Please dont shoot me just yet… bnUSD is having a hard time keeping its peg because there is more supply than there is demand.
One of the main drivers of supply is that people are encouraged to take out a loan… In fact, the act of taking out the loan is so beneficial, that it encourages people to borrow an asset they dont really want. Therefore selling it right away.
in my thinking… if we use the incentive freed up to actually create demand (for example incentivising bnUSD pools). The peg would become alot more stable.
I agree with the core idea behind it, but I think we should think of borrowing as a combination of origination + borrower incentives +the market value of leverage, lets call it the net value proposition of minting bnUSD.
Whatever the balance between the 3 factors, it has to be net positive for the minter. This is because they provide a service, the pegging of bnUSD. The trick is, we don’t know how much TVL we need for a safe peg, more is not better, but too little is bad.
Note the when I say net positive, it does not need to be positive directly in terms of monetary position since one of the factors is the value of leverage. We also don’t know ‘how positive’ is enough.
A side issue to that is the relationship of service fee <> BALN minting, that gives some sort of real price/value to BALN as they are essentially buying BALN with orignation fees.
Aside from that, adding to the dicussion of giving demand/value to bnUSD, I feel something we don’t talk about is the largest demand for bnUSD minting, its not incentivised LPs or OMM lending. It is the ability to buy assets at a fair price with it, ie. a strong peg.
I don’t think my post is that useful since I don’t think I know the answers to these. But I just think thinking about the borrower rewards in isolation to the other factors is probably incorrect. Also minting bnUSd cannot be exactly neutral (which it wouldn’t be even with 0-orig/0-reward because of the value of leverage), but the holy grail would be figuring out how much backing we need for a safe peg.
Also erring on a bit more orgination and a bit more BALN borrower rewards than ‘correct’ does have additional benefits of ‘anchoring’ the value of BALN.
One last point is, its 100% clear borrowing is too beneficial. This is because despite the supposed horrors of rebalancing, people still mint and bid down bnUSD. If minting was so bad, people would stop.