Protocol Update Proposals
Hello Everyone.
We have released governance token.
It’s time to change our tokenomics.
After releasing this articles, discuss it on discord and hear from community.
Then, we are going to create proposals one by one, ( or at once ) on https://snapshot.org/#/coffinfinance.eth
Note that only the community members who hold relevant amounts of xCOFFIN at the time of the creation of the Snapshot block number would be able to vote on the proposal. So please stake COFFIN for xCOFFIN in advanced. We hope to create proposals on snapshot within 24hours, and start votings within 48hours. The schedule depends on feedback from the discord community, DMs and Twitter.
Proposal Overview
The problems
- While allowing a complete lack of regulation over both the minting and redeeming processes, bad actors can take advantage of our system.
- The protocol cannot control Inflation & deflation as of now.
- So much to a degree, that CoUSD is approaching failure.
- It may be due to the lack of the redeem function temporarily, therefore the utility it had on our protocol’s site.
- We currently use a collateralized system of mainly Fantom, with a minor amount of COFFIN to supplement it and strengthen itself.
- It has become apparent that this coin alone is too volatile for our needs.
- Now without the redemption feature, CoUSD is backed entirely by Fantom taking away our ability to adjust accordingly with a deflationary mechanism
- At this rate, the price of CoUSD is going to align with a very volatile ratio, lacking in appropriate collateral.
- We need to prevent inflation, and we believe that the protocol alone should control both the minting and redemption of CoUSD.
- Unfortunately, abusers of arbitrage have brought the health of the protocol to a critical level, and we need to stop those actions.
- At the same time, CoUSD and the protocol operating behind it need to ensure a product of value to our community
How We Are Going To Solve The Problem:
- We need to improve our collateral mechanism.
- Using transfer tax for xCoffin incentive. And using marketing funds as well, it’s up to 2 months or until CoUSD peg recover.
- We may reduce farm rewards temporary instead.
- Our new collateral reserve will be consistently rebalancing itself with a diversified portfolio of stable assets to keep the protocol at a level of zero risk possible.
- Users will be able to mint CoUSD at a discount and will be able to collect it later. Or users will be able to mint immediately without discount.
- To maintain a healthy supply of CoUSD, users may only mint/redeem when we have an acceptable ratio of collateral and the price is within acceptable range. (Similar To the logic of FRAX Finance.)
- Though of course COFFIN must have utility and value in itself.
- So we still refer to it as one of our collateral stablecoins.
- There will be a limitation on the amount a user may mint/redeem, based upon both the current collateral to debt ratio, and the frequency with which the mint/redeem per day.
- The protocol will have limitations for total daily redemption for each address.
- The protocol will have limitations for total hourly redemption.
- Users can redeem CoUSD to FTM + COFFIN , but receive it a few days later.
- New Bonding Mechanism for CoUSD demand.
※ Redemption and minting fees will be imposed.
A new partially collateralized token mechanism in action
Using transfer tax and change threshold of burn/tax.
There is a threshold for transfer tax or burn.
For now, In case of that CoUSD price is between $0.98 and $1.00, trasnfer tax is charged. And the tax is no used as of now.
If CoUSD price is below $0.98 , transfer tax is not collected and burned.
The burning should be similar with buy back. It’s good for all COFFIN holders, but not for xCOFFIN.
We beleive we should change as below.
- We should use the transfer tax partially for xCOFFIN users, bassicaly.
- Temporary, up to 1 month, we should change the threshold to $0.00, to incentivize xCOFFIN holders. After 1 month, change it to $0.9. After 2 months of now $0.98 back. After 3 months, 50% of the tax should be used for xCOFFIN.
Marketing funds for xCoffin incentive
COFFIN transfer tax for xCOFFIN holders.
Until revising our protocol, we believe we should suspend marketing temporarily.
V2 farms make marketing rewards but we believe we should use it for xCoffin holders.
We should use the funds for xCOFFIN holders, up to 2 months, or CoUSD price back to PEG.
Reducing farm rewards temporary
On the other hand, such rewards cause inflation, so our proposal may include reducing farm rewards temporarily. We suggest that, once the bonding system works well, COFFIN will be used as only bond rewards to increase its value.
We believe xCOFFIN pool could be alternative of COFFIN single pool, for a while.
New Collateral Reserve / Rebalancing
We need to improve our collateral mechanism.
Our new collateral reserve will be consistently rebalancing itself with a diversified portfolio of stable assets to keep the protocol at a level of zero risk possible.
We will rebalance the collateral and manage how to maintain and grow it.
At least, after 3 the months of release, the developers will rebalance the collateral without DAO voting until they are sure that the system is stable.
A New Mint Mechanism
So far, we have used Target Collateral Ratio for Minting. However, we don’t use the ratio.
The new minting mechanism uses new ratios depending on current collateral ratio and prices.
Only when the protocol has enough collateral ratio, users are able to mint CoUSD.
When too enough collateral ratio, users may be able to mint CoUSD at discount price ,get CoUSD for a few days later.
Minting/Redemption CoUSD will have some limitations. It’ll depend on collateral ratio, current CoUSD price, CoUSD supply changes.
Currently our ZapMint function swaps COFFIN with FTM on the market partially, and burns. It’s good buy pressure for COFFIN, but we would like to have options to keep FTM, FTM-COFFIN LP, CoUSD-USDC as collateral for CoUSD back. It’s still idea, and we are testing in terms of feasibilities. We would like to have ibtks( interest bearing tokens) also as collateral.
In case of too much collateral ratio, we can have the option to offer CoUSD mint by COFFIN single. It’ll be good to buy pressure for COFFIN. We don’t need to keep it as collateral, 100%. We can stake COFFIN by ourselves to get XCOFFIN, and burn XCOFFIN. So that, we can incentivize XCOFFIN holders.
A New Redemption Mechanism
User can redeem CoUSD , then
- 1 CoUSD => (2) days later => $1 worth of FTM.
- 1 CoUSD => (2) days later => $1 worth of FTM+COFFIN
New redemption mechanism will have
- Limitation by current price
- daily limitation
- Enough collection delay. It’ll be more than 2 days.
Because of the delay and limitation, we discourage arb users.
We still ensure the value by FTM + COFFIN.
To prepare a new collateral & redemption system, continue to disable redeem another 4 weeks after voting resolution.
There is a two-week timelock on the current collateral reserve.
It means developers will need to wait at least two weeks to access the reserves.
After the voting resolution, we would like an additional four weeks to resume redemptions in order to prepare for the new system and to take over the reserves.
Before the voting result, please allow us to setup transfer ownership for Collateral Reserve to prepare update. ( It takes 14 days after the setup. )
New Bonding Mechanism for CoUSD demand.
We create CoUSD demand by bonding mechanisms.
- Users bond $1.00 worth of CoUSD => (5 days later) => users will receive $1.10 worth of COFFIN. ( APR 730%
- Users bond $1.00 worth of CoUSD-USDC => (5 days later) => users will receive $1.10 worth of COFFIN. ( APR 730%
- Users bond $1.00 worth of CoUSD-USDC => (5 days later) => users will receive $1.10 worth of COFFIN. ( APR 730%
Bonding mechanisms don’t assure the price of COFFIN after (5) days.
It should incentivize users to do bonding rather than minting.
And it can create CoUSD demands.
We believe that CoUSD demand will stabilize COFFIN.
Also we are considering using a new token as bond rewards, instead of COFFIN. About the new token idea, we are going to make one of the proposals. In case of using COFFIN as bond rewards, we also would like to make a proposal to stop COFFIN farm rewards instead. We would like to hear of ideas from the community.
How to keep the CoUSD price stable. Buyback options with collateral if enough collateral. Sell options if above peg.
We still have concerns about the price stability of CoUSD.
With the minting incentives & our control of supply, we think we can prevent it from going far above the peg.
Also, we have guaranteed redemption of FTM or FTM+COFFIN.
But both mint & redeem, users can collect a few days later.
Because of the risk premium of the delay, CoUSD might be volatile than other stable tokens.
To stabilize CoUSD more , the protocol might buy back COUSD with other currencies from time to time by the collateral reserve. Or sell CoUSD to get other currencies.
New Road map & Expected Schedules
Firstly, We would like to cancel all current roadmaps ( https://docs.coffin.finance/roadmap ) , to focus on new roadmaps. It doesn’t mean that we don’t consider current plan forever.
Unless the CoUSD peg and the price of COFFIN recover, we will need to give up the protocol and additional features. So we would like to cancel all current roadmaps, and focus on important things as of now.
What we focus on are
- Stable token itself.
- Bonding mechanism to prepare bear season.
- Rebalancing.
- Security.
- New Minting/Redemption mechanisms.
- Others as suggested by the community.
Expected Schedules are below.
- Rebalancing ( estimate: first 2 weeks after voting )
- New minting/redeem system ( estimate: next 2 weeks )
- Bonding system ( estimate: next 2– weeks )
- Audit & Partnership ( after finishing above )
※ The audit needs enough funds for us. So it depends on project status.
We want to thank you so much for all the effort you have put into this community and into our own team itself, again we are unable to express our deepest appreciation and thanks, but we would like to hear your opinion on a few things if you wouldn’t mind.
Sincerely, and with so much admiration,
The Coffin Finance TeamRelated articles.
