[DONE] - Used protocol fees to direct deposit on ETH pool - Rebalance pool ratios

[ericjuta]

Target weighting on ETH and BTC are higher than NEAR
But ETH and NEAR have much higher OI right now, also people burn NDOL for BTC draining the pool right now of collateral before it can be borrowed.

Three options

• Rebalance protocol fees via AMM, direct pool deposit
• Rebalance protocol fees via AMM, mint NDOL and bond for NECC
• Rebalance protocol fees via AMM, mint NDOL, unstake some nNECC for NECC, seed liquidity in Trisolaris pool, bond NECC/NDOL LP for NECC

Minting NDOL essentially TWAPs in the collateral redemption ratio and bonding seeds the Treasury to afford more rebases.

Would also like to not unbalance further and bootstrap the BTC pool for trading too.

Update - Option 1 was chosen for the ETH pool

[ericjuta]

There are more options out there I'm sure so please lay them out!

[ericjuta]

Please be weary, maybe we don't want to aid collateral redemption ratios but prefer to boost collateral pools for borrowing too!

[ericjuta]

just food for thought (ofc not correct)

[0xKoda]

I like option 1 and potentially option 2. Also see value in bootstrapping a stable pool on an amm for NDOL to facilitate capital efficiency when maintaining peg.

[premjeraz]

IM STILL CONCERNED ABOUT REDEMPTION VALUE, THIS STILL GOING DOWN IF THIS CONTINUE TO GO LIKE THAT THAN IN WEEK 1NDOL WILL BE 0.5 USD

DEV NEED TO DO SOMETHING

I THINK OPTION 3 IS BEST OR IF NOT THAN NONE OF THEM ARE GOOD.

[0xKoda]

WHY ARE WE YELLING

[premjeraz]

THIS IS WAY IM TALK.
AND SOME TECHNICAL ISSUES, I CAN'T TURN OFF MY CAPS LOCK.

KEEP THIS PLACE CLEAN.

[KuroXLB]

LOL

[JTq0]

Option 1 is nice imo. And agree with 0xKoda, a stable pool would help us for NDOL

[satojandro]

I like option 1 - direct deposit of protocol fees into the pools. It seems to me that the only way to bring redemption value back is increasing NEAR/ETH deposits WITHOUT increasing NDOL.

Alternatively, what about depositing fees into pools by minting NDOL, and then redeeming the NDOL copping the discount? Would essentially be an NDOL burn by the protocol, an arbitrage loop that should help reduce NDOL in circulation.

If we were to choose option 2, I wonder whether it makes sense to stake the NECC. I can see the argument both ways: the treasury could benefit from holding that yield bearing asset, but individual nnecc holders would receive higher rewards if the treasury didn't have such large amounts staked. We are already dealing with the issue of 125k Staked nNecc I really don't think addingg protocol fees to that pie make any sense.

To be honest, I didn't quite get the third option, but as long as it is consistent with my priorities and reasoning above I am open to it.

Whatever the option we end up taking, let's keep the North Star in mind: WE MUST INCREASE DEPOSITS. We are operating at 99% utilisation rates. There is likely a lot of unmet demand from traders. We are leaving a lot of money on the table by not being able to attract more capital to lend out.

Due to this urgency, I would still prefer option 1 for its simplicity, and encourage devs to act swiftly. Better done than perfect. Get those fees into the pools asap, at least we'd be getting the compound benefit while we figure out the rest.

[ericjuta]

Target weighting on ETH and BTC are higher than NEAR But ETH and NEAR have much higher OI right now, also people burn NDOL for BTC draining the pool right now of collateral before it can be borrowed.

Three options

• Rebalance protocol fees via AMM, direct pool deposit
• Rebalance protocol fees via AMM, mint NDOL and bond for NECC
• Rebalance protocol fees via AMM, mint NDOL, unstake some nNECC for NECC, seed liquidity in Trisolaris pool, bond NECC/NDOL LP for NECC

Minting NDOL essentially TWAPs in the collateral redemption ratio and bonding seeds the Treasury to afford more rebases.

Would also like to not unbalance further and bootstrap the BTC pool for trading too.

for clarification, 2 and 3 are TWAP on collateral redemption ratio based on current collateral prices
1 is direct deposit but don't get to seed the treasury because no ndol minted
fwiw I prefer 3 since it is more capital efficient and still helps collateral redemption ratios

update - change of mind, prefer option 1 based on repeg calculations

[ericjuta]

we can also do a mix of 1 and 3 and keep it a strict rule BTW.

[0xKoda]

ty for clarity on 3

[premjeraz]

PICK OPTION 3
MAKE NECC DEGEN

[satojandro]

Can we also clarify whether this would be a once off strategy or would become the default way of using all protocol fees? If you believe option number three achieves the same outcome and is more capital efficient, then I support your decision. I would just reiterate the importance of timing both in managing community sentiment AND in compounding.

[leaf22]

In the current state I would prefer Option 1 as it is the most effective in improving redemption ratios. TWAPing is great and all but still relies on market going up again eventually. We shouldn't rely on that if there is a quicker alternative.

Once redemption rates are back up, we can switch to minting NDOL and bonding for NECC

[ericjuta]

Once we get to a decent TVL, yes I would be willing to accept PRs for automating this via smart contracts
logic being, withdraw fees, amm swap via Trisolaris based on diff for each pool and their programmed target weighting values against current values, redeposit or mint and bond.

[satojandro]

Rather than having it determined by time (once weekly), it'd aim to do it based on amount of fees accrued - say, every $500,000 worth of fees they get deposited into the protocol. Hope this is not too much of a burden on you or your team.

The only other thing I would add is that perhaps fees should go back into the pool that generated them? For this first instance, I think it is reasonable to have the full amount go into ETH (do DEXs on even have so much liquidity to swap NEAR and BTC into ETH?). However, going forward I am mindful of nurturing a divers market, we need several healthy pools to guard against one dumping. Strategically, due to the price appreciation prospect, we want to have exposure to NEAR

[ericjuta]

+1, every 500k sounds like a fair amount but yeah will have to increase that amount that if things go exponential (hopefully)
yeah it's a weird one, people don't want boomer coin btc but it's stable price wise compared to the other two pools zzz

agree trisolaris needs deeper liquidity and most pairings are with wnear at least
interesting times to say the least

[satojandro]

So given the liquidity constraints, do we just deposit the fees back into the pools that originated them?

When do you think it is possible to do this by? I strongly believe this is going to be VERY strong signalling, we may even see more bonding and deposits solve our problems before the next $500k batch of fees are due (bullish sentiment, less people wanting to burn NDOL, more people adding assets to mind NDOL, more funds available for traders, MORE FEES).

Let's do it Sir.

[premjeraz]

fair point, did the calculations

if we used all protocol fees on $ETH with option 1, it would go up to roughly 0.86 redemption

if did option 3, it would go up to 0.78

SO WE REKT, NO WAY MAKE REDEMPTION STABLE AND NOT LOSS JUST RIGHT AFTER ENTER?

[ericjuta]

also wasn't expecting these many productive replies already
you guys and gals rock!

[0xKoda]

wagmi

[itsjohnwick]

The underlying issue with the protocol as it stands is that we are stuck in a negative feedback loop that is extremely hard to recover from without intervention OR the price of the backing collateral assets going back up.

There is very little, if any, incentive for someone to mint ndol with accepted pairs (unless they are just trying to buy nnecc) if ndol is under peg, as it is currently an instant 10-20%+ loss. Bottom line is, NDOL needs to be burned somehow when it is under the $1 peg to close this negative feedback loop.

Only accepting NDOL minting in yield-bearing assets and offering LONG/SHORT positions on synthetic non-yb versions of those assets could help assure that the value of the backing assets is always increasing (abracadabra - esque).

Algocoin-like bonding (not just bonding for necc) similar to TBOND from tomb.finance to incentivize people to bond NDOL for bNDOL and redeem bNDOL for NDOL once NDOL is above or at the peg of $1 could be a possibility, but is hard to maintain without a strong community / "belief" in the protocol.

[leaf22]

I pretty much agree with this. The MicroDao lists adding stNEAR as whitelisted collateral, so it looks like we will have our first yield-bearing asset at some point!

A fourth option would be using part of the NDOL in the treasury, which the protocol earned from selling bonds. While more drastic than just using protocol fees, we could simply burn part of that to get us out of the negative feedback loop you described almost instantly.
Since that is a pretty big intervention, it would probably require an actual snapshot vote from NECC holders, though.

[0xKoda]

WRT stable pegged assets, these are often bootstrapped using a pool of other pegged assets to facilitate capital efficiency in the market, I.e: 1 asset in a TRI pool loses peg? It is rebalanced and offers an arbitrage opportunity for market participants, who would be adequately motivated to do so from the profit.
We have seen this already on a very popular protocol, Curve factories, who use pegged asset pools to maintain capital efficiency across pegged asset markets. Gauged governance tokens also facilitate a better reward offering, while also being labeled defi "2.5", we have seen the CURVE wars commence.
Curve doesn't exist on aurora, but ROSE does. Bootstrapping a stables pool +nDOL would inherit the benefits outlined above, without much input.
As I see it, this is the fastest way to re-peg, while also remaining efficient in market movements

[0xKoda]

For clarity, I was not referring to Trisolaris here, rather, bootstrapping a pool like curve's TRI-pool (usdc, usdt, dai), we could do NDOL + USDC + USDT on rose, this would rebalance and provide arb ops while bringing us back to peg very quickly

[ericjuta]

Locking for now since an action was made, feel free to create another