The problem with SURF is that it is just a call option on the BR, but the value of the BR is currently designed to only go down, not up, unless there is a sudden increase in the WAVES price.
A solution is to add an Anti-SURF token that would function like a put option on the BR—the inverse of SURF.
The value of Anti-SURF (I’ll call it LULL, meaning a temporary calm period) is 1 minus BR (and cannot be negative). So if the BR is 0.25, then the value of LULL in the smart contract is 0.75.
Like SURF, LULL could be minted by returning WAVES or USDN to the smart contract.
However, the only way to ultimately redeem LULL would be to convert it to SURF.
People would want to buy LULL until the momentum shifts toward an increase in the BR caused by all the WAVES and USDN being sent to mint LULL.
For example, if people expect the BR to drop from 0.27 to 0.10, they would want to buy LULL at 0.73 with the expectation that its price would later rise to 0.90. They could sell their LULL for profit on the market, or they could convert their LULL to SURF.
With LULL worth 0.90 and SURF worth 0.10, they would get 9 SURF for every 1 LULL redeemed.
LULL could be swapped to SURF at any time in the smart contract. If the BR were 0.66, then 1 LULL could be redeemed for only 0.5 SURF.
Protection should be built in to prevent minting extremely cheap LULL. If the BR is 0.80 or higher, then minting LULL is disabled.
LULL would provide another exit option for trapped Vires USDT/USDC depositors as well. People who have lost trust in Waves/Neutrino/Vires’ ability to solve the debt crisis could convert to LULL (short BR) instead of SURF (long BR). But ironically this distrust would help solve the debt and BR problem by returning USDN to the smart contract without releasing WAVES collateral.
LULL is the mechanic that is missing from SURF. There has to be a counterbalance. LULL would allow investors to bet on the ‘guaranteed’ profit from the decreasing BR—but by sending WAVES and USDN to the smart contract, LULL investors would be contributing to increasing the BR. Eventually there would be a momentum shift and a stampede to race into SURF instead of LULL, because investors keep sending WAVES and USDN that increase the BR and thus increase the value of SURF instead of LULL.
1 Like