This proposal is to address the current imbalance in our R liquidity pool, with a 71% R to 29% DAI / bb-a-DAI ratio, resulting in R’s price being just under 99 cents.
Notably, other decentralized stablecoins like LUSD, GRAI, and GHO and others are facing similar peg deviations as a result of low or no interest rates on these stablecoins coupled with low borrow fees, which results in minters selling them for sDAI.
While our planned sDAI-based Peg Stability Module (PSM) offers medium/long-term peg stability, we’re seeking efficient short-term solutions. This proposal recommends incentivizing single-sided DAI liquidity in the R / Dai Boosted pool, promoting stability and enhancing our stablecoin’s utility.
Single-Sided DAI Liquidity Incentives
We propose incentivizing single-sided DAI deposits into the R / DAI (Boosted) pool.
Depositing single-sided DAI into this pool will increase DAI / sDAI reserves in the AMM and increase R’s price. The rebalance will also affect other R pools due to the resulting DAI inflow.
Single-sided depositors will receive a higher yield than double-sided participants, comprising swap fees, BAL incentives, AURA incentives, sDAI yield. Unlike double-sided depositors, they will also receive additional token rewards from Raft.
- Estimated APR for single-sided DAI LPs: 10-20% APR
- Target new DAI inflows: $5-10 mln
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.
Strengthening the Peg: Balanced liquidity pools improves the value proposition of the upcoming PSM and reduces reserve asset capital needs.
Boosting Stablecoin Utility: By incentivizing single-sided Dai deposits, we improve stablecoin peg and utility, promoting wider adoption.
Enhancing New R Positions: A tighter peg renews the appeal of new R short positions, negating any implied fees if R’s price increases.
Our Balancer pools’ imbalance demands proactive strategies. This incentivization plan aims to tackle current issues and set the stage for growth. By aligning incentives to repeg R and enhance our peg, we aim to boost our stablecoin’s appeal and function.
Stakeholders: Please review this proposal. If agreed, this can be implemented in a very short timeframe, i.e. this week.