Proposal: New approach to negative rebase combining Inverted Discounted Share Curve and Debase like AMPL

This proposal is already on Snapshot for voting. I am not sure how voting proposal are conducted in the community but the end goal is just trying to help.

PROBLEM:

Once the protocol enter in negative rebase, two main adverse behavior happens:

  • Recovery takes long because, ppl wait until the discount is big enough to start burn DPUSD for SHARE.
  • SHARE price is continuously pushed down by arbers that sell acquired
    Discounted Share at spot for DPUSD to accumulate more discounted SHAREs. While this behavior pushes DPUSD back to peg, it has the extremely adverse effect of depressing SHARE prices that leads to generalized wealth loss, while also lower yields on farming affecting attraction mechanism of newcomers.

SOLUTION:

  1. Implement an Inverse Discounted Curve (explained below).
  2. Impose locking period for Discounted Shares
  3. Implement Debase AMPL style only after Discounted Share incentive fails.
  4. Implement quota for Discounted Shares with the aim to curb malicious bots/whales from exploiting discounts.

Detailed mechanism:

All numbers below are subject to adjustment/fine tuning on another vote
proposal, if the main mechanism is approved:

Suppose Max discount is 40%, Max Burn Supply of 40% of total circulating supply and current threshold prices of $0.95

USD TWAP goes below $0.95
1st cycle:

In the first interaction Protocol disposal of 5% of Max burn supply at max 40% discount to be burned for SHARE and the discounted SHARE is locked for 1 week.

2nd cycle: IF USD doesn’t come back to peg, in the next cycle protocol creates additional 10% of max burn supply with 30% discount locked for 5 days.

3rd cycle: If USD doesn’t come back to peg, protocol creates additional 20% of max supply at 20% discount discount locked for 3 days.

4th cycle: follows the logic above lower discounts and more supply.

WHAT IF:

  1. After any cycle if the discount is not enough, and there is supply left with no interest and USD is not back to peg?
  • Then the protocol wait for 4x12 hrs cycles (or two days), before start debasing like AMPL.
  1. What to do prevent a bot or a malicious whale that keeps px just above $0.95 and alternates px above and below threshold to exploit the max discount?
  • One possible implementation is to put a cap on Discounted Share each acct can get at each discount level and this cap limit would free as lock up period expires. It would not prevent whales and bots to act maliciously but it would make costlier as they would need to spread out to several accts to make it worth.

This would also hv the benefit of more benefits being spread among several accts than one single whale sweeping all the juicier discounts.

I think that a well calibrated model would incentivize ppl to jump in to buy at max discount soonest possible and in the worst case would prefer to jump on a discounted share than be subject to debase.