iUSD Buyback & Rewards Adjustment

Temp Check Discussion
1

TL;DR
Implement an iUSD buyback program with monthly 30% of ADA currently being sent to INDY stakers.
New treasury split :

  • 40% for OpEx
  • 30% for INDY buyback program
  • 30% for iUSD buyback program & send bought iUSD to SPs, send excess SP INDY rewards to INDY stakers

1. Implement iUSD Buyback Program
To fund an iUSD buyback program, the existing ADA sent to stakers previously approved in Proposal 53 can be instead be directed to help gain & maintain iUSD peg. At the time of this writing with current price, roughly 13,310 iUSD can be bought using the estimated monthly 30k ADA. For simplicity, this buyback program can use the existing infrastructure currently being built for the INDY buyback program.

In return, stakers receive ~50% more in total ADA value compared to receiving raw ADA.

2. Restructure Existing Rewards
Stability pools will receive the iUSD bought during the buyback program.

Sending additional rewards to stability pools would create an imbalance in rewards to SPs & INDY stakers. To counteract, a partial of INDY emissions sent to SPs would be decreased and sent to INDY stakers instead. Currently, SPs receive ~75% of INDY emissions sent to the SPs and INDY staking, with staking receiving ~25%. The updated structure will result in the emissions sent to SPs & staking to a 50% split for each.

Any ADA not used from the 30% iUSD buyback will be sent directly to SPs. This will become more common once iUSD is pegged, diminishing the need for buybacks. Partial amounts may be used to maintain peg once achieved.

Historically, the large majority of INDY rewards sent to SPs are leaving the protocol & sent to the open market, while INDY stakers have historically proven they compound the majority of rewards back into their staking positions, keeping INDY within the protocol. During this adjustment, we can take the opportunity to also balance INDY reward emissions between SPs & INDY staking.

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INDY stakers will continue to receive the initial 30% ADA distribution until the iUSD buyback program is implemented. At the time of implementation, the rewards restructure detailed above will be put in place.

Rewards denominated in iUSD will be distributed each epoch, following the existing flow for INDY rewards.

Updated reward split
Estimated with 30k ADA worth of iUSD bought monthly, at current market prices. The estimated figures for SPs are also estimated given past percentage share of INDY rewards. Subject to be slightly adjusted depending on each epoch share percentage as they are normally.

Destination Current Daily INDY Rewards Updated Daily INDY Rewards Est. Daily iUSD
iUSD SP 2938.03 1944.88 346.57
iBTC SP 493.85 326.91 58.25
iETH SP 300.97 199.23 35.50
Staking 1209.22 2471.04 0

Not only will the iUSD buyback program help with peg, but will help reduce INDY emissions leaving the protocol, thus assisting with the existing INDY buyback program making it more effective.

If approved, this structure will remain in place until the DAO decides a new balance is necessary between SP & INDY staking rewards.

13 Likes
2

This makes more sense. Helps peg, helps INDY price by reducing emissions, helps SP providers by giving them a stablecoin instead of Indy to sell.

Makes sense to me. Much more balanced and rewarding system. I’m in!

5 Likes
3

On my view, it is a very strange proposal:

  • I feel that peg should be built by design, not by centralised temporary measures I.e not by buybacks,
  • V2 was launched in May, with a dual peg mechanism which has not been adjusted yet (interest rate has not changed, RMR either) and we would already implement an additional layer??
  • interests are coming from all iAsset (tomorrow, hopefully more than 3, by the way, we are still waiting for another one… ), and the revenue from that should be allocated to only one peg maintenance I.e iUSD ?
  • segregating rewards in iUSD for SP and INDY for stakers will just kill attractactiveness for INDY… INDY buyback has done, will do very little on INDY price, and spoiling revenues from it will kill its attractiveness… revenue to Indy staked was a way to reward holders and encourage participation to liquidity pools and SP…

I appreciate the effort made here to elaborate and document a sounded proposal, but for me, it is NO, NO, NO

NB: reading the proposal, it might be felt that iUSD peg is an excuse to try to find a way to increase reward for iUSD SP regardless of other aspects of the protocol and history of changes…

3 Likes
4

I really like this proposal.
It deals with peg stability of iasset, reuction in indy inflation and rewarding both indy stakers and SP participants.

3 Likes
5

This is detailed enough The new balance rewards structure and adjustment of the buybacks will be more fair and help for sure. I agree.

2 Likes
6

I agree that peg should be achieved by design, however it is a very difficult problem to solve. Implementing a buyback program along with parameter updates/protocol upgrades can better maintain iUSD peg. Ultimately you cant control the market. The reason the buyback program is specific to iUSD is due to the fact that iUSD has be depegged for a while now, while iBTC & iETH have been holding their strength. We can always implement buybacks for them as well when needed, but iUSD really needs it right now.

This proposal is also not an excuse to increase rewards to the iUSD SP, they actually receive less in total ADA value given current prices. This is done to work towards SPs receiving the iAsset they care more about, while also trying to reduce INDY leaving the protocol.

2 Likes
7

Even though the design is subject to improvements, the buyback will be a complement to the soft peg. Great proposal!

3 Likes
8

We are trying to artificially move the market in one direction and that is not gonna work. It’s the reason we are in crypto. Please do not try to overrule the market.

ADA has the highest value for INDY holders / stakers. We shouldn’t devalue it with iUSD only if the market prices is in a discount.

2 Likes
9

I find this discussion interesting but I have mixed feelings. It’s an excellent idea to buyback iUSDs in addition to interest to support the peg. Taking into account that the stakerz will have more reason to restake although the majority of them already do it. But in my mind, and this is just me, I have a preference for receiving ADA rather than iUSD.

So here are a few questions I have.

  1. If I understand correctly, you are proposing to buyback iUSD but not with the 30% allocated to buybacks by the DAO but rather to use the 30% of the interest initially paid to the stakers to transform it into iUSD, put it into SP and send rewards to the stakers? Do we agree on that?

  2. Why don’t you use the 30% initially earmarked for buybacks by the DAO to buy back iUSDs and add them as LPs on DEXs? Thanks to that, as the DAO rises, you’ll accumulate iUSD and dex fees + You’ll gradually increase liquidity.

  3. Taking into account that INDY stakerz will receive iUSD, don’t you think that the majority of stakerz will sell their iUSD reward to accumulate ada or indy, thus creating selling pressure on the iUSD? So none of this is really useful after all?

Finally, I’m not sure it will help the peg, given that there’s a very good chance that stakerz will sell their iUSDs on the market just after receiving them, especially if the iusd has depeg.

10

The SPs receive the iUSD as rewards, not the stakers. The stakers will receive more INDY in total value, which was removed from the SP since they are now receiving iUSD.

2 Likes
11

Let be clear,

  • the fact SP holder will not sell rewarded iUSD back to market as most are currently doing with INDY, is an assumption…
  • the fact that INDY stakers will not start selling rewarded INDY (INDY likely continuing trending down if emission is not squeezed and if no other reward than a asset trending down is given) is another one
12

Any expected result of a parameter change, reward restructure, etc. can be argued as an assumption. The assumptions made in this temp-check are based on historic data, something tangible that we can look at. The problem is, we don’t have the data to tell us that SPs will dump the iUSD & stakers will start dumping INDY. If this happens to be the case, there is nothing stopping the DAO from creating another restructure. Just like any other parameter update or restructure.

1 Like
13

This proposal definitely has my support. Not only does it address iUSD depeg concerns, it also addresses the current growing imbalance and disconnect between the protocol’s governing group and the user base.

I get that there needs to be mechanisms internal to the protocol that funds its ongoing evolution and development, but this needs to be done in such a way that grows the user base while encouraging the types of CDP behaviours that support the iUSD peg. One of the main rationales behind the implementation of the current V2 CDP RMR and interest rates has not proved to be true. These changes have not solved the depeg problem. Instead they have resulted in a big drop in CDP and SP TVL, a big drop in SP HRA, a big drop in the $price of Indy while at the same time seeing the interest charged on CDPs flowing to the INDY governors.

Providing more rewards for SP stakers will grow the user base and encourage the “mint and hold” behaviours that support the peg.

I love this protocol and want to see its success, but from a CDP user’s point of view the risks associated with minting and long-term staking iUSD in a SP no longer makes sense. I see this proposal reversing that concern and making the “mint and hold” activity, that has nothing to do with the depeg, an attractive option.

1 Like