DIP-16: Improving Advance Incentives

  1. Confidence: When epochs aren’t advanced, DSD holders could be afraid that they will not be able to recover their DSD that they have bonded, without large costs for advancing the epochs. However, the confidence of market participants is crucial for the long-term success of DSD.
  2. Vulnerability: A larger epoch delay could be exploited by conflicting actors. For governance proposals to be approved, 25% of DAO bonders need to approve the proposal. When epochs are delayed, an attacker with significant DSD holdings could bond his DSD to the DAO and advance 12 epochs to be frozen immediately. Then he could propose a governance proposal, approve it with his frozen DSD, advance 36 epochs and commit the proposal. If this proposal e.g. mints infinite DSD to the attacker’s wallet, he could drain millions of USDC from the DSD pools and dump DSD into oblivion.
  • If the transaction cost is $70 and DSD is at peg, then the advance caller receives 70 / 1 * 1,25 = 87,5 DSD.
  • If the transaction cost is $70 and DSD trades at $0.9, then the advance caller receives 70 / 0.9 * 1.25 = 97,2 DSD
  • Long-term guarantee that DSDs epochs are always up-to-date
  • Catch-up of the current epoch backlog
  • Confidence that bonded DSD and LP token can be withdrawn without additional advance() costs.
  • Increased security against adversarial attacks
  • Decreased inflation for higher DSD prices

A brief history of DSD advance incentives:

  • November 26th 2020: DSD starts with 50DSD advance incentive
  • Dec 1st 2020: DIP-1 lowered advance incentive to 25DSD because advance()-bots were dumping large amounts of DSD during the bootstrapping phase.
  • Dec 6th 2020: DIP-2 increased advance incentive to 50DSD to account for decreased price after bootstrap.
  • Jan 10th 2021: DIP-3 increased advance incentive to 150DSD because DSD price fell below peg and gas costs rose.

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