xBond redemptions

as an instrument, xBonds seem to be imbalanced currently as it rewards large xBond holders while penalizing smaller xBond holders for the asymptotic reward structure (the amount of USDx you can redeem decreases as you redeem more because your xBond pro-rata ownership decreases).

A solution to this is to balance the 1-1 minting of xBonds during negative rebases with a 1-1 redemption of xBonds for USDx during positive rebases.

Any user now can get at least the amount of USDx they put in, + any seigniorage that occurs during the positive rebase cycle windows.

This positive rebase redemption of xBonds for USDx at a 1-1 ratio would be precluded by a minimum xBond lock window (could be 0 seconds or perhaps 3 weeks). That is a governance parameter decided upon by the community.

This proposal would also include the xBond accrual discussion (so small users can wait multiple cycles to redeem their xBond rewards).

2nd snapshot vote: Snapshot

9 Likes

Excellent. I support. Love the responsiveness of the Dev team. Big ups!

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As an addendum to users who are a bit confused, xBond will still follow the bonding curve for rewards. So if you want to redeem xBonds for seigniorage you can do so at the current locked USDx to xBond ratio.

The only thing that changes is that users can now also optionally do a full withdrawal of their xBond into USDx at a 1-1 ratio.

So if there are 1000 Locked USDX and 250 xBonds (4:1 ratio), a user with 150 xBonds can redeem for 150 USDx during a positive rebase (assuming they met the minimum bonding time).

The new global ratio would be 850 locked USDx to 100 xBond, meaning a 8.5 - 1 ratio. This makes it much more profitable for existing users to redeem seigniorage as their xBonds can redeem more USDx during positive rebases. Of course during negative rebase this ratio can be diluted by new users wishing to bond during negative cycles.

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Totally support this idea, i think this is exactly what needs to be done with xBonds system.

So now xBonds will look more like USDX staking during positive rebases, which is great.

About last part with “xBond accrual”, not very clear to me whats the idea.
I think with each positive rebase you should have more and more USDX redeemable per burned xBond and thats it (because there is more USDX in pool and every xBond gets new minted USDX pro-rata, and pool dilutes if new xBonds are minted). You can’t redeem just rewards, only by burning xBonds and exiting from xBond pool.
Maybe even make it this way - you can only fully exit from xBonds and thats it, for simplicity and to incentivise longer holding of xbonds.

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xBond accrual would only apply to seigniorage rewards so if you are owed seigniorage from multiple positive rebases you can claim that amount using the latest bonding curve ratio. But when you do a full redemption you get 1:1

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Ah ok, now i understand it, its old system + option to redeem 1:1

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Awesome Dev Team! Should help a lot.

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Lets imagine following scenario:

1.) neg. rebase, ppl buying up XBond --> pushs the USDx up
2.) pos. rebase ppl. sell xBond, redeem also full xBond 1:1 and sell for profit as they bought the USDx cheaper in neg. rebase
3.) pushs the price back to neg. rebase and ppl will buy again xBond and USDx

I think this is an excellent solution, as ppl will not be stucked in xBond (no bad feelings) and are willing to sell USDx in pos. rebase (brings price down) and buy xBond and USDx in neg. rebase again!

Hats off!

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Please vote on Proposal: Snapshot

1 Like

I like this proposal however it opens up USDx to a high sell pressure during expansion phases. higher than current parameters allow.

robert have you considered a penalty system for xBOND redemption as proposed here:

xBOND Rationale: lock up liquidity during negative rebases.
xBOND Method: offer attractive rates to lock up 1USD:1xBOND
xBOND Problem: Users can not get their priciple back in a timely manner
Solution: Increase USD claimable per cycle + offer penalty premiums for additional claims

Technical Solution: Permit users to claim 2x their % xBOND ownership of the Initial Claimable USD. Any additional xBOND redemptions can start at a 30% haircut and increase on an exponential curve that increases as they try to liquidate higher portions. This gives liquidity to any desperate participants, but would go as high as 80% penalty for example. xBOND holders would be disincentivized to redeem too much of their holdings at once, but they should have the opportunity to do so if they need to get out. These penalty fees can be absorbed by the xBOND pool or a separate treasury.

I agree the original proposed solution of 15 epochs would cause major downward sell pressure and fluctuations on USDx. everyone who mints at 1:1 would be getting out at the same time and dumping etc. a penalty curve gives different timelines for this sell pressure and encourages holders to stay in xBOND.

Great work Robert, this is a solid solution, thanks for being receptive to the community’s feedback and quick to act as usual.

2x their ownership of the initial claimable would still be asymptotic in nature - one would at some point need to pay the penalty to fully exit. This would unfairly penalize smaller users I think as they never get their principal back.

I agree some sort of function can be appliqués to slow the release of coins though. Will need to think about this more. Perhaps money streaming can be involved (allowing users to claim a fixed portion of coins per day - e.g 1000 xBonds such that larger xBond holders will need to wait a longer linear weighted timeline whereas smaller users don’t have to wait as long).

Another point to consider is that while a user can indeed redeem 1:1 during a positive rebase, he will need to consider the opportunity cost of exiting early. One way to potentially disincentivized this is also adding a cooldown period where they commit to redeeming 1:1.

During this period, let’s say for 7 days, their xBonds will be removed from the reward calculation such that the ratio of xBond : locked USDx is much higher.

Example: current 1500 xBonds to 6000 USDx. Bob commits to redeeming 500 xBond. New ratio is 1000 xBond to 6000 USDx. Thus existing xBond holders now enjoy a 1:6 rate of redemption instead of a 1:4.

The cooldown period can be modified to change the redemption incentives.

I think overall that majority of the participants don’t like cooldown periods, especially longer ones. I would rather see the use of a vesting period here. So, you commit to redeem xBonds 1:1 - You lose any future seigniorage rewards. But instead of having it completely locked up, it would get vested 20% per epoch (5 epochs to receive complete stack in this example). This would allow participants to move funds, but would mitigate the USDx impact (if it would be a larger xBond holder).

@Robert Is it also an idea to lower the 0.99 limit again (1.01 upper limit is fine)? With this limit we go way to fast (and too often) in a negative rebase. The xbond effect doesn’t work than anymore. It should be a rare situation to have effect.
(I know it was done to create some instability to grow, but it has the opposite effect IMO. We could better focus on bigger positive rewards I think )

Yes understood. I do think adding the cool down ad an option would be important as governance can decide whether there should be a cooldown or whether it should be set to 0 (effectively no cooldown).

It seems like there wasn’t enough interest to warrant this change: Snapshot

Only around 200k share voted in favor. Perhaps a community member should hold a revote. Ideally we see a bit more active participation (closer to quorum) although an exact threshold is not needed…

please revote: Snapshot

Good decision! :innocent:

Pretty sure the community supports. Ok, we need to drum up voter participation