DIP-7 Treasury Bonds

The goal is to get DEI to a 1:1 backing with a basket of assets.

We will achieve this by selling DEUS Treasury bonds in exchange for collateral.

How does FRAX recollateralize its treasury?

They are using a “recollateralize” model.

What are US treasury bonds?

Treasury bonds (T-bonds) are government debt securities issued by the U.S. Federal government with maturities greater than 20 years. T-bonds earn periodic interest until maturity, at which point the owner is also paid a par amount equal to the principal.

How will DEUS equivalent work?

Like US Treasury Bonds, DEUS bonds pay the principal back in a stablecoin after maturity.

Doesn’t that mean that this creates sell pressure on DEI in the future?

Yes, at some point DEI of Treasury Bondholders will mature, and they will be able to sell it, but because of the dynamic behavior and different maturity dates, selling pressure is dampened. On top of that, we will also offer attractive programs to maturing bonds that will either make them keep their DEI locked, or redeem it directly for underlying USDC.

Reverse dutch auction with increasing fixed interest.

DEUS Treasury bonds for sale will increase attractivity over time if they are not bought by increasing the fixed interest that a buyer can expect every block where the bonds have not been purchased.

How does it work in detail?

Quick example, let’s imagine the protocol has 5M DEUS Treasury Bonds to sell. We offer them via our Bond Marketplace.

Important TL:DR on Bonds

  • Fixed interest over a user-selected period based on current market conditions
  • possibility to burn a bond before maturity with a punishment tax.
  • possibility to sell your bond as an NFT on the secondary market.
  • redeem your 1 USDC paid for the Bond as 1 DEI after maturity, and collect the fixed interest until then.
  • Bonds are low-risk fixed-interest products, Bonds can be at any time burnt and redeemed for USDC, in a Black swan you are protected from your bond going to 0.

Will this affect redeeming?

Yes, we will implement a dynamic redeeming mechanism, meaning if the treasury is at 100%, you can redeem for 100% USDC; if it’s at 80%, you can redeem at 80% & 20% DEUS. (the protocol-owned DEI bought back from the market and DEI in maturing bonds will not be counted to the circulating supply.)

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