Manual vs Automatic Seigniorage

Seigniorage USD is paid automatically currently.

Auto Seigniorage
Pros: no action from user + no gas fees, low friction, no UI required
Cons: auto-“burn” of Share, potential problems of integration SHARE to other DEFI ecosystems

Manual Seigniorage
Pros: no autoburn of share (good for trading and listing on CEX)
Cons: requires gas and UI. Need to constantly check to see how much new USD you have

I want also point that we can direct all USD to the Treasury and use the Treasury to sell those USD for SHARE (putting those SHARE outside of the system, the can be burn).

Pro: This allows 100% efficiency in USD minting (it goes directly to push USD price down) and helps SHARE price a lot (each USD minted is a buy of SHARE).
Con: You no longer get new USD, it goes directly to raise SHARE price.

Currently the process isn’t automatic at all
To trigger the burn you have to move your share.
Originally I thought it would be actually automatic and my usd would be sitting in my wallet but it didn’t. I still have to do something which costs gas regardless

From the point of view of the protocol, the best thing to do during a positive rebase would be to

Claim USD with share
Share is burnt which pushes share price up
Sell USD back to share which pushes USD down toward peg and pushes share price up further

If we’re going to do something automatically, why can’t the protocol do that?

Not really a con imo

USD is a stable coin, share is the speculator.
You don’t invest in stable coins you use them.
It’s way better to be getting paid in a coin that has unlimited upside like share

Another con of Auto Seigniorage: if someone want to exercise their Share partially, they have to plan and manage multiple wallets from the very beginning.

Another option is featuring 1 staking pool with auto burn. Then share can be used for trading and voting without burning.

I think Robert articulated the composability problem with auto-burning well.

But there is other downsides to the auto-burning mechanic as well, for example price discovery is significantly hampered because any movement of shares/USD in wallets triggers an auto-burn. What this will do is not allow the price to move in small increments since this discourages token movements.

To make the system more market efficient, token movements, sales, buys should be encouraged not discouraged.

If the project is to be an algorithm + game stablecoin system, then your approach seems to be far from the original intention of the project. This design is more like a game for hype.

The disadvantage of Auto Seigniorage is that it harms the interests of long-term holders, because when the price of $share is much lower than $usd, the amount of pre-burned $share is too large, and long-term holders are not sure that this will happen. How long will it last? When the risk is unclear and huge, they will give up holding.
We should encourage long-term holders to hold $share, so I think that providing a share-eth staking pool and obtaining a positive premium of $usd for its stakers will encourage long-term holders to withdraw from the pool. Tax is implemented when $usd, and the tax is included in the national treasury.

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We use the positive premium of $usd as seigniorage, and the seigniorage tax collected is included in the national treasury to purchase $share for destruction or retain to generate new $usd for system maintenance.

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The stated benefits of auto seigniorage aren’t actually working as intended anyway.

It still requires a UI to realistically figure out the pending changes to your positions, and it still costs gas to execute the effects of the rebase on your wallet…

I think this change is good enough as proposed as a simple implementation and an iteration forward. I think its likely this process will change eventually, but many of the arguments here could be presented later as improvements or tweaks on top of this proposal.

Last second thought though; how will contract and LP wallets handle the rebase? Automatically as it currently is?

LP’s and mining contracts aren’t subject to rebases now.

Seems like consensus from this chat is to move back to manual seigniorage.

Time to vote on it?

Automatic Seigniorage was fine when there was no Auto burning of SHARE.

I think Manual Seigniorage is better. We should have an UI to burn SHARE for USD during positive rebase like we are burning USD for SHARE during negative rebase.

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Couple of points i want to add is that

  1. if during positive rebase there is pending USD to be claimed and USD goes into negative rebase then all those USD yet to be claimed should be burnt.

  2. if project goes positive from negative rebase and there is USD yet to be burned then i think those USD should be removed from burning so SHARE dilution should stop.