Improved vDEUS tokenomics
Principles and Implementation — Introduction
Until now Market Forces should have made everyone realize that we cannot offer an early non-dilutive repayment.
Even the current “optimistic” outlook is a repayment over 3–7 years at a yearly rate of 40% of your DEI redeem value, given the price of DEUS stays stable at $40, as currently debt is repaid in DEUS tokens its more likely the price goes down more, crippling repayments further until they stall completly.
Such early repayments are dilutive and extract value from the protocol and ultimately from the people that should be repaid, as repayments become slower and slower.
We fully acknowledge this situation and only see a solution in a switch to a rational “pay more and quicker later, with controlled dilution” plan, to create a positive feedback loop.
We also understand that given this times, constant changes and “community influences” via proposals are misplaced & negatively affect the outcome.
We wont be allowing any adjustments to these newly implemented changes, these ideas were discussed & formalized internally with great input from people experienced in debt restructuring.
Past measures even though good elements & ideas were present, have led to uncertainty and doubt inside of the community, which created an even worse outcome short term.
Bullet points (shortest version)
Essential changes TL:DR,
Supply cap* of DEUS at 800,000–850,000 total supply. (depending on the buffer we want on farming incentives & DEI redemptions.)
- vDEUS becomes an ERC20 token, migrations will be possible approx next week.
- vDEUS staker are receiving real yield as compensation for the waiting time in form of 25% APR in vDEUS that can be traded to DEUS on DEXs for instant liquidity or held until conversion for maximum value.
*supply cap forecast includes:
- 20m DEI redeemed as early redeemers at an average of 1.5x multiplier 150,000 vDEUS minted.
- 15m DEI redeemed as late redeemers at 1x multipler & newly opened migrators with 1:2 migrations. 60,000 vDEUS minted.
- 140,000 veDEUS migrated to vDEUS 140,000 vDEUS minted.
Finalized & already minted vDEUS @ 345,858.861578 (21/12/22)
- continuous 25% ontop for stakers to reward the waiting time for 1Y, 43,463.84 vDEUS
Minted over next 248, with maximal 0.00206 vDEUS per second.
will result in 420,000 vDEUS total.
- Solidly development fund 10,000 — 25,000 DEUS minted. (1m DEI redemptions @DIP-8.1 depending on DEUS price max @ $40).
Minted over next 810 days, with maximal 0.00035722 vDEUS per second.
- 22,615,911.19 DEI redeemed at $40.70 would result in 50,000 DEUS minted.
- Incentives for Liquidity & v3 MarketMakers taken out of the DAO redemption amount, 92,000 vDEUS minted &converted to DEUS. (450 days at 0.001954 DEUS per second vested)
800,000–850,000 total supply. (depending on the buffer we want on farming incentives & DEI redemptions.)
next step after finalizing the DEI redemptions & tokenomics, finalizing masterchefs & filling up the solidly fund, is to burn the mint function forever.
ETA Q1 2023
more bullet points
- APR is 25% on your vDEUS amount which is fairly close to 40% APR for early redeemers(if you count based on multiplier $ of your vDEUS, instead of as DEI as it was done before)
- vDEUS staking locks will be opened & users can withdraw their NFTs.
- all NFT vDEUS positions can be migrated to vDEUS ERC20 at their $ ratio.
- vDEUS will become the unique DEUS single staking option, with 25% APR for one year or until the DEUS price reaches $250. Also for new holders, buying vDEUS to stake is the only option.
- revamping the vDEUS model enables the protocol to have a maximum inflation of 260k DEUS. ((50m *1.25) times 1/250 DEUS) which adds to the (100k+APR) veDEUS. With current circulating supply and farming rewards, leading to a maximum supply just short of over 600k DEUS, a modest increase from the pre-blackswan max-supply of 300k DEUS.
meaning APR for vDEUS staking is not deducted from debt, paid in vDEUS.
vDEUS APR is guaranteed for one year or until DEUS price hits $250.
bDEI is non-dilutive for DEUS, it guarantees legacy DEI holders fully-backed DEI when the protocol has enough cash.
vDEUS NFTs can be unstaked and converted at 1$/250 DEUS, & will be converted into DEUS above $250, with the “Drip” — Equity Swap settlement model (taken from DIP-8)
There will be a vDEUS <> DEUS stableswap pool and staking option for LPs.
Another maximum 5 million DEI can be redeemed, those who prefer to keep & farm with their legacy DEI can continue; options to do so & Legacy DEI buy-back plan will be spelled out early-September.
Starting today, the protocol will adhere to three essential management principles:
(1) rational DEUS minting: we will only mint DEUS when this creates value. This also means controlling dilution.
(2) pay back more later: when the protocol is cash constrained or there is excess supply, rather than repay debt now, repay more later when the protocol is rich enough.
(3) these two principles will ensure a realistic maximum supply of DEUS around 600k. (includes calculating 21m redeems at $40 per DEUS.)*
Current supply, farming incentives, veDEUS and vDEUS will amount to a maximum DEUS supply of less than 600k DEUS.
*full redemption of 21m DEI at 40$ per DEUS at 10% deus ratio, would mint another 50k DEUS, increasing supply to a maximum of 600k DEUS.
Pareto-equilibrium and contract theory
Pareto improving equilibrium is about everybody being better off. In the new plan, a lot of DEUS is saved (not minted), and both DEUS holders and redeemers get a fair share of these savings:
DEUS holders benefit from reduced dilution thus increased valuation.
Redeemers benefit from increased payments at a higher speed when the DEUS price is higher.
Contract theory studies the incentives needed to reach a pareto improving equilibrium:
Redeemers make DEUS savings possible by being repaid later. They get a compensation in the form of being paid back more later (a 25% APR accrued).
Restructuring theory studies how best to allow a protocol with limited cash flow to restore its financial health and maximize its value. Debts are either:
· repaid later (as in bDEI)
· swapped for equity (redeem is essentially a debt for equity swap)
We hope all parties can be happy with the revamped plan, since it is aligned with all financial principles and maximizes value for all parties.
Each party helps reducing inflation — renouncing to dilutionary short-term dividends.
in return current stakeholders benefit from the rise in the DEUS price they enable.
current stakeholders, redeemers and stakers benefit — more than future stakeholders as is the case with high inflation.
DIP-8 Drip (Equity Swap settlement)
— 160 days repayment explained
Our objective is to repay vDEUS debt as soon as possible.
- at 20m liquidity vDEUS > DEUS conversion will be done after 3 months.
- The speed of debt repayment depends on the price and liquidity of DEUS, the repayment token. (only rationale)
- We reckon at least 50k DEUS will be provided as liquidity in one year, due to farming incentives and vDEUS unstaking. At this point, vDEUS debt can be repaid in 160 days (Swapping 2% vDEUS to DEUS at a $250 price tag implies half a million dollar is made available each day)
Calculation of the speed of Equity Swap settlement:
The Equity Swap settlement guideline is that 2% of the LP-ed DEUS can be swapped (i.e., repaid) each day.
We forecast at least 50k DEUS will be LPed in a year : 20k DEUS LPed now + 30k DEUS in farming incentives.
If DEUS price reaches $250 tomorrow, DIP-8 implies Equity repayment starting at a 50% yearly rate (close to today’s 40% APR, but sustainable given a higher DEUS price)
If DEUS price reaches $250 in one year, DIP-8 implies debt repayment in three months
Current DEUS liquidity in Detail
($100k on solidly, $250k on spirit including LQDR, $500k on spooky) for the 50% LP
plus $300k on Beets two-gods’ pool unbalanced at 80% DEUS
($100k+$250k+$500k)/2 + 80%*$300k = $665k in DEUS; divide by $36 gives us $665k / ($36 per DEUS) = 18k DEUS
Today: 20k DEUS * 2% = 400 DEUS / day, so at $250/DEUS we have $100k per day and 75m in 750 days or “2 years” if remained the same