DefiDollar users incur a fee at the following steps during various user journeys:
1. While minting DUSD, curve charges a 0.04% fee. This is reflected in the amount of DUSD that the user receives. The DefiDollar protocol doesn't charge a separate fee. 2. While redeeming DUSD, the DefiDollar protocol charges a 0.02% fee. If DUSD is redeemed for a single coin (as opposed to all 4), Curve charges an additional .04% fee.
3. The redeem fee charged by the protocol gets directed towards staking rewards.
Different peaks earn different rewards, we have tried to detail them below: We launched DefiDollar with the Curve susdV2 pool. Since then we have added support for the Curve y Pool via the yVault integration. Peak #1 | Curve susdV2 pool (Deprecated) - Curve trading fees - Earns CRV and SNX liquidity mining rewards Peak #2 | Curve y pool (Active) We have added support for the Curve Y pool integration in tandem with the yearn yCRV vault. This enables the LP funds to draw income from Curve and the harvested rewards depending on the vault strategy. Peak #3 | DAI/sUSD Balancer Smart Pool (Proposed) We are exploring adding a dedicated decentralized stablecoin peak to ensure that the protocol can offer exposure to decentralized stablecoins to help keep the index diversified. Do check out the proposal below: https://forum.dusd.finance/t/decentralized-stablecoin-index-dai-susd-peak/18 We are actively exploring adding more peaks to the protocol.
Staking Rewards: (Disabled for now)
Liquidity mining rewards: The liquidity mining rewards refer to the following: 1) CRV farmed from the underlying Curve yPool 2) The yield being farmed by the yVault 3) The yield farming rewards on Balancer in BAL tokens from the USDC - DUSD 50-50 pool 4) The swap fee from the above balancer pool 5) Retroactive DFD liquidity mining rewards The rewards in 1 & 2 will be distributed to the LP addresses on a weekly basis by the DefiDollar team. The rewards in 3 are transferred directly to the wallets by the balancer team. The swap fee in 4, accrues to the BPT in the said balancer pool. For 5 the team will be communicating the release details closer to the genesis launch of the DFD token. Rewards are distributed based on the amount and the time duration of the liquidity provided during the snapshot intervals.
DFD will be the governance token for DefiDollar. It will be used to govern the following protocol decisions :
Whitelist & remove peaks
Assign peak ceilings similar to the ones in Maker Vaults to balance the index
Fine tune parameters like redemption fee within a peak
Decide on the distribution of the protocol income
For more details please refer to the blog post below: https://medium.com/defidollar/the-next-chapter-of-defidollar-b227935f10e7
Let’s consider two scenarios, one where the protocol is sufficiently collateralized but the value of DUSD fluctuates in the secondary markets and the other when the protocol becomes under-collateralized due to peg fluctuations of underlying stablecoins.
DUSD >$1 Arbitrageurs mint more DUSD to sell in the secondary markets thereby increasing the DUSD supply and returning DUSD to $1.
DUSD <$1 Arbitrageurs buy DUSD from secondary markets to redeem DUSD from the protocol in order to get a discounted price for the underlying stablecoins. This reduces the overall DUSD supply and returns the DUSD value to $1.
DUSD is sufficiently collateralized but the value of DUSD being traded on the secondary market fluctuates:
The underlying value of the deposited assets < Circulating DUSD (DUSD minted - DUSD Staked) Explaining the concept with a scenario:
Let’s say 110 DUSD are backed by $110 worth of stable-coins like DAI, USDC which are deposited in Curve and hence generating income.
Alice, with a higher risk appetite, decided to stake 10 DUSD. Since these staked funds act as collateral for the system, effectively the freely circulating 100 DUSD are collateralized with $110 worth of stable-coins.
Over some time period the protocol generated income (on the entire $110) from underlying curve pools and now has a total of $115 in assets. At this point Alice may decide to withdraw her stake and receive her proportional share (100%) from the income, so will withdraw $10 + $5 (denominated in DUSD). Note that though the protocol income was about 4.5%, however, that is directed entirely towards staked funds. This results in a 50% APR for Alice.
There may be a situation that causes one of the underlying stable-coins to break it’s peg, causing the system to be backed by $100 (instead of $110).
In this situation, the entire burden of the under-collateralized system is borne by Alice. So effectively, while the freely circulating 100 DUSD are still backed by $100, the staked DUSD are worth nothing (i.e. they will remain locked in the protocol). This is how staked funds provide a volatility cushion.
Say, a black swan event occurred which caused the underlying assets to fall further to $80. Since we still want DUSD to be redeemable with the protocol; the system will use the price feed from the oracle to devalue a DUSD token to $80/100 DUSD = $0.8 / DUSD.
In the event of peg failure of the underlying stablecoin assets, the stakers act as buyers of the last resort in the DUSD system.
We've been live since Aug 27th 2020 and have since been iterating on feedback from our users. The team is currently working on:
Reinstating an improved and robust Staking mechanism
Building a DAI/sUSD peak to provide exposure to decentralized stablecoins
Governance and stability modules
Please refer to this blog post for details on the roadmap and vision.