Author(s): Sperax Core Team
Reference: Mentioned in recent AMAs
Created: Aug 15, 2022
Labels: #USDs Parameter
Simple Summary
The Sperax core team proposes to remove the barriers to grow USDs TVL by making the mint fee 0%, remove the SPA requirement to mint and set the redeem fee to 0.2%. In preparation for the launch of the Demeter protocol, this upgrade will allow for partners to easily mint USDs, increasing TVL and lowering the barrier to participate for liquidity providers of the Demeter protocol . Demeter is the new protocol allowing Arbitrum projects to launch Uniswap v3 farms without needing to know how to code. This proposal includes a new burning mechanism to retain SPA supply reduction while retaining 100% collateral ratio.
Abstract
When projects use Sperax’s new Demeter Protocol to launch trading pairs against USDs, this user needs to acquire USDs to seed against the community token. Once they get the USDs, they will deposit USDs + partner token in the Demeter Uniswap farm to earn SPA and the partner token as rewards. By making the mint fee 0 and removing the need for SPA in the minting process partner protocols will more easily spin up a farm. Removing the SPA component should increase the user experience by removing barriers to minting, increasing USDs TVL in the process. This increase in TVL will produce more revenue for the protocol , more auto-yield for USDs holders and should result in more SPA burnt through the Demeter Protocol, more SPA bought back on the open market and more revenue paid out to SPA stakers. The revenue from Demeter is used to buy SPA and burn it. This is done by requiring Demeter users to acquire and burn some SPA. As use of Demeter grows, the community can anticipate the SPA burn being greater than when SPA was being used to mint USDs.
Motivation
Make minting USDs seamless so Demeter Protocol will increase USDs TVL and drive more value towards the SPA token. Reintroduce SPA burn through the Burn 2.0 mechanism.
Overview
The Demeter protocol will reward any project that incentivizes a trading pair against USDs with SPA. This is similar to if Curve had their own stablecoin, the protocol giving a guaranteed amount of CRV, just for pairing against the Curve stablecoin. We will deliver this experience through Demeter, although the liquidity will live on Uniswap v3 for ease of use.
To remove all barriers for community members to provide liquidity, the Sperax core team proposes two changes to make it as easy as possible to acquire USDs via minting. By minting, users don’t have to pay the fees associated with buying USDs on the open market. These fees include: paying a fee because USDs is trading above peg, tx fees from Uniswap and slippage fees if the order is large. All of these factors prohibit the ability for partners and community members to seamlessly acquire USDs to deposit into the incentivized Demeter pool.
Redemption fee of 0.2% is the lowest rate where the protocol can still generate revenue without presenting a large barrier to users. This rate can be adjusted by future SIPs, of course.
Burn 2.0 Concept
Stakers of SPA benefit from weekly yield payments, generated by 100% of protocol fees and 50% of all yield generated on the collateral backing USDs. The Sperax team proposes that 50% of the SPA from the weekly buyback be burned. We currently give back 100% of the fees collected and 50% of the yield to SPA stakers after converting them to SPA.
The proposal is to burn 25% of the yield component - so if yield is 100 USDs, the protocol buys SPA with 50 USDs and burns SPA worth 25 USDs.
In addition to the above SPA burn, The Demeter protocol will charge a small fee by retaining some of the LP transaction fees in future. The LP will be compensated with reward tokens so this fee won’t be felt by the LP. But for the SPA holder, this is very promising because this fee is used to buy SPA on the open market, to burn. These two burning forces could make SPA deflationary once again without forcing USDs to be collateralized by SPA. In the first version of the Demeter protocol, other protocols/projects which launch a farm will have to pay a fee in the form of SPA tokens which will be burnt.
Technical Specification
Sperax team to update the following parameters to the below numbers:
Mint fee: 0%,
Redemption fee: 0.2%
SPA requirement in mint/redeem: 0%
One of the two following revenue direction updates:
Revenue direction 1 with Burn 2.0:
100 USDs (from collateral yield) → 50 USDs to Auto-Yield reserve, 25 USDs buys and burns SPA, 25 USDs buys SPA and transfers to veSPA stakers.
Revenue direction 2 without Burn:
100 USDs (from collateral yield) → 75 USDs goes to Auto-Yield Reserve and 25 USDs worth of SPA is bought and transferred to veSPA stakers.
