Using DAO Funds to Create $BUSD/$LUSD LP

hey everyone

wanted to get the thoughts from the community on creating more liquidity for the $LUSD/$BUSD LP.

the DAO has considerable funds that could be used to build more $LUSD. we could sell some $LUSD for $BUSD and create LP tokens and help increase the total liquidity for these pairs. more liquidity would help the price impact of $LUSD for any transactions.

what do you think about using DAO funds to build more $LUSD? i think we would want to build at a very conservative p-ratio, 1000 or higher. the DAO would not enter the VAULT, so we wouldn’t need to be concerned about the DAO diluting those rewards.

the DAO could potentially use a smaller percentage (<25%) of $LUSD to build a portfolio that mirrors the debt pool. this is probably another conversation, but i think we could set up a system where the DAO balances their portfolio around the composition of the debt pool.

curious to hear from you!

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I like your idea. how much LUSD would be used for that?. and how big is the overall DAO funds?
Yeah, i found it. So DAO funds are 1,5 bil Lina tokens.
So i would suggest 100 mil lina tokens to build Lusd.

hey,
nice to see some activity over here! I think the history of lUSD peg shows clearly, that the liquidation mechanism works successfully for larger timeframes and shifts / resets the peg on large price movements. But the deviation from the dollar is way to high for calling lUSD a stable coin.

In my opionion there have to be a second instance of short term price pegging mechanism in place to fix it. As stated before the pure increase of liquidity of the LP tokens will help to stabilize drift by low volume trading. But it will make it harder to fight large drifts because the liquidtiy to create counter price preasure will be very high. I would prefer the approach @Captain_Trips_Linear mentioned without increasing the LP tokens, because it will be less expensive to make aditional adjustments in the future and the entities who enter will have to pay the price for entering. The DAO funds can do the arbitrage.

But I don’t get, why there will be no such implementation like the Peg Protection Pot described earlier. It would have some strong advantages over adjusting peg through the DAO voting manually from time to time and it is not to hard to implement. The long term goal should be an automated pegging system, which puts the supply and demand of lUSD on the price of LINA IMO. There are clearly risks of frontrunning attacks, but there are also ways to use the attemps to encourage frontrunners to do the arbitrage for us.

Best regards!

2 Likes

THIS THIS THIS THIS.

I think a smaller percentage of that 1.5 LINA billion would suffice to hold that peg. This should be our number one priority right now as it doesn’t look pretty to outside investors seeing an important asset of our protocol being unstable! It’s hard to market something that isn’t running at full capacity!

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okay, i’m going to discuss more seriously with the team on how we might manage this, and will follow up with y’all

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First of all thank you all for supporting the ℓIP for the settlement button! I hope this can be implemented very soon.

But back to this topic. I was surprised by the new dApp at https://debt-terminator.linear.finance. This brings a new situation to the ℓUSD pegging issue. The debt terminator is a great new feature where the community can participate in maintaining the peg.

Great Job Team! :+1:

Now I understand why the peg protection pot was not implemented in the first place. As long as there are many outstanding liquidations the artificial increasing of ℓUSD could lead to sell pressure on LINA because liquidators would liquidate a lot of positions and get LINA at a 10% discount which could be sold for an easy profit. This is not possible at the moment because ℓUSD is above 1.10$ and therefore the situation makes it unprofitable.

Any ideas how we can get the ℓUSD down without triggering mass liquidations? A $LINA price pump would be very helpful! :grin:

Don’t know if it helps to increase the pool liquidity at this point. We should rethink it in this context. Maybe we have to wait until the peg is back in balance and hope for some better market conditions in the near future. Wallets at risk could see it as a chance to prevent liquidation and buy $LINA to bring their ratio back above 500.

One thing I want to point out. With the debt terminator in place the ℓUSD is well protected against market crashes and things like the UST fail are very unlikely on this platform. There is a serious need for algorithmic stable coins, I hope we can profit from this point. But therefore we have to find a balance mechanism between market extremes where ℓUSD tends to go in the different direction extreme.

Hope to hear your thoughts! Best regards!

2 Likes

Here’s an idea for you

what would be the ethics of using the DAO funds to liquidate accounts, maintain a healthy and extremely conservative p-ratio and contribute to the $BUSD/$LUSD LP?

I really have no clue about it from an ethical standpoint. I think it really depends on the view of the liquidated accounts. On one hand they will loose the 15% fine on top of what the price action did in the last year. On the other hand the rest of their tokens is locked away and they cannot access it until they got liquidated or they come back above 500 pratio. But we have to keep in mind it’s possible, that they dump the rest of their LINA tokens at the point of liquidation. With the current lUSD price level liquidation doesn’t make sense from a profit oriented view and it can bring trouble to healthier accounts if the lUSD price further rises.

For me it would be better if we encourage the accounts to raise funds to prevent liquidation. I thought a lot about how to bring the lUSD value down to one dollar. But as long as there are as many outstanding liquidations it could be hard to get to the point under current market conditions. From my view one
bit risky possibility would be to lower the target pratio for a certain amount of time. This will increase the lUSD supply and lower the barrier of preventing liquidation. The current price of lUSD would allow this move.

I don’t think any kind of spending $LINA via DAO funds can help at the moment, in the end it would increase supply. Unless someone knows Elon and can get him to tweet about us with money. :see_no_evil:

Best regards!