Today at 4pm UTC, the Zero Risk Meeting #2 will be held in the Community Voice room on Discord.
Discord Link:
See you there!
Recording can be found here:
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First the bigger picture, that Yago talked about in regards to HODLing DLLR:
A key thing to consider is that we want to onboard NEW users, and Zero is a great tool for that. It is what we get when we access sovryn.app, so the apps primary focus is to get a loan. What do people use loans for? Usually not to HODL. If we want to change the perspective that DLLR is something we want people to HODL, because itâs a safer alternative than centralized stablecoins, why are we in that case promoting that the main purpose currently with the DLLR is to get BTC backed loans, not to BUY DLLR.
Sovryn.app should therefore FIRST communicate to visitors the functionality of converting their other stables to DLLR. SECOND should be the BTC backed loans. I think this is the biggest mistake when it comes to the sovryn.app right now. We want them to HODL DLLR, but we promote the idea of BORROWING DLLR. I think this is extremely important if we want to change the way people perceive DLLR. So why not put on the start page of sovryn.app the bridge, where they can convert other stablecoins to DLLR? I know this is not an easy thing to do, because it requires re-thinking the UX, but the functionality we already have with the Babelfish bridge.
In regards to what was discussed during the meeting:
I agree with lowering redemptions another 0.5%. I do think the origination fee for getting a new loan is too high, but for the time being, and trying to maintain the peg itâs necessary (I would like to see it go back to 0.5% in the future).
I know the redemption function was removed from the public because we got so scared of redemptions. But now we are instead having problems with the peg. Maybe we should not be so afraid, and just face the facts: Redemptions are a necessary evil of the peg.
As long as we properly communicate this to users, when they take a new loan, that if they have the lowest CLR, they may be redeemed at ANY time. People confuse liquidation with redemption constantly, and donât understand what happens when they get redeemed. This needs to be properly communicated. This needs to be a part of the UX when setting up a new loan, just like everyone can see their redemption buffer once the loan is set up. If the redemption buffer is 0, they need to be warned. If the redemption buffer is close to zero, they should be warned. This way we avoid loads of bad will from people not reading the wiki and understanding that they may be redeemed at any time if they are first in line (or even 2nd, 3rd, etc.) and have their loan paid off by someone else.
I do not like the idea of increasing the SOV rewards for the AMM pool, and especially it becoming liquid immediately, will put additional pressure on the SOV price, which is not of benefit for stakers/hodlers. But I can see that as a temporary measure.
I also dislike the idea of the exchequer creating a low CLR loan and using Sovryn funds for that, but it might necessary for a short time, so new users in the eco system donât get burnt. But itâs for sure not a long-term solution. Question is: Could Sovryn, the whole platform and all of itâs functions that generate fees reach an equilibrium, where those fees could be used in itself to protect the peg, but having a low CLR loan? I would just guess no, but I want to put it out there anyway.
In addition, something to consider for the future:
Look at a dynamic base in regards to the peg value, if itâs possible and even viable: If value goes below, for example, 0.995 USD, the range would change for redemptions. Lets say the normal redemption fee is 2.5-5% normally, but peg is below 0.995 USD, range is changed to 0.5-5%. The inverse relationship would happen to loans. Long-term I would like to see Zero go back to 0.5-5% origination fee, so when the peg is at 1 _USD, the origination fee would be at this. When the DLLR peg goes below 0.995 USD, the range would change to aggressively to 2.5%-5%, and if it goes below 0.990 USD, it would go as high as 5%-10%. By experience from the past week we can see that people still take 5% loans.
The most important aspect is once again to communicate this properly to the Sovryn.app users. WHY does this happen. Why is a loanâs origination fee 0.5% one day, and then 5-10% the next. Classic supply and demand scenario. It needs to be done in simple terms and to describe that itâs what keeps DLLR stable.
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A key thing to consider is that we want to onboard NEW users, and Zero is a great tool for that. It is what we get when we access sovryn.app, so the apps primary focus is to get a loan. What do people use loans for? Usually not to HODL. If we want to change the perspective that DLLR is something we want people to HODL, because itâs a safer alternative than centralized stablecoins, why are we in that case promoting that the main purpose currently with the DLLR is to get BTC backed loans, not to BUY DLLR.
Sovryn.app should therefore FIRST communicate to visitors the functionality of converting their other stables to DLLR. SECOND should be the BTC backed loans. I think this is the biggest mistake when it comes to the sovryn.app right now. We want them to HODL DLLR, but we promote the idea of BORROWING DLLR. I think this is extremely important if we want to change the way people perceive DLLR. So why not put on the start page of sovryn.app the bridge, where they can convert other stablecoins to DLLR? I know this is not an easy thing to do, because it requires re-thinking the UX, but the functionality we already have with the Babelfish bridge.
This is a really excellent point.
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To get the ball rolling, I propose that we keep Origination fee where it is and reduce Redemption fee to 1.4%
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I want to broach 2 ideas.
The first is from @dseroy - Exchequer creates a LoC meant to act as a buffer for redemptions. Initially I didnât see any value in this. However, last night it occurred to me that because of slippage, even when we maintain the peg at spot, slippage could induce a user to prefer redemptions. So there may be value here. Would be best to model it out.
Second from @Martin_Adriaan is the suggestion to create a SOV/DLLR pool. Currently the routing mechanism assumes all pools are rBTC, and this would likely need to change, implying quite a few changes in supporting systems as well. However, putting that aside @light also objects that volatility between the assets would be higher than with rBTC - leading to higher impermanent loss.
Despite these objections, I think one of the best ways we can drive DLLR demand in the medium term is via trading - and so having more trading paired against DLLR should be something we shoot for.
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If I find time, I will pull the repository this weekend, and see if I can make a proposal to implement this idea. (I have no knowledge of solidity but Iâve worked as full stack/web/system developer and solutions architect for the past 25 years, and Iâm specialized at UX.)
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- In agreement on redemption fee.
- For origination letâs compromise and adjust down 0.50%. Small tweaks are important just so we can get new data points.
- For $SOV rewards, letâs take 7.5K $SOV out of xUSD/rBTC and shift to DLLR/rBTC. That way overall emissions is un-changed but we can drive DLLR demand and see if it actually causes larger shift to DLLR pool. xUSD should be relegated to purely a bridge to other stablecoins moving forward. I donât think we need to incentivize it.
Proposal:
- 4.5% Origination (down 0.5%)
- 1.4% Redemption Fee (down 0.5%)
- +7.5K SOV to DLLR AMM pool (up to 37.5K Weekly to DLLR)
- -7.5K SOV from xUSD AMM pool. (down to 7.5K weekly to xUSD)
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Few things to consider with âExchequer Bufferâ:
- The lowest CR LoCâs sit around 200% currently.
- Hereâs the weekly redemptions on Zero. Only pulled last 3 weeks.
Week Of ZUSD Redeemed 3/26/2023 $12,000.00 3/19/2023 $75,730.07 3/12/2023 $109,981.68
So as an example, if Exchequer pledged $150K BTC and opened a $100K LoC that would be lowest CR at 150% by a comfortable margin. That should cover most if not all redemptions based on historical averages.
Cost to Exchequer would be: $5,000 origination fee. We could try it for one week and keep it open. If redemptions burn through it all we chalk it up to a sunk cost.
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Are you suggesting to lowering redemption fee at the same time as this?
I missed that there was a new topic in the forum for the second meeting.
I have a running Google doc on the meetings. The bookmark for brief notes on the second meeting is here .
Iâm a terrible note-taker, especially when Iâm trying to participate too, so I highly recommend that you listen to the recording. 
This makes a ton of sense to me. Currently, I donât think you can find any information at all directly on the dapp about bridging in stablecoins or RBTC to buy DLLR. Youâd have to somehow know to go to Sovryn Alpha to bridge in through the Portfolio page.
I suggest we consider another menu item at the top, with either âBuyâ (or âBuy DLLRâ) or âSwapâ. In the simplest implementation, that could just be a link to the Sovryn Alpha portfolio page. But thatâs really not clear enough. Ideally, we could string together a Babelfish âReceiveâ with an XUSD->ZUSD->DLLR conversion in one step to minimize on-ramp friction.
A second option would be a one-step FastBTC-based BTC->RBTC->DLLR swap.
Iâm going to propose this as a product idea in the discord channel.
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Thank you all for the amazing work. I am in favor of testing out @dseroy 's idea of having the Exchequer open an LOC with 150% CR to shield users against redemptions. Seems like a smart way to go about it, I am paying a lot of attention and trying to learn as much as possible from all of you so I can continue to add value to the community.
I started aggregating he Forum conversations into a newsletter, hopefully in that way the rest of thee community can follow them and become more active.
Stay Sovryn everyone!
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Iâm giving my feedback as a bitcoiner.
I like the Zero protocol very much however, itâs use case for me is to offload ZUSD.
Every month as soon as I get my salary, I use 80% of that to DCA into BTC and SOV. The 20% stays in euros becauseâŚI got to live.
Holding DLLR unfortunately is just not for me and others that already express this. Maybe when a lending pool opensâŚgetting a LOC to have stablecoins earning interest would be something worth holding for. But for now it is not.
Dialing with Zero variables is worth the experimentation but fundamentally we need a public target other than bitcoiners. Bitcoiners can create the supply of ZUSD/DLLR but others interested/in need of this supply have to consume it.
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I am in favor of promoting and advocating for DLLR hodling. Itâs a good idea to incorporate bridges in stablecoins or RBTC within the dapp for buying DLLR. Alternatively, a fast BTC-DLLR could be a good idea.
I strongly disagree with putting the ZERO loans on the backburner. As you mentioned, if people generally donât use loans to hodl, why should we go against what people decide? Initially, the goal of ZERO was to fund dreams. Now, the peg stability makes us seek out hodlers.
Why not seek out hodlers who can still achieve their dreams? Letâs offer both things. The market is bigger.
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It feels like we are kneecapping the great marketing effort of the last year regarding zero. It was just about to take off and now we have this mess. Killing more borrowing with high fee wich stands total contrary to the ZERO brand just to keep a peg of DLLR which noone uses yet and which will take a LOOOONG time to reach a broader market who would actually care about the peg being perfect.
I do not see our mini ecosystem that is not really growing to actually absorb ZUSD/DLLR that ZERO spits out over the mid or long term. Maybe very short 1 month the incentives and further faster dilution of SOV will have this consequence but the funds of the community are not exactly endless and we are not onboarding many new users either especially now that ZERO is anything but not a ZERO interest loan as its advertised.
We need to build bridges very very very fast to diffuse the distribution of DLLR.
What is the usage of stablecoins?
- Trading: Itâs difficult to provide an exact percentage, but stablecoins are likely used as a trading pair for the majority of cryptocurrency trades. Stablecoins like Tether (USDT) and USD Coin (USDC) are often among the top-traded cryptocurrencies by volume, which suggests that a significant portion of cryptocurrency trading activity involves stablecoins. Estimate: 30-40%.
- Remittances: Stablecoins have the potential to significantly reduce the cost and time required for cross-border payments. While the exact percentage of remittance payments made using stablecoins is unclear, itâs likely a relatively small portion of the overall remittance market at this time. Estimate: 5-10%.
- Decentralized finance (DeFi): Stablecoins are a critical component of the DeFi ecosystem, as they provide a stable means of exchange and collateral. As the DeFi market continues to grow, the use of stablecoins in DeFi applications is likely to increase significantly. Estimate: 40-50%.
- Hedging: Businesses and individuals can use stablecoins to hedge against currency risk, although this is likely a relatively small portion of overall stablecoin use. Estimate: 5-10%.
- Store of value: Stablecoins are a relatively new asset class, and their use as a store of value is likely still developing. However, as stablecoins become more widely adopted, their use as a store of value is likely to increase. Estimate: 10-15%.
So the biggest two are defi collateral and trading. I think actively trying to get a big CEX to add DLLR would actually diffuse the DLLR in circulation tremendously and take a lot of weight off our shoulders. Absent of that find other bigger DEFI projects that would add DLLR as stablecoin. It needs to get a life on its own. For that to happen you need to sell it to them. Assemble a sales team and get to promote it. They will just not come to you if they are big. You need to come to them at least to make sure they know you are there and what you have to offer.
I think that should be way more focus then trying to keep it all inside the sovryn ecosystem. We need exposure we need diffusion into the wider market. I donât think people come to this obscure site to change their stables to DLLR if they have not seen it anywhere else either. The option is great but its not gonna help us in the mid term.
The fees need to come back under 1% ASAP or product needs a very quick rebranding to BBL âBitcoins backed loanâ and get rid of the ZERO - right now it all looks like a big scam from the outside.
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And as we can see - the problem with most current stablecoins is that they cannot be trusted. They are centralized. This is key in the acceptance of DLLR. For the broader market to accept DLLR, it needs to first behave âstableâ. It itâs not doing that, then itâs not a stablecoin. So to focus first and foremost on the peg of the DLLR is critical. The appeal of DLLR must be that it is backed by BTC and not by some centralized entity that promises that their 1 USD stablecoin can be redeemed for 1 USD fiat. This is the appeal of the DLLR. So people should choose to have the DLLR instead of USDT, USDC, DAI, or any other coin because they know it is decentralized and trustworthy, i.e. will maintain its peg. And for that, once again, the peg needs to work. Once the peg works, then people will also be ready to use the DLLR as a safe alternative to other stablecoins. And then it will be of interest for other DEXes and CEXes.
ZERO as a brand is one function of the DLLR. Yes, I agree, the origination fee to borrow DLLR needs to go back to the original levels, i.e. 0.5-5%, but it can come after the peg works as it should. Therefore, now in the beginning, nothing wrong with slow organic growth, but yes, for sure, the DLLR should be available everywhere possible in the end. But a sales team? That costs money too. Bitcoin didnât a sales team. It has sold itself. DLLR will sell itself once people see it as a safe stablecoin, and for that, once again, the peg must work.
So to start with, if we want people to use the DLLR instead of some other stablecoin, is to implement a simple UX on the sovryn.app where people can swap/bridge directly from any stablecoin to the DLLR. On top of that, they can borrow DLLR for BTC. And soon lend DLLR and borrow DLLR with other supported currencies as collateral. More liquidity will also make it more stable. More use cases will further improve the peg. It starts on Sovryn. With more AMM pools for DLLR. XUSD should be replaced with the DLLR as the main stablecoin on Sovryn.
Itâs still ZERO interest. The origination fee increase is temporary. Some experimentation is needed first, to see how the peg holds. And the more use cases thereâll be for the DLLR, the less of an impact it will have on the DLLR peg. Because the biggest issue right now is the bad will ZERO creates because of redemptions. New borrowers getting burnt because of massive redemptions. Redemptions happen because itâs not properly pegged. So it being regarded as a âscamâ is less of an issue - what makes it a scam btw? So 0.5% origination fee is not a scam but 5% is? At what percentage does it stop being it?
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Iâd be in favour of moving SOV rewards from XUSD to DLLR pool.
With that being said, paying out 60k SOV/week for AMM rewards is much too high and unsustainable.
If we want to add incentives for DLLR lending and stability pool once available, we must cut AMM rewards.
We should target a maximum of 20k-30k weekly SOV payouts in total in order to be sustainable for the long term, also having in mind the impact of required protocol revenue with larger than usual SOV-inflation and high increases in staked SOV.
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Hey smarkus,
thanks for the comment. So there is a lot we seem to agree. I am in this space for âI almost bought a pizza with BTCâ so I have witnessed it all first hand.
that is the chart of tether - the leading stable coin. I can remember vividly the beginning of this scam. the peg fluctuated so much you could play lotto with it - guess what - it still became the leading stable coin on the market and it got stable over time with adoption. The perception of a absolut stable peg as top priority is only within very narrow geeky circles. Most are happy when it âabout to stay around $1â.
That brings me to general perception. Marketing is everything here. Going out there explaining whatâs happening, why redemptions, what fees why the peg is currently not totally stable etc etc. people understand they are not stupid. I know devs want the perfect product and are afraid to admit its not 100% and try to hide whatâs wrong - I think that not the right approach.
On Zero app there is still a big black bar at the bottom that should contain all the information face on easy to read and understand so people know what they are getting into. This should be right now top priority to not lead to bad vibes.
As for the âsales teamâ. We are not in 2008 anymore. A lot has changed. First and all we are not the only one in this space vying for attention as was the case back then. There are a gazillion projects in this space and we are - like it or not - a very very tiny blotch in that landscape. To bring DLLR to adoption you need to be proactively promoting it and that also means actively seeking out bridges to other projects - I have not really seen this happen at all. There is only waiting for projects to come to us and even those requests seem to be ignored or not followed up. Find other DEXs that want to experiment with DLLR. Anything would help the diffusion even degen DEXs or whatever. Try to find one CEX that makes DLLR/USD pair (that would rock) for off ramping - that would add so much credibility also all of the sudden you have a lot of eyes on DLLR out there. Waiting here in our little corner we are probably 6 feet under before enough people notice us. As it seems with stable coins the broader the market the better the pegâŚ
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I think this poll have some valuable data. Sure, itâs from the Dojo or Citadel, and not enough respondents, but at least indicative on what people want the DLLR for, for use, and how they would obtain it. This poll should be made for a larger audience, because it can provide us with future insights into how we should build Sovryn.app and market it. 50/50 on that people want to buy DLLR directly, not getting loans - so getting a swap function from other stables through Babelfish to DLLR should be high up on the priority list. This must be done.
I guess the swap would be something like: USDT/USDC/BUSD/DAI â XUSD â ZUSD â DLLR. Other potential would be USDT/USDC/BUSH/DAI â XUSD â DOC â DLLR to increase the amount of DOC in the pool. Maybe there is some arbitrage opportunity here that could be built into the swap function, so it uses ZUSD or DOC depending on how the peg looks.
