Open Swap Proposal

As we all know, USDN has depegged. I am new to the Waves community and I have been busy trying to fix this situation behind the scenes, so pardon me if my ideas are not fully formed.

There is a governance vote happening right now to increase max swap for NSBT holders to make it easier to arb the peg back to $1. I support this proposal but want to propose a stronger measure.

I propose that we eliminate the NSBT staking requirement to use the swap function when USDN price is < $0.97.

This parameter of $0.97 can be changed with community input but I feel that this is necessary for USDN to repeg quickly. Right now it is not economical for new arbitrageurs to enter due to lack of NSBT liquidity and high prices. The longer USDN is depegged, the lower community confidence becomes.

I know this may be controversial to NSBT holders but I think the long term health of the protocol is more important than any “Moon Factor” or measures to limit supply of NSBT. We can discuss changes to max swap and the bonding curve in parallel, but I feel my proposal is necessary to restore the peg fast. Also NSBT stakers would still receive massive fees from arbitrageurs rushing in when the condition I describe is met. They will have a monopoly on swaps when the condition is not met as usual.

Removing the NSBT requirement when USDN price is below a certain level is technically complex according to Neutrino developers. As a temporary and fast solution we can fork the existing swap contract and use a placeholder token, say USDN-A. We can guarantee redemption of USDN-A for USDN at a later time and back USDN-A with reserves to ensure confidence. We can calculate the maximum supply of USDN-A and the reserves based on the amount of collateral or bidding needed to restore the peg across major markets.

Another simpler workaround is setting NSBT stake requirement to 1 token and having no max swap. I am not sure this is technically feasible.

What does the community say to this proposal?

1 Like

I agree this would help the ecosystem overall. sadly wouldn’t help nsbt price moon as much like stated, but the ecosystem would benefit greatly. I think keeping a 1 nsbt requirement for even .95 or under would be a good idea. EDIT: I think at .97 it is too close and the arb of 3% or less for whales is not worth it and defeats the purpose of having NSBT.

1 Like

I don’t think we should be too hasty to make such drastic decisions. I understand the severity of the current circumstances but let us give time the space it needs to heal. The governance vote to increase max swap for NSBT holders to help with arbing. Let us give this time to see what effect it would have on the system first before we go about changing things.

If in more than 3 days the situation hasn’t changed, then we could look into implementing stronger measures to fix things.

However, I think I would support your measure as a future preventative measure. I’m just not that confident with it being a reactive measure. The FUD situation is what it is at the moment. But let’s remember that this too shall pass.

Welcome aboard though. I’m proud and excited to have you on the team. The future is exciting!

Hi Coleman,

good to see you in action! :slight_smile:

I’m very much in favor of this proposal. I would suggest to start with a value of 0.97$ per USDN, but in general make this a parameter that can later on be decided by governance votes.

In order to allow a fast re-peg, users would need to be able to arb, right? Therefore, the swap from USDN to Waves might be way more important in this scenario. If you follow your suggestion of forking the existing swap contract, where will this new contract get the necessary Waves from?

And did i get you right? Those swaps will still be instant?


1 Like

I am strongly in favour of implementing this change. This is not the time to wait a few days and see as one user suggested.

This proposal should be swiftly implemented to restore the USDN peg. After which, a new proposal can be made that fine tunes this one. If USDN stays off peg too long it will severely damage the faith people have in Neutrino, which in turn will negatively impact the price of NSBT far more than this proposal ever would.

Another reason this should be added quickly is that even under the current proposal to increase max arbitraging potential for NSBT stakers, there is not sufficient liquidity or volume for new users to build a stake safely. To arb even $1MM requires a new user to buy four days of total trading volume for NSBT. It’s not realistic to have this requirement while USDN is sitting off peg by 20%.

Beyond a 3-5% drawdown it is absolutely necessary to implement measures that make it easier for regular arbitrageurs to step in.

I’m also ok with the 1 NSBT requirement or some other nominal amount proposed by another user.

Welcome to Neutrino Coleman :smiley:

This proposal makes sense. However, I would like to add an extra variable to this. When the value is lower than 0.97$ per USDN, I suggest increasing the swap fees. The situation in that case allows for it - since arbing will still be highly profitable -, and more fees will end up in the hands of people that have the best interest of the protocol at heart.

1 Like

Increasing swap fees during emergency conditions is fine with me. Everything is up for discussion and this was not a very specifically defined proposal. I understand NSBT holders are thinking of how they can benefit as I have been getting lots of comments from them, but I stress that if USDN remains off peg for a long time, NSBT will suffer far more than if they do not earn income from fees or maintain very tight scarcity of NSBT supply.

Could the 24 hour swap window be a variable to be lowered sub .97? This would allow more swaps while still incentivizing nsbt staking.

Although the new swap limits are better than before, it is still too slow. Four days after depegging, it’s still an emergency situation with USDN at only $0.89 as of this writing. Thousands of gNSBT are required to swap a meaningful amount. You need an army of swappers to get it back to peg quickly. If anyone with just 1 gNSBT could do something like 100 per day, it would speed things along.

In the current circumstances I’d be nervous that holders of smaller amounts of USDN will run, swaping out their existing USDN bags, and dumping WAVES. This would fail to pump USDN price back to peg, but it would still deplete USDN collateral. The proposal is good, but let’s let USDN find its peg again before we implement.