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Decentralize SPA buyback process + add TVL booster
Author(s): Sperax Core Team
Reference: This proposal
Created: 08/22/2022
Labels: #Product Features
Simple Summary
The SPA buyback contract decentralizes the SPA buyback process while adding a boosting mechanism to continuously grow USDs TVL with protocol revenue. Protocol revenue (yield from USDs collateral and USDs redeem fees) will be swapped for collateral used to mint USDs. The freshly minted USDs used for buybacks gets deposited into the Buyback contract. Any users or external wallet can sell SPA tokens for USDs using the buyback contract. SPA sold to the protocol is used for veSPA staking rewards.
Abstract
Currently the yield generated in the form of various tokens is used to buy back USDs from various decentralized exchanges, depending on reward token. Instead of buying back USDs, yield can be converted to collaterals which can be used to mint USDs. This will organically grow USDs TVL, forever.
- The yield is collected in multiple tokens through pool fee (USDC, FRAX, VST, etc) and farm rewards (like CRV, FXS, VSTA, STG etc.). This yield will be converted to USDs, then the portion of the yield that is used to buy back SPA will be deposited into the Buyback contract.
- Mint and Redemption Fee from the Sperax USD protocol is collected in the form of USDs. This component will be directly deposited to the Buyback contract.
Users and bots will be able to view the USDs balance in the Buyback contract and can sell their SPA tokens for USDs. Staking reward distribution happens every week and above steps are executed manually every week. So automating this process is critical and will save several man hours which the Sperax foundation can otherwise spend in building other critical product solutions.
Motivation
- Remove centralized vectors in buyback process
- Increase USDs TVL with protocol revenue
- Reduce SPA sell pressure
Overview
Buyback Contract will have three main functionalities
- Swapping yield tokens to eligible collateral tokens (for minting USDs) using audited DEXesbased on the path of lowest slippage
- Mint USDs using the collateral tokens
- Allow users to buy USDs using SPA
The Sperax Dapp front end will have a separate page where users can see USDs amount in the buyback contract. They can buy the USDs using SPA.
Example :
Sperax protocol deposits Frax and VST into the Curve pool and then stakes the LP token in the Frax gauge to earn FXS and VSTA tokens. Protocol earns FXS and VSTA token.
- Sell the FXS tokens for Frax using Fraxswap
- Mint USDs using the Frax collected
- Transfer the USDs to the Buyback contract.
- Deposit USDs Mint and Redemption Fees directly into the Buyback contract as and when they are collected
- Users can view the amount of USDs left in the contract
- USDs is bought by the users using their SPA and contract receives SPA against the USDs
Technical Specification
Conversion of Yield to USDs and transfer to the Buyback contract
- Yields generated from the strategies in the form of stablecoins (USDC, FRAX, etc) and reward tokens (STG, CRV, FXS, VSTA etc.) are converted to any of the accepted collateral types. The swapping algorithm will be optimized to minimize slippage while exchanging for the acceptable collateral.
- Use the collateral generated in step 1 to mint USDs instead of swapping them for USDs.
- Deposit the amount that is used to purchase SPA into the buyback contract and the rest of the USDs is transferred back to the USDs vault’s auto-yield reserve.
Discount parameter
The buyback protocol can have a discount parameter which will allow the protocol to sell tokens at a discount to the market price. Discount parameter will be set to 0 in the beginning and can be changed later on. In future, the community will have the power to increase the discount parameter to incentivize the buy back process.
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