Zero Governance Call #5

Summary -

  • exchequer did not deploy funds to defend peg
  • DLLR averaged around $0.97 over the past week
  • dseroy suggested lowering redemption fee to 1.5%
  • We took a vote & out of 30 participants, 13 voted yes, 2 voted no
  • Yago will draft a SIP for reducing redemption fee
  • Rewards to DLLR lending pool requires more work than anticipated
  • SP rewards will have rewards, which we will observe first




so we are going free zero now ^^ \o/

I think there needs to be a really easy to understand infographic / video right on the screen where you open a line of credit that explains

  1. Redemptions
  2. Liquidations
  3. Offramping Problems
  4. How to successfully HODL DLLR

No more then 1 minute if its a video. One easy pop up without any clicking if its a graphic. That would make new users aware what’s going on. I don’t think its apparent enough yet how everything works - people are not going to the wiki to understand. They heard they can open a line of credit and do that and then you might get bad blood. So it needs to be in the face.


Not sure if anyone is reading this thread anymore, but I’ll try posting here and then copy/paste if necessary.

I’ve been thinking more about the supply/demand of Zero. There comes a point where a given ecosystem is saturated with a stablecoin. If there’s no new demand for it, any new supply will only decrease the price, leading to redemptions in this case. This doesn’t take into account users who are borrowing and paying off loans.

Realistically, our ecosystem is saturated with DLLRs at the moment. If it weren’t, the peg would be aligned. That means if we allow users to borrow more DLLRs, we will see more redemptions. We have a dilemma:

  1. a high redemption fee protects borrower LoCs (slows redemptions against LoCs)
  2. a low redemption fee protects DLLR holders (supports the peg)

In the long run we’ve said pretty clearly that our priority is to protect the integrity of DLLR, which means leaning toward #2.

Another dilemma is origination fees:

  1. a high origination fee slows DLLR issuance
    • protects borrower LoCs from more redemptions
    • protects DLLR holders from depegging
  2. a low origination fee increases DLLR issuance
    • serves new borrowers

It’s unclear which of these serves SOV stakers, as there is a sweet spot between #1 and #2 where origination fee revenue is maximized. At present, it appears that a 5% fee is yielding more revenue than lower fees were. So it seems at the present fee level and time, #1 serves SOV stakers.

Until our ecosystem is able to absorb DLLRs at a higher rate, the above analysis seems to suggest that we keep the origination fee high and the redemption fee low. That seems to best serve:

  • existing borrowers
  • DLLR holders
  • SOV stakers

but not new borrowers so much. Since we have no obligation to serve a large number of new borrowers at this time (and eager borrowers can still borrow with a 5% fee), I don’t think this is a significant negative consideration.


Unless/until (if ever) there is a way to get DLLRs out of RSK this problem will persist. How can the use cases for DLLR expand within the Sovryn dapp? That’s pretty much exhausted at this time.

What is best for stakers is DLLR remaining off its peg. The further DLLR moves from its peg the more redemption and arbitrage activity, ergo the more fees. From casually observing the activity spikes and their direct correlation to redemption activity, i think its safe to say that the majority of activity within the Sovryn ecosystem is arbitrage activity.

Despite all of the new developments within the Sovryn products, the real problem we’ve all been banging on for…a year? At least the least 6-8 months, is a lack of liquidity. If the DLLR was pegged to $1 i suspect stakers wouldn’t be super excited, as activity, and therefore fees, would drop significantly. That 18% APR that is be championed everywhere isn’t real. It’s a result of ‘flaws’ in the system.

Note the SP incentives did almost nothing to attract new DLLRs to the SP.

Agree that the next step should be to bridge DLLRs out of Sovryn, and out of Rootstock.

The protocol revenue is dominated by origination fees - which is not driven by arbitrage. Arbitrage grows around real activity. Without real activity creating arbitrage opportunities, there is nothing to arb.

I think you mean something different than he did. He’s referring to transferring value out. You’re referring to locking the token on Rootstock and minting the equivalent token on another chain.

I think.

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Yes, you’re right, thanks for disambiguating. Indeed, I meant pegging out the DLLR to eDLLR in the same way Sovryn pegs out SOV to eSOV. It’s a bit of shame though that, due to the peg sitting between the backing BTC and the eDLLR, the eDLLR could not quite claim to have the features of the DLLR, so it’s a tricky trade-off. But moving it to a range of DEXes would help the eDLLR in various ways, I think.

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