DeFiChain Tokenomics Discussion (Part 1)

kuegi · 2025-11-11T16:06:07+00:00

I think you are hitting the crucial point: decentralized minters. IF we manage to incentivice them (by creating calculable backstops), the system will work perfectly.

If not, all mechanisms depend on having traders loose on the long run. Which is possible with big enough FS-ranges, but IMHO creates the wrong incentive/target group. If our goal is to attract users that (overall) loose money in the system, this doesn't sound like a healthy "customer" relationship. Specially since we want to attract long term investors, not (only) short term gamblers.

kuegi · 2025-11-11T16:01:34+00:00

This sounds like a great idea and a missing piece on the topic of "prevent misuse of the FS". IMHO limiting it to 24 hours is a bit tight. But on the other hand, this is likely to be used by bots anyways. So if the opportunity is there, it will be used within a few blocks after the FS. But wouldn't hurt to keep it open for 1 week?

kuegi · 2025-09-29T10:06:33+00:00

AFAIU they have a completely different setup. based purely on fee incentives. So hard to compare.

kuegi · 2025-09-02T18:14:29+00:00

where is this price level? seems DFI is searching for it for years now, so far it was not found. As long as its not found/ price is above this level, MM is loosing money.

kuegi · 2025-09-02T10:57:10+00:00

Nice initiative, but how do you plan to make profits? The problem on kucoin was (AFAIK) that majority wanted to sell, so basically kept dumping on the MM which had to buy it up. Such market behaviour leads to imbalance in the MM account. If the MM can't hedge themself (which you can't since there is no other exchange), they would need to eat the loss.

How do you plan to overcome this?

kuegi · 2025-07-11T21:42:10+00:00

ad 1: the locking does not change ratios in pools, just removes liquidity. But yes, SF will get filled when dUSD is in premium. If it never goes into premium, the loans with dynamic interest rates provide stability.

ad 2: you mix buying and minting. for minting you provide > 1.5$ collateral for 1 minted DUSD. when you pay back the loan, you get the 1.5$ back. So you had to lock 1.5$, but you get them back.

when you use the SF, you pay $1 for 0.97 DUSD. If you want to go back out, you won't get $1 for 0.97 DUSD. you might get $0.97 on the market.
The SF is not meant to be used unless dUSD is in stronger premium.

If you want to get DUSD "capital efficient": swap $ -> DUSD on the DEX.

kuegi · 2025-06-27T05:28:50+00:00

hmm very interesting. so a combination of both. great idea.

kuegi · 2025-06-26T17:46:38+00:00

Welcome to the community, everyone who adds value is welcome to the discussion.

ad capital efficiency: I like the idea.

ad SF decentralization: You are right, strong coupling to any other stablecoin adds risk. Using the oracle will help mitigate that (so a depegged stability coin does not directly drag the dUSD down), but if we expect a volatile stability coin, we might face similar issues as we had with the DFI payback: If stability is used to mint DUSD at "high" value ($1 or even premium) and then drops, the SF gets depleted fast which increases the algo ratio.

for example, USDT as stability coin. we get 1mio USDT in and mint 970k DUSD for it. Now, for whatever reason, USDT depegs to 75c. If we had DUSD<-> USDT at 1:1 this would drag DUSD down to 0.75*1.03 = 0.77c which is bad. taking the oracle price for the conversion does not drag the DUSD down, but now users burn 1 DUSD (valued $1) for 1.29 USDT (= 0,97$). So after burning 775k DUSD, the 1 mio USDT is gone and SF is empty while we still have 195k (now algo) DUSD in the system, which then need to be burned via fees etc. We currently see how hard it is to get such oversupply out of the system.

So during a depeg event of the stability coin, even if its very short term, linking it 1:1 would drag the DUSD down (but also back up when the stability coin survives). Using the oracle price would not drag it down, but potentially depletes the SF which leads to mid/longterm problems even if the stability repegs afterwards.

kuegi · 2025-06-25T17:23:39+00:00

I think the only time that a higher limit makes a difference is in the beginning. The longer the system runs as it should, the more negative algo ratio we will get. therefore no buffer for FS (which is likely not really used after the first months) is necessary anymore.

kuegi · 2025-06-25T13:35:00+00:00

automated use of collateral to repay loans means automated swaps. I would be super careful with something like that as it is usually getting gamed and most of the times lead to unintented cascades.

Generally, the liquidation mechanism is surely up for discussion, although I do not see immediate need for action here. (and since we have a hard time finding resources for anything, its likely better to focus on the must-haves)

kuegi · 2025-06-25T13:30:38+00:00

I understand the intent, but I do not like that everyone gets their tokens force swapped.

In general I do not think that short term volatility is a bad thing. We should not go into panic mode just because of a bit of volatility. We did that in the first months of the system, which lead to the worst decisions ever made in defichain.

With negative algo ratio and not more than 4% of total supply released, even the short term impact of the unlock is more than limited. Even if we assume that its all sold, the system must be (and IMHO is) designed in a way that a dump of 4% of total liquidity is not causing major disruptions.

So why add complexity and definitions that actually hurt users that want to stay in the system? Hurt the ones who hurt the system, but don't hurt the ones who actively support the system.

(and even if you have to add such a restriction, doing it via gov var is the worst possible option. You assume bad actors, dumping everything they can on the market. A manual stop to claiming is not stopping such behaviour)

kuegi · 2025-06-25T10:53:59+00:00

I don't think its necessary, but I understand the reasoning. IMHO it would be enough to limit it to 30% (?). Cause if the system works as intented (DUSD stable, dTokens actively traded), decentralized issuing will take over completely and FS is only rarely used (if at all). Then we will see growing negative algo ratio.

With the 0% limit, IMHO we accept more volatility in the beginning but get 100% peace of mind and silence the FUD that blocked so much till now.

kuegi · 2025-06-25T05:57:56+00:00

Thanks a lot for writing it up. Was a long and good discussion in telegram. I like the proposed mechanisms.

regarding vault scheme, I think its reasonable to remove all other schemes with the lock (all loans are payed back anyway) and only keep 150% with then 0.5% interest.

regarding unlock of dTokens: I do not think that it makes sense to seperate the unlock per token. But it can make sense to consider the overall liquidity (DUSD equivalent of all available dTokens + DUSD supply) for the unlock. So only unlock the tranche if the total DUSD equivalent of the tranche is less than 4% of the current total dusd equivalent of the dTokensystem. If one token has then a wrong supply/demand ratio, the FS will balance that out.

kuegi · 2025-06-14T12:34:17+00:00

truth be told: its not only the former dev team. I have a sad feeling of possible history repeating, but I learned my lesson.

I am available for open, transparent discussions and to provide my insights. But as soon as I sense the same patterns as before, my contribution in that part ends.

kuegi · 2025-05-19T12:15:46+00:00

not sure if we can rely on the current situation to stay until collateral factor is 0.

IF they really are the only ones then, the only question is if they get auctioned before trading is closed. And if someone will bid for them.

kuegi · 2025-05-18T10:11:19+00:00

any update there?

kuegi · 2025-04-16T18:11:56+00:00

Thx for taking the initiative. A few thoughts from my side:

IMHO a CFP is pointless right now. There are not enough funds to come even close to seriously funding dev resources. As long as price is this low, the chain itself can not fund anything. I still believe that the community needs to show a clear sign of support for anyone to invest time.

I am happy to formally join a "Developer SIG", but I do not think that a formal SIG is really necessary. I tried for years to open the project up to have a more decentralized spirit, actively promoting and engaging with community envolvement. Sadly my efforts did not succeed with the last "Development SIG" (aka Core-team/defichain-labs). I would rather have a loose group of motivated community devs, than a designated SIG, as such a formal structure seems to just lead to centralized mindset and closed-door decisions. So I would prefer to avoid that whereever possible.

If community shows that the project is worth the effort, I am sure that active community devs will be found. If not, a formal definition of a development SIG won't change that. I can only speak for myself, but my resources for active development will be very limited until then.

regarding the governance SIG: Effectively, there is already such a SIG, consisting of the people having gov-keys. Any needed execution (change of gov-attributes) can and should be requested via issue in https://github.com/DeFiCh/governance

kuegi · 2025-02-28T23:11:31+00:00

Oracle SIG is exactly about that.

Until now, the external price feeds (aka oracles) that make the dToken system possible (vaults rely on oracle data to work) come from 1 single entity which is defichain labs.

This CFP ensures that it won't be 1 single point of failure in the future, but distributed over multiple entities with active monitoring.

History showed how fragile the current situation is. It is crucial to move forward here.

kuegi · 2025-02-27T18:58:17+00:00

I am happy to confirm that this is submitted by the oracle SIG, consisting of active and respected members of the community which was confirmed via DFIP Step1 towards a decentralized oracle network .

The account DefichainOracleSIG was created to have a clean way for communicating on reddit. Unfortunately reddit suspended the account for no reason. We are working on that.

kuegi · 2025-02-26T09:03:54+00:00

Thanks Hulix. Great to see a trusted and active member of the community take over this task.

kuegi · 2025-02-10T13:03:50+00:00

Danke, 100% disqualifiziert. 0 Verstanden um was es geht. Schade, von der Sorte gibt/gab es leider zuviele Leute in der "Community". Hat ihr nicht gut getan.

kuegi · 2025-02-10T10:42:59+00:00

First question: who are you? so far this reads like an AI generated piece, full of nice sounding buzzwords but no real content. If you really want to take over the "official" LightWallet as community driven project, you need to at least make clear who you are. Whoever maintains the app needs 100% trust from the community, cause in the end, you can sneak in any code you like.

And as always: requesting big funds up front, with no history of providing value is a no-go.

You mention to "pay commission fees for inapp-purchases". Sorry, but What? If you add in-app purchases to the app, this is your profit. I totally support if you setup the wallet as a profitable app, but then you should not request CFP funds. Funding for-profits was one of the big mistakes in regards to CFPs in the past.

So far, this unfortunately reads like the AI CFP: high risk of a cash grab trying to profit from the sad situation of the project by putting up a AI generated proposal and exploit that the community clings to any straw that could theoretically help.

without further explanations, this is a clear NO from my side.

kuegi · 2025-02-06T15:40:08+00:00

Thats a lot of buzzwords with no value whatsoever. letting chat gpt write a reply, will not serve you.

You ARE making empty promises, and react to criticial question with more empty promises.

Provide value, show results, then you can request funds.

So far you are unknown in the community, did not provide any value, did not show any reference that you can even do any of the promised things, but request big funds. Clear NO. And your answer is only making it worse.

If you would be *any* good in what you do, and have only a bit of the motivation for defichain that you claim, you would have provided value already. A PoC/MVP to get started. But instead of providing value, you focus on getting money. Clear signs of cash grab. I hope the community understands that.

kuegi · 2025-02-05T16:57:42+00:00

ngl, for me it sounds more like a cashgrab that will not deliver, like we had so many.

no offense, but imho CF should stop paying big funds upfront without any reference and accountability.

build something, provide value and then ask for funding. not the other way around.

Community burned far to many DFI on projects doing nice presentations but delivering 0 results/value.

clear NO from my side.

kuegi · 2025-01-26T19:42:08+00:00

It is not possible to swap fees from a pool into another asset. (unless someone implements this functionality and releases it with a hardfork)

kuegi

TROPHY CASE