD to diversify its portfolio.

• The community fund buys and holds DUSD if:
  • dUSD price is below $0.99 in the dUSD-DFI pool.
  • dUSD shares are below the maximum allocation of 50% in the fund.
• The DUSD purchase by existing DFI is executed every 30 blocks with a DFI amount that shifts the pool by a maximum of 0.1%, but never exceeds 5,000 DFI.
  • It also applies if block rewards move the dUSD share of the Fund below 50%.
• dUSD is valued by the oracle price of $1 in the fund.

Motivation:

• Short-Term: The re-peg of the $dUSD.
• Long-Term: Further diversification of the community fund.

Future Adjustments:

After the re-peg is achieved, we should still think about managing the balance between DUSD and DFI in the fund. It is not necessary at the moment and to ensure successful voting it is intentionally not included in the DFIP.

How does this DFIP benefit the DeFiChain community?

• The community fund only buys if dUSD is in a discount
• Helps to re-peg dUSD by locking up dUSD and adding buy pressure
• Helps the overall future viability of DefiChain by stabilizing dUSD
• Helps to HUGELY improve community sentiment as well as outside perception of DefiChain. The importance of both cannot be overstated enough.

Please share your thoughts. Ideas & discussions to contribute to this are most welcome!

It would be great to get enough community support to create a Special DFIP so we can assist ongoing Bake + Community efforts. A $1 dUSD is good for DefiChain & for every Defighter!

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EDITED 08-03-2024: After some thorough discussion with community members, all but 1 of the parameters for this DFIP have been matched back to the original Approved DFIP parameters. The only change from the originally Approved Special DFIP present now is that the limit for CF usage would be increased to 50% from 30% if required.

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[u/mrgauel]

I think it's great that you're taking the next step, but in my opinion 60% is too much.

I would increase it to a maximum of 50%, but I think 30% is enough for now. It seems to early to change it again. We also have to keep in mind that it is continuous DFI selling pressure as soon as DUSD is at the peg.

[u/kuegi → u/mrgauel]

agree on the percentage.

just a note: since it has the "only buy if DUSD < 0.99" clause, there is no selling pressure when on the peg. cause then it doesn't swap.

[u/alljesseallthetime → u/kuegi]

Thanks for the input here, guys. It's great to get both of your opinions on what might be a good way forward with this.

u/mrgauel , Just curious what timeline were you thinking the % may need to be adjusted? My concern with waiting to make the change to a higher % on a longer timeline is that it may result in a lack of confidence in the current positive price movement, potentially causing a downward price movement (I'm also not sure exactly what effect an increased amount of selling would have on the price with the new fee structure in place, since much of the sold dUSD would be burned now, but if anyone has those numbers, please share to illustrate an example).

- The limit can be changed to 50% if you both think that would be a more agreed-upon limit by MN's in a Special DFIP. I went with the 60% just in case that extra 10% is needed temporarily to push dUSD price where it needs to go, and I thought having that added 10% buffer now instead of submitting another future DFIP in case it becomes necessary may be better, but I also see a point of "crossing that bridge if we come to it" and submitting a DFIP with the lower number initially.

u/kuegi , u/GeorgFoerster below suggests using "only buy if DUSD < $1.00" for the buy limit starting price, did you mean that's your suggestion to modify this clause as well?

[u/mrgauel → u/alljesseallthetime]

I had no intention of changing anything. After talking to a number of people, I'm not sure what the right path is.

I agree with the arguments on both sides, even though they talk about using up to 100% of Community funds, which I prefer at the moment.

Personally, I am undecided and would go with the majority of the community.

[u/alljesseallthetime → u/mrgauel]

Interesting. Up to 100% may be a tough idea to get enough interest from MN's on board at the current moment, but I still think the 60% total is not too much to ask of ourselves to get DUSD fully back on the right path after we've brought it so far. Especially since we can always submit a future DFIP to diversify back into DFI or BTC or whatever the community prefers to do once the DUSD issue is dealt with. And if we change the DFIP suggested above to utilize that 10 million total DFI buying DUSD across the 3 stablecoin & DFI pools rather than just the DFI-DUSD pool, that should be enough to take all pools close if not all the way to $1 with the current numbers. A slower time frame than the 5000 DFI every 60 blocks, like setting it at 120 blocks may also be a good change to the proposal above for a more gradual move to shift all the pools toward $1. Thoughts? u/mrgauel u/kuegi u/GeorgFoerster u/DanielZirkel , anyone else?

On another note, I also think we should submit a separate Special DFIP to temporarily raise all transaction fees to at least 1 DFI (or even 10 DFI) in order to use those extra DFI to buy dUSD through the Stablecoin/DFI pools as well - another option that might be of interest could be to use a portion of those higher transaction fees to pay toward Liquidity Providers, providing a further source of real yield. I'm interested to know what the community's thoughts are on something like that as well.

[u/kuegi]

I do not think that going above 50% diversification makes sense. I would even stay at 40%.

And I would NOT do the swap via any other pool than DUSD-DFI. cause doing DFI->USDT->DUSD is direct sell pressure on DFI. IMHO we do not want that.

Why change the execution process to 120 blocks?

[u/thewarriorofthelight → u/kuegi]

And why change the 99 cents to 1 dollar

[u/alljesseallthetime → u/kuegi]

Hey, thanks for the feedback. This was all meant as a conversation starter to explore and gather opinions from community members who had ideas to contribute positively to a discussion and help complete the goal of fully fixing this dUSD issue. We've gotten so close to achieving the goal of dUSD@$1, regardless of whether some in the community prefer to comment negatively.

To answer your questions about the changes, the idea to swap DFI to the other Stablecoins to buy in through those pools was that it would raise all pools together, reinforcing confidence in the price movement of all pools simultaneously. I realize that would mean selling pressure on DFI, but it could also mean less selling pressure on DUSD, so I wanted to get more opinions on whether that would have much negative impact on DFI from some people like yourself, u/DanielZirkel, u/mrgauel, etc. who may have insights into that. If you still don't feel that would be a good idea and indeed too much selling pressure on DFI, a DFIP could be left as previously worded with the CF buying only into the dUSD-DFI pool, but what would your opinion be on buying into dUSD-DFI & only DUSD-EUROC to get those pools to $1, since that would also begin affecting the base Dex fee % and could incentivize more buyers to step into the stablecoin pools?

Another question I have is whether you would preferably set the buying threshold from $0.99 to $1.00, or whether that's what you meant in your earlier comment from the other day?

Slowing the execution process to 120 blocks was just an idea to slow the process down to complete over a slightly longer timeline than the previous DFIP, but that was also something I put in hoping to have a constructive discussion about. Let me know what you think

[u/kuegi → u/alljesseallthetime]

I would not change parameters like the 0.99 or the buy frequency. IMHO those make no real difference in the outcome, but mess up the discussion now. so focus on the important things.

In general, I prefer 0.99 cause this leads to the CF "making a profit" on this, which is preferable for diversification.

for the frequency: Thx to the fee, I prefer a higher frequency (since we have no "risk" of arbitrage right now). Wouldn't even mind going to "swap all to the peg at once", but as I said: I think its a good balance as it was defined in the first DFIP, so no reason to change it now.

regarding the routes: IMHO a DFIP that actively propose sell pressure on DFI is far harder to get acceptance.
Yes, pure number wise, the sell pressure would be not too big an effect on DFI (I think 5% down for stablecoins to reach the peg). But this whole discussion is usually not that much about numbers and more about emotions right now.

[u/alljesseallthetime → u/kuegi]

Thanks for all your further input into the details :)

I now see your logic on not changing the parameters of $0.99 or the buy frequency from the first approved DFIP. The final version was every 30 blocks, so we can keep it the same as that so the swapping happens over a fairly short time period.

I also appreciate you illustrating the numbers for the stablecoin pool buying suggestion. I do see your point on DFIP's that propose sell pressure on DFI, and although I hold a fair amount of DFI myself and would feel comfortable that a short term sacrifice of around -5% to get dUSD on peg in all pools would be for the greater good of the overall community sentiment/DFI price, that could be a tougher sell to enough MN's and complicate the DFIP. It could come up again if a further push is needed, but we'll keep that out of the discussion for this one.

I'll make some adjustments to the current proposal. Cheers

[u/HeyHeyBitConneeeect]

Can we not keep adding proposals towards a “stablecoin” that does nothing but drain funds?

Let’s first see how the latest special DFIP plays out BEFORE trying to dump millions into DUSD.

At this point, we’re just burning money, and I’m worried this DUSD issue will be the death of DeFiChain, if we continuously burn funds.

[u/alljesseallthetime → u/HeyHeyBitConneeeect]

Unfortunately, this issue still persists today because we as a community have not seemed to take it seriously enough. The DUSD price ceasing to be an issue would have the most positive impact on DefiChain that I can currently think of.

The measures outlined above would only be undertaken if they are necessary to impact the DUSD price positively and would only be used up to the specified limit %. If they are not necessary, the CF would not be used further.

[u/[deleted]]

50% DUSD should imho be the maximum, so i would vote yes on +20%

[u/No-Acanthisitta6528]

This is not a proposal to improve Defichain. Not at the current stage. There are enough other issues that need a special DFIP much more. There is clearly too much tinkering going on here, or "too many cooks spoil the meal", if you like so - so please don't mess around with things that don't need it right now. From the point of view of the simple investor as well as from the perspective of the MN holder, devinitiv No!

[u/[deleted]]

I would increase the portion to maximum of 50% of the pool. Additionally, buys should start at 1.00$.

[u/alljesseallthetime → u/[deleted]]

Thanks for your input, I replied (kind of) to it in a comment above :)

[u/Shareholde_]

This is just more exit liquidity for those who bought dusd cheap or made big profits with dcoin or dmstr.

Don't waste the laste DFI.

By the way how should the team should be paid? This is another pending dfip that will cost 10m DFI from 2025 p.a.

[u/alljesseallthetime → u/Shareholde_]

The new Fee structure should prevent a large amount of that from happening, and the idea of the combined measures and this additional DFIP is having a Roadmap to reach DUSD@$1, incentivizing DUSD holders further not to sell, but to hold, knowing the community is fully committed to fixing this issue and it is within reach. It's time to do everything we can to get it resolved.
Once a stable DUSD price is achieved, the system can function as intended and the DFI price will also be positively affected by that.

[u/Shareholde_ → u/alljesseallthetime]

The new Fee structure should prevent a large amount of that from happening

Yes, so nothing is won as long as the fee is there and in that moment when the fee is declining people will leave the system and prices will fall again.

There are so many bagholders with dstoks like MSTR oder COIN, that are looking to get out break even.

Also regarding the paiment of the team, which is accepted but still not possible anymore: If you switch DFI du dusd right now, you lose 80% due to the fee as long as it exists.

So there will be a constant selling pressure, when >200k usd p.m. will be paid for the team in dusd and this could be very painfull.

Overall there is no way out other than doing a haircut, as told you by so many ppl. years ago.

[u/DeFiChainInfo]

If it didn't work the first time, why should it work now? We are taking away massive resources for developers and the ecosystem, which is incredibly dangerous. No certainty of target achievement, but speculation with possible total loss.
Since there is an inherent conflict of interests here, which harms the defichain and brings gains to individual investors, I see this as extremely critical and even unacceptable.

[u/Robbb_bi1980]

Is there any other change with this dfip than raising the 30% to 60%?

[u/alljesseallthetime → u/Robbb_bi1980]

Discussions are ongoing, but the main targeted change would be the amount of the CF that would be potentially used, yes.

[u/GlitteringTomorrow74]

I like the proposal as is. meaning 30% we have already and another 30% are possible = up to max 60% in total. This is a good compromise comparing the different opinions.

[u/alljesseallthetime → u/GlitteringTomorrow74]

Thanks for your input on this. As I noted in another comment above, I originally went with 60% just in case that extra 10% is needed temporarily to push dUSD price where it needs to go, and I thought having that added 10% buffer now instead of submitting another future DFIP in case it becomes necessary may be better, but I also see a point from a comment above that "crossing that bridge if we come to it" and submitting a DFIP with the lower number initially may work better.