What is Stabilization Reward

MakerDAO charges stabilization fee and we propose to give stabilization rewards. This is because we believe that we, as community, can achieve better stability.

The assets under USDONE will be used to earn as well as to keep the value anchored to 1 USD. The stability of the token is key attribute. Therefore, if community is incentivised to help maintain the stability then the responsibility of maintaining the stability will be distributed and decentralized. So the key here is to incentivize the users of the token to help maintain the stability. These incentives are called stabilization reward.

Maximum Reward Percent

The maximum stability reward percent (MSRP) will be adjusted depending on the supply demand dynamics of the token. Starting MSRP is 0.0000005%.

How will Stability rewards be computed

The stability rewards will be computed using normal distribution function approach with mean 1 and SD 0.015 as shown in below picture:

The formula used to compute stability rewards will be :

X in the formula is your order price.

So if your trade price is 1 then you get full stability reward. And if your order price is away from 1 on either side then your stability reward reduces which becomes zero if your trade price reaches the limit of 0.95-1.05.

Examples

Suppose a sell order of 10000 USDONE is there on the exchange @1. Then you place a buy order of 10000 USDONE Token to buy @1. So the trade will be executed. In this case you will get a stability reward of 1X10000X0.0000005/100=0.00005 USDONE
Suppose a sell order of 10000 USDONE is there on the exchange @1.05. Then you place a buy order of 10000 USDONE Token to buy @1.05. So the trade will be executed. In this case you will get a stability reward of 0X10000X0.0000005/100=0.0 USDONE
Suppose a sell order of 10000 USDONE is there on the exchange @1.025. Then you place a buy order of 10000 USDONE Token to buy @1.025. So the trade will be executed. In this case you will get a stability reward of 0.5X10000X0.0000005/100=0.0000025 USDONE

When do you get the stabilization rewards

You will get your stabilization rewards once per day in the form of USDONE. Your rewards will keep accumulating and will be credited when your rewards are greater than 0.01 USDONE.

Minimum Trade Threshold

Minimum trade threshold to be eligible for stabilization rewards is 1000USDONE. This is to make sure that our resource credits are utilized optimally.

Earning Potential

If one deploys bot to take the benefit of this proposal then maximum number of trades one can execute in a month are 30X24X60X60/3= 864000. Each trade gives maximum 0.0000005%. That means in a month one can earn maximum of 0.432%. Which would be apprx 6% annual return. And all this return is in addition to the 7% dividend that USDONE already gives for USDONE holders with guaranteed stability.

Feedback

We invite comments and feedback from community about the proposal to further improve on it before we implement it. We would like to know if the proposal is sustainable or not.

USDONE Stabilization Rewards Proposal