much of the concern around xBOND
For the clarity of this thread, what are the concerns around xBOND?
It feels antithetical to try to defuse some of the pain points of the xBOND properties since part of what makes the current system stable is definitely (at least in part) due to this lock-up. I think we need to be very careful about this to avoid a run on USDX. Erring on the side of caution would mean to set the number of epochs arbitrarily high to avoid problems (which is still better than the indefinite/asymptotic redemption model currently).
I definitely prefer this to an incentivised xBOND pool.
Current problems that I see with xBOND are that it takes a long run of positive rebases to get anywhere close to redeeming the principle lock-up let alone any additional (from seigniorage). Any negative rebases during a positive run will completely cripple the ability to redeem further and slow the redemption process by an order of magnitude (I went from being able to redeem triple digit xBOND to single digit xBOND amounts). This risk of either never being able to fully redeem or it taking too long to do so is where I see the problem.
Certainly adding an epoch for full redemption can be a solution but I’d hesitate to even start to picture how this will play out.
How about tweaking the % of redeemables during positive rebases? I couldn’t find the code that dictates how much xBOND can be redeemed during a positive cycle. Couldn’t we start there? Increasing this percentage means that people can begin to redeem larger portions of their xBONDs and see the light at the end of this redemption tunnel. This is a minimal change to the system that also will create minimal implications. USDX release back into circulation will remain slow and controlled as opposed to uncontrolled floods (if a bunch of people bond a lot at a certain time, they will all unlock at the same time and flood the market with USDX, NOT a good thing).
An alternative idea would be to use this epoch value but allow slow redemption on a curve over the redemption period of X epochs. Any bonds unredeemed in a positive cycle don’t count towards the curve. This curve can be linear or exponential and be rising or falling. I would suggest a rising exponential curve where bond holders’ first redemption starts the epoch cycle for their full current bond balance. The first redemption is small and exponentially grows towards the end of the redemption period. Any new bonds acquired during a redemption cycle are ignored unless the holder wishes to restart the cycle and include the new bonds. This way full redemption is still guaranteed and we avoid big floods to the market and still maintain the illiquid property of xBOND and USDX by keeping initial redemptions at low values and gradually increasing towards the end of the redemption period.
The exact continuous function used for the redemption period can be discussed here. Exponential (x^2) curves are just a starting point. We could even use cubic root curves (starts slow, accelerates towards the mid term, and plateaus off towards the end).
I would argue that we should aim for gradual and continuous functions for lock-up and release to avoid situations where there can be big market fluctuations based on user activity (negative rebases cause a big mint surge, which all unlock at the same time and flood the market causing big spikes and dips in USDX price). We should follow the rationale behind rebase lag.