f93c66938df0d4990ccd5c45ec38c73d01cfb637
Proposal: DAO Deposits Stable Coin to HBD Savings, using Interest to buy & burn DEC daily
This proposal is a response to the previous failed proposal by bulldog that suggested the DAO spend 500k to acquire DEC. Instead, I propose the following:
Proposal:
- Convert DAO Stable Coins (equivalent to 250k USD) to HBD.
- Deposit 246k HBD into savings. (Why less than 500k as per bulldog's prior proposal? Answer: This keeps the DAO diversified, and allows for others to propose alternate uses for the remaining stable coins)
- Currently, HBD offers a 20% Annual Percentage Rate (APR).
- Earn interest on the deposited HBD.
- Divide the earned HBD interest by the number of days in the month Divide this then by 2.
- Use half the calculated amount to purchase and burn DEC from the market each day.
- Use half the calculated amount to purchase and acquire DEC for the DAO Treasury.
- Use 4k USD HBD to immediately commence the daily buy and burn, over a 30 day period until subsequent interest is received for the following month this would be ~133 HBD or thereabouts per day
Proposed scenario
Considering the current HBD APR and a proposed 246k USD in HBD, approximately 133 HBD of DEC would be burned per day. At the time of writing, this would result in buying and subsequently, burning 75,000 DEC on the first day and adding 75,000 DEC to the DAO, if that day was today.
The second day would see similar buy and burn pressure. To avoid "prediction" or gamification of the timing of the buy, a random number generator should be used to determine each day's time of purchase so it is not able to be predicted or "front run" by people intending to manipulate the market.
To ensure immediate implementation, we deposit only 246k USD and use the remaining 4k as a "Seed" to start the daily buy-burn process as soon as possible after the approval of this proposal.
If, on any given day, DEC is > 0.00095 USD, the excess HBD compounds into savings, earning a return for the DAO.
It is important to also note that the DAO shall acquire these funds in a way that is not likely to spike the volume of HBD in any given day, meaning the buy order and deposit into HBD savings would staggered.
Benefits:
- Consistent removal of DEC from supply when below peg.
- Earning returns on stable HBD balances through the HIVE blockchain HBD APR when DEC is at peg.
- The DAO retains 246k USD in HBD Deposits
- Growing the DAO Reserves in HBD when DEC achieves peg.
Downsides/Risks:
- Difficulty in understanding the mechanism of HBD APR and its integration into the HIVE blockchain. For more information on HBD, refer to this link.
- Potential future decrease in the HBD APR below 20%.
- Possible decoupling of HBD from its peg.
- Funds locked for 3 days, making them inaccessible in case of emergency capital needs for the DAO.
- Lower liquidity of HBD compared to other stable coins, requiring a measured, multi-day, or multi-week approach for entry and exit from the position.
- Decreased future demand for DEC, resulting in HBD interest being used to purchase and burn a constantly declining asset.
- Potentially a labour intensive, manual process for the DAO; but arguably one that could be automated via the use of robotic process automation
Assessing Success:
- Returning DEC to its peg.
- Maintaining DEC stability over several months.
- Seeing a material, consistent increase in the DAO's DEC balance
- Activation of the SPS Flywheel, leading to a decline in circulating SPS supply and an appreciation in its value as it becomes scarcer.
When to Stop:
- The DAO would need to agree on a future proposal to withdraw funds from HBD savings and decide how to utilize them.
Transparency/Funding for this Proposal:
@holoz0r personally funded this proposal.
Thank you for your time. Please maintain a civil discussion in the comments. Remember, I won't be emotionally affected if you disagree with my proposal.
This image of Zyriel is here to remind everyone that Splinterlands isn't Life and Death. :)
If you don't know what HBD is, and you didn't click the link: https://hive.io/hbd/
Thank you to those who provided feedback on this proposal prior to it being published. I have made some modifications to take into account all of your suggestions in a balanced manner. Your contributions of feedback and wisdom are appreciated and valued.