Decreasing the fee was to help offset some of the pains of rebalancing.
Rebalancing has been limited with recent changes.
Is increasing origination fee from 0.75% to 1% something we are interested in?
Decreasing the fee was to help offset some of the pains of rebalancing.
Rebalancing has been limited with recent changes.
Is increasing origination fee from 0.75% to 1% something we are interested in?
@AwaxJago what are your thoughts on increasing the origination fee and moving the rebalancing threshold to 2% from 2.5%. In the past two weeks, there have been very few rebalancing transactions. I think the supply of bnUSD has reached a point where it is more stable, so that could be why there is less rebalancing. If we move it to 2%, it would also further bnUSDās use case as a stablecoin because itāll always be redeemable for $0.98 instead of $0.975.
My hope in starting this thread was to find the next best step in finding balance. Thank you for your input.
Maybe it would be better to tighten the rebalancing threshold first, and see how it goes (with regards to rebalancing); And if all is well, we can increase origination fee then.
If we do both, and rebalancing increases to the point borrowers are put in a borrow/buy loop; then it could look disingenuous. If that makes sense.
Hmm, overall Iām actually leaning toward the opposite. I think we need to have a meta-governance topic about the selling point of minting bnUSD and using Balanced as a platform for leverage, basically, how to attract more borrowers.
The low origination fee is great without rebalancing, but a 1% origination fee would imply a 365% interest rate on any rebalancing that was done 24 hours after borrowing. The implied rate can go up drastically depending on how frequent rebalancing occurs.
I have it in my to-doās to organize this into a proper meta-governance thread, but overall, Iām thinking something like this as the framework for the discussion.
āGet free leverage in exchange for maintaining the stability of our algo-stablecoin, bnUSDā
Iām not saying to do this overnight, but overall Iād like to see more people borrowing bnUSD, trading bnUSD, and have bnUSD be more stable. To do this, I was thinking:
After doing this, Iād hope for the following results:
Thank you for your input.
So would the next best step be changing the rebalancing threshold to 2% from 2.5%?
Or would combining that move with a lowering of the origination fee be a good idea ~ as it may trigger more rebalancing.
Let us say: Change the rebalancing threshold to 2% from 2.5% and lower the origination fee from 0.75% to 0.6%.
How does that sound?
I think overall a slow drift is reasonable. My current issue with rebalancing now lies with the very rigid edges.
Is some sort of time rating still on the cards?
With regards to origination, it really depends on how long time horizon. At the longest time horizon, lowest (0) origination with the largest possible TVL is probably best. However, realistically without access to all the capital that would allow that, we are leaving some revenue on the table if origination is ātoo lowā. I think this is an area with a decent amount of leeway for experimentation with relatively low impact, as there is never any retroactive reprecussions, only forward looking changes. EDIT: zero is always a dangerous number, maybe a tiny amount is most correct, but nothing sounds as sexy as zeroā¦ not sure about that one.
I donāt think the exact peg % matters as much atm, since it often sits on one edge. I do think maybe a good metric to measure our peg by is not how far it is now, but the derivative of the peg versus time, basically the area, which will tell us how long + how far the leg is off by as a singular number. I feel there has to be a good formal way of measuring accuracy of the peg of a stable coin. (Which maybe different depending on use case). But if we canāt quantify āthis is a good pegā then its hard to work towards it.
Because if we decide a good peg means never straying an inch from the set limit, then its a waste of time to develop any time based solutions.
It seems obvious(maybe?) that there are parties trading in sICX:bnUSD because rebalancing is so infrequent now, so if you change the peg, likely whoever is trading will adjust their parameters slightly so the move is unlikely to cause a huge increase in rebalancingā¦
How about charging interest instead of origination fees? I know the 0% interest is a selling point for Balanced but is it not worth considering?
Sorry for letting this slip through the cracks!
An ongoing interest rate is possible, but only something Iād want to do in an extreme case. It comes with an entirely new set of issues/considerations. Iām glad you brought it up though so I can give you more background.
Weād be managing the bnUSD peg using indirect monetary policy, jacking up interest rates overnight to try to stimulate demand for bnUSD, or setting them to 0 if we need to increase supply. Itās just a very different mechanism from a monetary policy standpoint.
And even more-so, when I first came up with Balanced I wanted to create a product that doesnāt force interest rates. In fact, most companies that make money on debt originations earn income from origination fees, then they actually pass the interest payments to longer term investors through asset-backed securities.
My background prior to crypto is in ABS which is where the original idea came from. Here is a great website to dig into the ABS market if youāre interested. Youād be surprised at the fact that just about everything you pay interest on, the interest goes to these ABS bond holders, not the company you think youāre paying interest to (car payments, student loans, mortgages, smart phone installment plans, and more). Click on the Market Data dropdown menu and youāll see the many different sectors.
Balanced doesnāt need more capital to originate more debt. We donāt need to charge interest in order to raise money from other investors in the ABS market, so in reality, interest should not be necessary at all for the platform to be successful. Omm needs to charge an interest rate because they have these outside investors (depositors) that need to make money on their capital. Balanced mints bnUSD from thin air, so we donāt have that issue.