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SIP Title Author Status Track Created
0061
Zero stability pool subsidies
cowsant (@cwsnt), Ororo Monroe (@ororopickpocket), Edan Yago (@YagoBit)
Approved
Contract
2023-04-27

SIP-0061: Zero stability pool subsidies

Description

If approved, this proposal will implement a Zero stability pool subsidies system with the following features:

  • A role “reward manager”. The reward manager role can be assigned to a Rootstock address using an OwnerGovernor proposal. The reward manager has the power to set an APR and price feed source for the subsidies system.
  • A subsidy pool that anyone can send SOV to.

SOV will be allocated from the subsidy pool to stability pool depositors on a pro rata basis according to the set APR. The stability pool depositors will be able to immediately claim any SOV allocated to them by the subsidy pool.

Example: If the set APR is 5%, and the balance of the stability pool is 1,000,000 ZUSD at the beginning of the day January 1st, and this balance does not change at all throughout the year, then by end of day December 31st of the same year the pool will have earned 50,000 ZUSD worth of SOV. (Note that in practice the algorithm will be able to handle changes in stability pool balances as needed. The example is made simple for ease of understanding.)

These are the proposed initial parameters of the subsidy system:

Parameter Value
Reward manager 0x6c94c8aa97C08fC31fb06fbFDa90e1E09529FB13
SOV address 0xEFc78fc7d48b64958315949279Ba181c2114ABBd
APR 5%
Price Feed Source SOV to RBTC: SOV AMM Pool Oracle , RBTC to ZUSD: Money On Chain USD oracle

Motivation

Currently, there is no subsidy for depositing ZUSD into the Zero stability pool. This means that the incentive to deposit ZUSD into the stability pool is based completely on the returns earned from liquidations. Initial analysis has shown these returns to be relatively high, with one estimate showing an APY of 127%. However this rate of return, and the frequency at which return events occur, is completely random, depending on volatility of the BTC market and the risk levels of Zero users.

Zero users need a more reliable “sink” for ZUSD that can help absorb excess ZUSD supply, thereby mitigating some of the negative effects of excessive inflation such as redemptions for line of credit collateral. To this end we propose to introduce a subsidy for stability pool deposits that will pay a predictable rate of return in SOV. The SOV for this subsidy will be sourced from the Adoption Fund to incentivize adoption of the stability pool and by extension, Zero and the Sovryn Dollar.

For future consideration

Instead of, or in addition to, paying for the subsidy using SOV from a steadily-diminishing Adoption Fund, the subsidy could be paid for using a portion of revenue earned from Zero and/or other parts of the Sovryn smart contract system that are earning fee revenue. This would require further discussion, development, and implementation as part of a future SIP.

Proposed change

New contracts:

  • Community Issuance Proxy: 0x9b38044A276fED8bC1703bd4a2DA1b17F2c61d16
  • Community Issuance Logic: 0x5059A057df377436Fc9b68369b696A23cc61Ecc3
  • Stability pool logic : 0x05a2dac59122f1dAcb7BB42b9736a8B27C12e193

Proposed change: DistributedCollective/zero#205

License

Copyright and related rights waived via CC0.