This proposal to introduce the R Savings Module builds upon the idea of Single-Sided DAI liquidity incentive program governance proposal, posted in the forum earlier this week, whose aim is to address the current imbalance in our R liquidity pool, increasing R’s price to $1. We suggest reading our previous governance proposal for a better understanding of the context.
The R Savings Module is a novel new program designed to promote the growth and stability of R, as well as its utility as a stablecoin. Its primary purpose is to align with yield accruing mechanisms seen in other stablecoins, like DAI, paving the way for R to explore novel use cases beyond a device used for leverage.
Key Features of the R Savings Module
- Fixed APR: The APR, paid in R and subsidized by fees generated by the protocol, will have a fixed APR floor. Early depositors will be able to benefit from a higher APR until the Staking Capacity is reached.
- Staking Capacity: Initially set to 6 million R to prevent liquidity cannibalization, and is sufficient to address the current imbalance in R liquidity pools.
- Seamless Stake and Unstake: Users can enter and exit the program without facing lock-up or cooldown periods.
- Cross-chain Compatibility: The contract is compatible with our future cross-chain deployment in the future, enabling users to deposit R into the Savings Module on other chains, which reduces barriers of entry.
At the same time, we propose to:
- Increase the one-time borrow fees of R from the current 0.5% to 1% to counteract the effect of the higher R price resulting in increased borrowing activity.
- Increase the amplification of the Balancer pools from 125 to 250 over a one-week period from when the Single-Sided DAI incentive program goes live.
Anticipated Positive Effects on the R peg and the PSM effectiveness
The minimum APR on the R Savings Module, expected to be set in the 5-10% range, will exceed that on similar stablecoins, such as the DAI Savings Rate. Therefore, the launch of the R Savings Module is expected to:
Induce buying pressure leading to R restoring the peg and even trading above it once the Staking Capacity is raised further.
Such buying pressure will be absorbed by the planned Peg Stability Module (PSM) which is slated to launch soon. The PSM will act as a counterbalance to the R buying pressure by allowing anyone to mint R against sDAI and sell it on the open market to achieve a profit as long as the R price is above $1.
This strategy has the twofold goal of achieving a tighter peg for R and organically accumulating sDAI in the PSM that will act as protocol reserve backing R.
Launching the R Savings Module can provide a more efficient solution compared to the Single-Sided DAI liquidity incentive program we tabled previously. The current proposal aims at swiftly boosting the convergence of the R price towards the peg, bypassing the need for hefty capital expenditures.
Stakeholders: Please review this proposal. If agreed, this can be implemented in a very short timeframe, i.e. by the end of next week.