Ubiquity Variable Rate Credit (Variable Decay Speed)

[0x4007]

Overview

If we had perfect financial modeling at some point in the future, I imagine that we would be able to have our liabilities expire at the "perfect rate." There is perfect information on chain so I believe that this is technically possible, just probably quite difficult.

Its an early stage idea that I am sure I'll revise in the future, but the idea is that when the Dollar is really hurting to stay above peg (perhaps measured via TWAP) then the Ubiquity Credit "clock" (the exchange rate) rapidly increases in speed, diluting the outstanding liabilities (the redeemability of all the Credits) of the protocol quickly. On the other hand, if the protocol is running profitably, to be able to slow down the clock and have the exchange rate increase at a much slower rate, allowing credit holders more time to redeem at their leisure. Theoretically since we are changing the exchange rate on-the-fly, we could even consider reversing the clock/rate, making Credits accrue in value!

We could potentially offer both options: fixed rate credit (uCR) and variable rate credit (v-uCR.) This is somewhat similar to AAVE's variable and fixed rate loans.

Pros

• More options for users, which may increase adoption of our Credits.
• Increased capital efficiency within the Ubiquity Economy.
• Could be commercialized (more below at "Generalization")

Cons

• Potentially less profitable.
• Complex to predict, seems very risky for users.
• Complex to explain, it may be difficult to have users be comfortable with the idea.

Remarks

• Feels futuristic to have these algorithmic qualities, which I think is pretty nifty.

Ramblings

Generalization

• This could potentially be generalized for other partner projects if they have a slope they can model of where they want the price of their token to stay around.
• For us, the slope is flat, exactly at $1.00 ideally.
• For others, perhaps they want up-and-to-the-right (number go up technology)
  • This could incentivize their community to burn the supply
  • Would require a careful integration with their ecosystem to boost user incentives to take those risks.

Math

• If the TWAP is at $1.00 the uCR decay rate could be 0; If the TWAP is at $0.00 or $2.00 the decay rate can be 1. Our time interval can be (for now, arbitrarily) one Ethereum block (e.g. 13 seconds).
• If our TWAP is $0.99, then it will take 100 Ethereum blocks ((1/(1-0.99)*13)/60 = 21.6666666667 or 21 minutes) to halve in value (e.g. 2x exchange rate.)
  • That's probably too fast, so we can add an offset. For now, arbitrarily, 1,000x. This would make the above scenario's Credits halve in redemption value in 15 days. (((1/(1-0.99)*13)/60)*1000)/60/24 = 15.0462962963