DFIP-2211-F: Limit FutureSwap volume #238
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Graciaho
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Graciaho
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$ defi-cli signmessage 8WYgBxs8bXQkbiXKnZCe8utjDvuceaDGY1 "dfip-2211-f-yes" |
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$ defi-cli signmessage 8ccminZPSFox6bRseAgdqLccKvLs2aGHtr "DFIP-2211-F-yes" |
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$ defi-cli signmessage 8adjFmpmdACKuZheqLYnRkGMn8sFUXcUgm "dfip-2211-f-neutral" |
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$ defi-cli signmessage 8Jv2n6XkEsVxQnoA9yS9nsRMLmP69Kpbec "dfip-2211-f-yes" |
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signmessage 8b5QJxmxm6PWpzL4GkrT4KVJBcUyh3yNJG "DFIP-2211-F-yes" signmessage 8NmuiLWL22giTtpLFzAJpVTkEHhuqBiUmX "DFIP-2211-F-yes" |
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defi-cli signmessage 8JdbYYdXc4VaTmihQndAbutHURWU1MLDat "dfip-2211-f-yes" |
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signmessage 8QdRJ7h8oNcQNvM321RwWrBaNXUBzYiEMU "dfip-2211-f-yes" |
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defi-cli signmessage 8JH1oqEbY6fiP614Z4wJ41YNtXKzVdEwLH „DFIP-2211—F-yes" |
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$ defi-cli signmessage 8eAuuamYvdjpn7YBoiqT6PEhTJqc62tpCV "dfip-2211-f-yes" |
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$ defi-cli signmessage 8dK9Se1fAmQxNUnxu9CwE4gDHNe2813oEX "dfip-2211-f-yes" |
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Votes of the DFX Community Individual votes can be viewed transparently here: Votes: |
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signmessage 8XjGQuumUBGyevsG8Jn4yZQ6QBpkA4ukgM DFIP-2211-F-yes |
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$ defi-cli signmessage 8Qy6nhf1HxXakfFyGPuZSh8crum24pQ7ux "dfip-2211-f-yes" |
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and others
DFIP Overview
The history of DUSD showed that unlimited creation of "unbacked" tokens can lead to problems down the road. Currently the FutureSwap is unlimited which might lead to such problems. That's why I am proposing to limit the FutureSwap to a total volume of 10% of the average liquidity of the last 28 days in the corresponding liquidity pair.
The idea behind FutureSwaps
The FutureSwap was introduced to ensure a loose binding of dToken prices on the DEX to the corresponding oracle prices. With this mechanism users can either swap dToken for DUSD or DUSD for dToken, each with a penalty of 5% against the oracle price (and only once per week).
This does not create any immediate attack vector on the dToken system, but excessive usage of the FutureSwap might put the system into an imbalance which we do not want. In general the FutureSwap is designed to stabilize the system. It should only be used if the DEX price is in a strong premium or discount (>5%) for a long period.
Normally creation (and removal) of dTokens should work via loans. So a premium in the dToken should incentivize the creation of loans, while a discount should incentivize paying them back. Only if this mechanism fails, the FutureSwaps should be used.
The risk
Let's consider a pool like GME-DUSD with 2 mio in liquidity. So 1 mio $ worth of dGME and 1 mio DUSD. Now if someone would swap 100 mio DUSD into GME, they would not move the market in any way, but this user now has a 100 mio long position "against" the chain. This was clearly not to stabilize the DEX, but to prevent slipage and get a great entry price. Now GME pumps "only" 100% for any reason ("worst case" they push up the real GME price themself with enough funds) and they swap the GME back to 200 mio DUSD. So they made 100 mio DUSD profit, created out of the chain. This also creates a massive amount of algo DUSD which again hurts the dToken system as we are seeing right now.
The solution
If we limit the usage of FutureSwap to 10% of the average liquidity of this token in the corresponding DEX pool, this would be far less of a problem. In the example above they could only swap 100k DUSD per week, and since they would block the FutureSwap with that, the dGME might even go into a premium. And that's what a market should do when there is such a massive demand.
I also often hear the fear that algo-dToken might flood into algo-DUSD. With this cap we would limit this risk to a maximum of < 5% new algo-DUSD per week, because the max swap is limited to 10% of the total liquidity in the dToken pools (which is the same amount in DUSD). We usually have the same amount of DUSD also in the "gateway" pools, so DUSD in dToken pools are less than 50% of all DUSD, and that is not even counting the DUSD in vaults.
On the other hand a 10% cap per week would be enough to move the DEX by 21%. So more than enough to deal with any overboarding discount/premium coming from normal trading and inflow/outflows. Even a higher premium/discount would only take an additional week to be resolved. During this time the high premium/discount would be a strong incentive for vault owners to mint tokens and benefit from it. Which is a great benefit for the ecosystem again.
How does this DFIP benefit the DeFiChain community?
Limiting the usage of the FutureSwaps will prevent future exploits and unhealthy shocks to the system while still allowing the FutureSwaps to make the dToken system efficient. This will increase confidence and trust into the dTokens and therefore drive adoption and marketshare.
Non-obligation
I understand that vote of confidence for DFIP carries no obligations by any developers to implement the proposals. DeFiChain is a community projects. Pull requests can be submitted by community and reserved to be evaluated for safety and general community acceptance.
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