denome announcements 09.04.2021 17:16:55
I have bad news today. I have been researching the BDO price stability mechanism more as the new bdollar multi-pegs have introduced and the new multipegs are ridiculously high (1 bpUNI = 4 UNI). So I ran a series of simulations in my head of how the price stability tokenomics would probably play out and have even talked with bdollar team about this today.
After a while, I realized that BDO price stability mechanism does not work as intended currently and is probably riskier than I thought.
Currently the supply for BDO is not going down fast enough even though the BDO price is under $1. Normally, the BDO supply would go down rapidly during a time like this so the supply/demand tokenomics would kick in and push the price back to the peg.
But the issue now is that even if the BDO supply was going down faster, BDO that is burned is actually being converted to the bdollar bonds (BBDO) which since last week has a lively secondary market. And those BBDOs can even be utilized for yield farming. This secondary market and the farmability of BBDOs are the thing that is causing an issue in my view. Here’s why.
Since BDO and BBDO have the same price, both can be used for farming, and have almost as much liquidity on pancakeswap, what really is the core difference between the two? Or is there any difference besides the name? So the conculsion for me is that there is really no point in burning BDO and minting BBDO as they are effectively the same thing. The combined supply remains the same. Even if 50% of BDO is burned, that burn is simply converted to BBDO.
Hence, the price stability mechanism (probably) does not work. The issue really started with the new multi-peg system as BBDO now offers same farming utility as BDO.
I contacted the bdollar team about this and after denying it first and shifting the subject that the peg will go back to $1 as they are creating more utility for BDO through the multi-peg system, they finally confirmed today that BDO supply and BBDO secondary market is actually an issue and that the devs are working to implement a solution “soon”.
As it stands, the price stability mechanism is not working in my opinion currently. This does not mean that bdollar system will not work in the future especially when they apply fixes some time in the future. The BDO price could still very well go back to the peg as more utility for BDO and BBDO is being added through the multi-peg system, but this is just my personal analysis of it.
I just wanted to let you know about my findings before you learn about it elsewhere as I will probably not be the first or the last person to bring this issue up. I am sorry that I did not realize this issue before and did not foresee this coming, and that I have even featured the project in a few of my recent videos (fml). I know I will get heat from this but I hope everyone who is farming there have accepted the risks when entering it and will make their own research and analyze the situation and reach their own conclusions of the severity or non-severity of the matter.
TLDR; I have exited the bdollar ecosystem for the time being and I am waiting for the team to officially address the situation and supply a reasonable fix.