Behind the Product #1— Why build a DEX for a Stablecoin Protocol?
Our mainnet launch is just around the corner, spotlighting on the DEX-related modules. We’re thrilling to have our product finally launching to the public after all the months of hard work, still, let’s address the elephant in the room first — why implementing a DEX for a stablecoin protocol?
Here’s the new series to let our members to learn a little more about our philosophy on vision, product, community, and ecosystem. We hope you will enjoy this behind-the-sense.
DEX as Mechanical Part
For most of the time, a DEX is indeed representing the market itself. Having an owned DEX meaning that, rather giving all the power back to the Invisible Hand, the protocol will somehow be enabled with the capability to influence, usually in the form of farming rewards and other parameters adjustment, on how they want to grow their ecosystem. Creating a market for a protocol is surely an important task before any economic could be built, but for most protocols, the DEX is a by-product of their core products. It’s the side-kick, not the hero here.
In Standard Protocol, we take a different approach when designing our stablecoin, Meter. Recalling our whitepaper, our DEX, rather than just providing more influential power to our DAO, its presence is essential — we aim to address capital inefficiency from most protocols during their liquidation process. Instead of putting the undervalued CDP for members-only auctions like MakerDAO, we liquidate the assets directly to our DEX. Such design not only allows full transparency to our community to swap for the recently liquidated collaterals, but indeed also enables arbitrary, in this case the discounted assets, available to everyone publicly on DEX during a bearish market in a timely manner. In other words, our vaults could then handle capital efficiently and hence stablizing the backed value of our stablecoin in no time in order to keep it close to the peg.
Standard DEX, is one of the key gears in our stablecoin “machine”.
But no, that’s not the end of the story.
Despite the DEX was already in Day 1 design to help resolving the liquidation problem, new challenges surfaced when closing to the launch date: why Standard DEX?
Here’s what we have planned.
- Arbitrary trading during bearish market — explained above.
- LP Farming — for community to yield more DAO tokens. STND in our case.
- Bounding for dividends — a new way to earn passive income.
#1, explained. #2, a typical Defi mechanic these days. #3, our way to ensure our community efforts are well rewarded.
Yes. Community comes first.
From Community. For Community.
In our whitepaper V1, we’ve mentioned that $STND is a DAO, and owning it will yield passive income based on stability fee earned from collateral redemption. Well, we take this step even further.
Referencing SushiBar from Sushiswap, which take 0.05% of transaction fee from the swap and reward their community in xSushi, we evolve the feature and season with our Standard philosophy. Here’s our design:
We charge 0.3% transaction fee, 0.25% will be yielded as LP rewards for LP providers, the remaining 0.05% of it will be taken out and put into our Treasury. The 0.05% will be splitted into three portions: Tech, Maintenance & Growth, DAO, & Dividends.
A. Tech, Maintenance & Growth
to fuel the operations as well as the future development of the protocol.
B. DAO funding
owned by a DAO contract that DAO members, a.k.a. STND holders will be able to use this fund by on-chain voting proposal. More details later.
C. Dividends pool
to reward our community members who has bound STND.
Standard Protocol is an open-sourced project that built from community, and no doubt that we treasure our fans, members and contributors, to an extreme that we have planned to empower everyone of you with our operation and sharing the earnings through DAO governance.
The ratio among three sub-pools will be announced and later adjustable through the DAO, for the moment, let’s spotlight on the most interesting and rewarding pool — the Dividends pool.
A Better Way to Reward
It’s nothing new to enable staking of a token to yield more tokens in recent Defi, even the term “staking” has been abused in a sense that no new protocol didn’t have any lock-to-earn mechanics, yet most of them just do it for the sake of it, without much consideration of its economic impact:
- Staking Token to earn Token is an inflationary feature that, despite capped by emission rate, alert the circulation of the Token unless additional burning mechanics is introduced.
- Otherwise, Sushi take the deflationary approach, that, If members stake Sushi, 0.05% from the transaction fee will be used to purchase Sushi back and converted into xSushi as rewards. This somewhat manipulates the circulation and creates an uplifting pressure to the token.
In Standard, neither of these is ideal because we prioritize emission of STND will be mainly for ecosystem growth, and hence we are rewarding STND through LP Farming as well as being our Oracle validators. Hence we need an economic-natural design to respond to this problem.
Taking Uniswap as a reference, they channel 0.05% of the fee to their treasury directly through its _mintFee function. In our design, we patch this function such that it split the 0.05% fee into three portions (as mentioned previously), and one-third of it goes to our Dividends Pool as default. Members who bond STND for 30+ days will be able to withdraw those LP tokens as dividends rewards.
Since we are sharing earnings as it is (LP tokens), this should shield STND from most market-manipulative tactics that might be influenced from our DEX, and hence enabling for a better DAO foundation for the future.
For the moment the team will be piloting a few selected LP to enable them with Dividends features, i.e. portion of 0.05% of the transaction fee will go to Dividend for STND bonders. This will be the first experiment we run on our MVP for maximize earnings to the community, and we’re thrilled to see how this mechanics will achieve in coming months.
Outro
Think ecosystem. Empower community. Iterate experiments. Our philosophy could be simplified in these three pillars, yet the interactions among them is what the Standard team has been perfecting on. We thank you all for the patient waiting in the past few months. What you’re longing for is just around the corner, let’s witness our next milestone, together.
D.W.
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About Standard Protocol
Standard Protocol is the first Collateralized Rebasable Stablecoin (CRS) protocol for synthetic assets that will operate across multichain ecosystems, with our in-built DEX as a market maker to ensure capital-efficient liquidation process and stability of our stablecoin MeterUSD ($USM). It is also a recipient of the Shiden Network Builders Program Grant, Polygon #DefiForAll Fund and Polkadot Web3 Foundation Grant. Standard Protocol strives to innovate as the next-generation digital asset and prides itself on its global community growth approach.
We are launching our DEX and will also be the first native stablecoin Shiden Network, which unlocks financial opportunities to its community in both bullish and bearish market.
Please click the following links for further more information about the Standard Protocol: Website | Twitter | Telegram Community| Medium | Discord | Clubhouse | Reddit
Behind the Product — Why build a DEX for a Stablecoin Protocol? was originally published in Standard Protocol on Medium, where people are continuing the conversation by highlighting and responding to this story.
