At BabelFish Money Protocol, we’ve been actively developing innovative solutions to tackle challenges related to stablecoin liquidity. We firmly believe that the stability and availability of stablecoins are paramount in DeFi, particularly during challenging market conditions. Establishing proper stablecoin allocations within the BabelFish aggregator has been a challenge. Still, with the introduction of Balancing Curves – a mechanism designed to maintain healthy stablecoin allocations, encourage diverse stablecoin deposits, and penalize deviations from target weights – we are making strides toward achieving equilibrium.
First part of the this analysis covers the period between September 26th and October 10th, 2023.
On September 26th, the Reward Manager was subsidized with 10,000 XUSD.
|
Target weight |
26.09.2023 |
Actual weight |
10.10.2023 |
Actual weight |
Change |
| DLLR |
49% |
3,060,436.06 |
95.58% |
2,633,260.50 |
82.96% |
-427,175.56 |
| DOC |
0.50% |
56,109.34 |
1.75% |
291,664.17 |
9.19% |
235,554.83 |
| rUSDT |
5% |
31,936.94 |
1.00% |
114,718.34 |
3.61% |
82,781.40 |
| USDTes |
5% |
22,073.67 |
0.69% |
85,412.46 |
2.69% |
63,338.79 |
| USDCes |
5% |
17,985.99 |
0.56% |
29,109.56 |
0.92% |
11,123.57 |
| USDTbs |
15% |
12,656.72 |
0.40% |
19,389.39 |
0.61% |
6,732.67 |
| DAIes (DAIes) |
5% |
350.31 |
0.01% |
350.31 |
0.01% |
0.00 |
| USDCbs |
5% |
277.35 |
0.01% |
317.80 |
0.01% |
40.44 |
| BUSDbs |
5% |
1.53 |
0.00% |
1.53 |
0.00% |
0.00 |
| DAIbs |
5% |
1.00 |
0.00% |
1.00 |
0.00% |
0.00 |
| RDOC* |
0.50% |
0.96 |
0.00% |
0.96 |
0.00% |
0.00 |
|
|
|
|
|
|
|
| Total |
|
3,201,829.86 |
|
3,174,226.02 |
|
-27,603.85 |
|
|
|
|
|
|
|
| Reward Manger |
|
10,000.00 |
|
158.67 |
|
|
*Deposits paused.
|
Deposits |
Rewards |
| DOC |
235,554.83 |
5,888.87 |
| rUSDT |
82,781.40 |
2,069.54 |
| USDTes |
63,338.79 |
1,583.47 |
| USDCes |
11,123.57 |
278.09 |
| USDTbs |
6,732.67 |
168.32 |
| USDCbs |
40.44 |
1.01 |
|
|
|
| Total |
399,571.71 |
9,989.29 |
DLLR withdrawals surpassed the aggregated stablecoin amount by 27,604.85 during the observed period. Withdrawals of stablecoins that significantly exceed the target weight are neither penalized nor rewarded, although they contribute to aligning actual weights with the target weights. Only deposits of stablecoins below the Target Weight can earn rewards if there are enough funds in the Reward Manager.
The majority of deposits were made with DOC, which not only drained the most rewards but also significantly exceeded its target weight. Despite this, there are still rewards possible for DOC deposits (currently at 2.33% level). Balancing Curves don’t prevent rewards for deposits that exceed target weights in a situation of significant imbalance.
Approximately 5,888.87 XUSD were consumed as rewards for DOC deposits.
All other deposits, aside from DOC, totaled 164,016.88, with 4,100.42 XUSD provided as rewards for those deposits.
Between September 26th (subsidy) and October 10th, 2023, approximately 147.96 XUSD in fees were collected into the Reward Manager.
Conclusions:
-
Implementing a feature that restricts rewards for stablecoin deposits exceeding the Target Weight is necessary. This measure would prevent the utilization of funds from the Reward Manager to incentivize deposits of stablecoins surpassing the Target Weight, allowing for a more efficient allocation of funds towards incentivizing deposits that are still below the Target Weight. Such behavior of the Balancing Curves would become a non-issue with allocations closer to the Target Weight, but adding this feature will ensure optimal incentive distribution.
-
With the Balancing Curves Parameter of Max Reward set to 2.5%, each 1 XUSD in the Reward Manager would yield a reward for a deposit of $40 worth of stablecoins.
Having 50,000 XUSD in the Reward Manager would facilitate the incentivization of at least $2,000,000 worth of stablecoins.
- It is essential to consider the behavior of Balancing Curves, the incentive for deposits below the Target Weight, and the imbalance fee applied to withdrawals that move stablecoin allocations further from the Target Weight. As stablecoin allocations approach the Target Weights, these incentives and fees would naturally diminish. While warranted, there might be a need to temporarily adjust another Balancing Curves Parameter - Factor (C) - to maintain attractive incentives for stablecoin deposits, ultimately leading to deeper stablecoin liquidity.
Analysis of the stablecoin liquidity in the BabelFish aggregator after 10th October 2023.
|
Target weight |
26.09.2023 |
Actual weight |
10.10.2023 |
Actual weight |
03.11.2023 |
Actual weight |
06.11.2023 |
Actual weight |
28.11.2023 |
Actual weight |
Deviation from TW |
| DLLR |
49% |
3,060,436.06 |
95.58% |
2,633,260.50 |
82.96% |
2,340,360.12 |
74.61% |
2,585,834.44 |
82.29% |
1,808,420.37 |
67.60% |
18.37% |
| DOC |
0.50% |
56,109.34 |
1.75% |
291,664.17 |
9.19% |
471,166.56 |
15.02% |
475,369.36 |
15.13% |
475,820.47 |
17.80% |
17.23% |
| rUSDT |
5% |
31,936.94 |
1.00% |
114,718.34 |
3.61% |
186,240.69 |
5.94% |
288.17 |
0.01% |
220,111.80 |
8.13% |
3.20% |
| USDTes |
5% |
22,073.67 |
0.69% |
85,412.46 |
2.69% |
45,263.82 |
1.94% |
2,275.71 |
0.07% |
565.31 |
0.02% |
-4.98% |
| USDCes |
5% |
17,985.99 |
0.56% |
29,109.56 |
0.92% |
60,743.84 |
1.03% |
32,193.08 |
1.02% |
96.23 |
0.00% |
-5.00% |
| USDTbs |
15% |
12,656.72 |
0.40% |
19,389.39 |
0.61% |
32,193.08 |
1.44% |
46,058.90 |
1.47% |
112,805.65 |
4.00% |
-10.80% |
| DAIes |
5% |
350.31 |
0.01% |
350.31 |
0.01% |
350.31 |
0.01% |
350.31 |
0.01% |
441.97 |
0.02% |
-4.98% |
| USDCbs |
5% |
277.35 |
0.01% |
317.8 |
0.01% |
11.381 |
0.00% |
11.38 |
0.00% |
16,048.90 |
0.59% |
-5.00% |
| BUSDbs |
5% |
1.53 |
0.00% |
1.53 |
0.00% |
1.53 |
0.00% |
1.53 |
0.00% |
1.53 |
0.00% |
-5.00% |
| DAIbs |
5% |
1 |
0.00% |
1 |
0.00% |
1 |
0.00% |
1 |
0.00% |
50,014.89 |
1.85% |
-3.14% |
| RDOC* |
0.50% |
0.96 |
0.00% |
0.96 |
0.00% |
0.96 |
0.00% |
0.96 |
0.00% |
0.96 |
0.00% |
-0.50% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
3,201,829.86 |
|
3,174,226.02 |
|
3,136,333.28 |
|
3,142,384.85 |
|
2,684,328.09 |
|
|
| RM |
|
10,000.00 |
|
158.67 |
|
20.05 |
|
8,273.51 |
|
0 |
|
|
*Deposits paused.
Between October 10th, 2023, and November 6th, 2023, the composition of stablecoin baskets within BabelFish Aggregator showed further improvement, despite the absence of significant rewards or occasional incentives. This can be attributed to the increased demand for Sovryn Dollar (DLLR).
Before November 6th, the quantity of DLLR was gradually and consistently decreasing, while the quantity of various stablecoins was on the rise.
On November 6th, a user deposited 253,684.03 DLLR into the BF aggregator. Subsequently, they withdrew 186,728.14 rUSDT, incurring a 5,756.39 XUSD imbalance fee. Following that, the user withdrew 57,218.44 USDTes and paid a 2,275.56 XUSD imbalance fee. This led to a net inflow of 8,031.95 XUSD, collected by the Balancing Curves Reward Manager, along with other smaller inflows.
Although there was a reduction of approximately 777k DLLR, 1.7k USDTes, and 32k USDCes, there were notable inflows of approximately 220k rUSDT, 67k USDTbs, 92 DAIes, 16k USDCbs, and 50k DAIbs. In total, there was an inflow of $352,713.45 worth of external stablecoins and an outflow of $33,807.25 worth of external stablecoins. The imbalance fee collected by the Reward Manager on November 6th alone resulted in an inflow of $312,278 worth of external stablecoins.