D3 Protocol Improved Sustainability Staking and Minting Implementations
ANNOUNCEMENT: WE ARE EXCITED TO CONFIRM THAT D3 PROTOCOL WILL LAUNCH BETWEEN 24 TO 27 JANUARY. ENJOY YOUR WEEKEND AND REST UP FOR OUR BIG LAUNCH NEXT WEEK!
One of, if not the main objective of D3 Protocol is to make it as sustainable as possible for as long as possible so every individual who uses the protocol can effectively “set and forget” once they have staked their DEFI tokens.
If we were to simply do what other protocols have done in the past, we are doomed to repeat their mistakes and share their fate.
To this end, we wanted to explore how we could optimise the protocol further to enhance these features without the end user losing out.
Before we explore these proposed changes, there are a few key concepts that need to be understood when it comes to how APY is calculated.
Taming wild horses: a lesson in APY and controlling inflation
The APY measures the real rate of return on your principal by taking into account compounding interest.
As we have seen with all other OHM forks, the APY has always been set ludicrously high (in the billions and millions of %). This, quite frankly, is unsustainable.
As we have mentioned many times before, these high APYs are used as a marketing ploy to attract holders once the protocols have launched.
D3 Protocol is not designed to give absurd APYs from the offset. It is designed to give users as high an APY as possible for the longest length of time.
We believe part of the sustainability equation has been addressed by adding in our unique [18.104.22.168] tokenomics layer but there may be a way to further increase the sustainability of the protocol by making tweaks to the APY formula.
The general formula for APY is as follows:
The way this formula translates to D3 Protocol is as follows:
Once we understand this formula and each of the elements, we can further determine what variables are within our control in the short and the long term.
So let’s break these elements down and understand what they mean;
This refers to the number of compounding periods per year. In almost every OHM fork, this is 1095. This is because every OHM fork has 3 rebases per day. As there are 365 days per year; 365 x 3=1095.
From this, we can see that the rebase value is a controllable variable for the protocol in both the long and short term.
Reward Yield and Distributed DEFI
Before we touch on the Reward Yield, let’s first look at the DEFIdistributed equation as this directly affects the former.
The distributed DEFI is determined by the DEFI total supply and the reward rate.
As a reminder: 3% of every buy and sell burns DEFI and removes it out of circulation which helps make the token deflationary but in order to keep paying out rewards, the total supply will always increase.
Capping the total supply would prove to be detrimental as after this cap has been reached, no one would be rewarded and this defeats the purpose of the protocol.
The reward rate however is a controllable variable. For most OHM forks, this is set around 0.3 but even the slightest change to this can have somewhat of a big effect on the distributed amount.
You may have seen recently that in an attempt to control inflation, OHM have begun a proposal to reduce the reward rate from 0.35 to 0.2975 , see here.
As such, tampering with the reward amount from the offset would not be the smartest move as it leaves us with very little to work with in the instance that we need to control inflation later on down the line, as can be seen with the current OHM proposal.
As such, the DEFI distributed, for the time being, is a variable that cannot be controlled, or rather, we can control it but will choose to treat it as an uncontrollable variable due to its negative effects on the protocol.
We are then left with DEFIstaked. Can this be controlled? In the long term, no. The reason being we cannot control if and when people choose to stake their DEFI tokens.
We can incentivise them as much as we can but ultimately the decision lies with the individual to stake or not stake. With our incoming STaaS (Staking as a Service) and dividend system, stakers get rewarded for staking via this incentive reward system.
But can we control the staked DEFI in the short term? Well actually we can, albeit for a very short period of time.
Proposed changes to control inflation
There are three variables which we can control in order to have a positive effect on inflation in the short and long term which should lead to increased long term sustainability for D3 Protocol:
- Compounding periods : long term
- Staked DEFI: immediate/short term
- Minting Rebase System (MRS): long term (more details on this below)
As we have mentioned, almost every OHM fork has a compounding period of 3 (i.e., a rebase happens 3-times per day). So, we can immediately see that by reducing the occurrence of the compounding event, we can have a direct impact on the APY straight away.
We don’t want to cut the compounding periods too drastically, but instead want to taper them and make them more cyclical so the longer you hold DEFI, the more you are rewarded with increasing compounding periods. Here is our solution:
The average rebase over the 4-week period will be 2.46 rebases/day.
Once the 4-week cycle is complete and the rebases increase from 2 to 3, the protocol will reset the rebase amount to 2 for week 5 and begin a new 4-week increasing rebase cycle.
We believe this will encourage long term holding of DEFI as individuals will benefit from more rebases the longer they hold alongside helping control inflation from the offset.
The next variable which we can control in the very short term is the staked DEFI.
As a reminder the equation we are referring to is:
It stands to reason that the lower the number of staked DEFI, the higher the initial reward yield. As the staked DEFI amount increases as more and more people stake, the reward yield will start to lower.
Initially when DEFI launches, and there is no DEFI being staked (this would lead to an astronomical reward yield) we checked and it’s in the billions!
This is not something we want to encourage as this sets the reward yield incredibly high from the offset and even within the first few hours whilst people start to stake and the reward yield starts to lower, it would take a lot of DEFI to bring this down considerably.
As we mentioned, we can’t control whether people choose to stake their DEFI. However, there is a large number of DEFI that no one will need for the first 24hrs… the 5,000 DEFI airdrop. Here is our solution:
- 24 hours after DEFI launches, everyone captured by the snapshot will be eligible for the 5,000 DEFI airdrop in proportion to their CCF holdings.
- For the first 24 hours, this DEFI is essentially not doing anything. It is effectively sitting in escrow.
- Therefore, we will stake this 5,000 DEFI immediately upon launch to bring the APY to a more “sustainable” level .
- This 5,000 DEFI plus the rebase rewards earned will then be distributed in a deferred vesting schedule of 25% per week over a 4 week period.
By doing so, we can;
- Effectively control inflation from the offset and make the protocol more successful
- Ensure that the staked DEFI amount is allowed to grow organically whilst the vested airdrop DEFI is distributed
- Reward our CCF holders with more DEFI due to the rewards it will have accumulated during the staking period
And probably most importantly; As a reminder, there is a limit on how much DEFI each wallet can hold in the first week DEFI launches. This vested approach will allow holders to effectively have less DEFI in their wallets in the first week from the airdrop so they can buy more DEFI off the market and further increase their holdings without the airdrop limiting their buying potential
Minting Rebase System (MRS)
We are also introducing a minting rebase system within our minting contract. This will help us control the hyper-inflationary nature of the original OHM contract which allows anyone to mint unlimited tokens.
As it stands currently:
However, since the total supply is not controlled, this current model allows unlimited mints at a maximum pay out of 1% per mint.
As you can see, the problem with this is that an individual can repeat this process ad infinitum and constantly increase the supply to mint the 1% max pay out. The individual constantly adds to his token supply, albeit to an ever increasing diluted one and this causes mass inflation for the protocol.
We are optimistic that the minting rebase system will change this and help to prevent such actions. There will be a daily rebase that resets the amount of tokens that are allowed to be minted via the mint contract.
We will have 4 variables which oversee this minting limit:
- epochBlock : next mint rebase block
- epochLength : duration of rebase = 24hrs
- Percentage : percentage of tokens on offer per day
- inStock : available tokens per day
To begin with, the maxPayout will be calculated as follows:
After the rebase, the inStock amount and endblock will be reset. This will translate as follows with respect to the inStock equation:
Given the current state of OHM forks, we want to ensure D3 Protocol does not suffer the same fate and so we want to learn from their mistakes and ensure we are prepared from the offset.
We believe these additional changes on top of the [22.214.171.124] layer will strike a great balance between making the protocol as deflationary as possible whilst also maintaining a healthy and sustainable reward rate.
We have always maintained that before anything great can be built, we need to lay a solid foundation on which to build upon — we believe these additional tweaks to the current OHM fork will go a long way to giving longevity to D3 protocol.
[126.96.36.199] provides a full suite of products offering easy, affordable, and secure DeFi access for all. D3 Protocol ($DEFI) offers a decentralized reserve currency and savings for DeFi 3.0. Cross Chain Farming ($CCF) offers risk adjusted asset management for DeFi 3.0. Full service DeFi made easy. Buy. Hold. Earn.
About D3 Protocol ($DEFI)
D3 Protocol ($DEFI) is a decentralized reserve currency for DeFi 3.0. Built with with a revolutionary [188.8.131.52] tokenomics layer, and automated yield algorithm generating sustainable yields for $DEFI stakers, via treasury exposure to yield bearing DeFi 3.0 assets. Stake, mint, and earn sustainable passive income through ownership of the $DEFI token.
About Cross Chain Farming ($CCF)
Cross Chain Farming ($CCF) is the first fully audited cross chain DeFi 3.0 Farming-as-a-Service (FaaS) protocol on the Binance Smart Chain (BSC). You buy and hold the $CCF token, experts farm and invest cross chain, profits are compounded and paid out to $CCF holders. We offer easy, affordable and secure access to DeFi 3.0 for all.
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