[BIP-5] - Lowering Seigniorage Threshold

BIP-5 Title: Lowering Seigniorage TWAP Threshold Author: @liquidity_king Category: Economic

Summary: Currently, Basis Cash only mints additional BAC to BAS/BAB holders when the TWAP for BAC is over 1.05 This proposal is to lower the seignorage threshold to a lower value voted on by the community.

Motivation: Early on in an algo coins lifecycle, investors are primarily speculators who are betting on continued expansion, while having confidence that the bond mechanism backstop will encourage buying below peg. BAC does not have a natural source of demand, with demand primarily coming from speculation that the network will expand.

Speculators rely on the seignorage dynamic to support BAS prices, which ultimately drive demand for BAC. They take comfort that the BAB mechanism will support them when prices fall below peg. However, with the current parameter of 1.05 there is a gap from 1.0-1.05 where investors are not supported by the protocols incentives. Speculators buying BAC at 1.04 are not supported by BAB demand for another 4 cents, and they are also not going to be receiving any seignorage income from their farmed BAS. The 1.05 parameter also effects BAB redemptions, meaning that BAB buyers need to have faith that TWAP will reach 1.05 in a reasonable time frame. Lowering this threshold gives BAB more potency which is the most critical incentive for the protocols long term survival. Finally in the very long term having a more narrow threshold should help us target a more narrow peg which is the ultimate value proposition of the project.

Response from @Morty:

1. Lowering the seigniorage threshold is something we must do to become a trustworthy algo-based stablecoin. Price remains between $1.00 - $1.049 doesn't seem to be a stablecoin IMO.

2. However, this is the decision that we should discuss on the later phase, Basis Cash has been live for less than a month and have become top pair rank #6 on uniswap and successfully protecting the peg. This reflects what we have conquered less than a month and clears out what we should for increasing the demand for BAC.

3. furthermore, we haven't experienced any contraction phase or integrated it into any DeFi applications yet. Currently, the CREAM proposal that I've uploaded earlier is almost going to pass. + I'm talking with other DeFi applications to enable BAC as a yield farming asset.

https://vote.cream.finance/#/cream/proposal/QmQ7vris6avUgepDiARAfqzYA4TCCHt9KVLqFmjxNXutAg

So what I want to counter-propose on BIP-5 is:

1. Let's wait and see how the cash price goes with patience. As much as you guys are sad that the $BAS price got down, I bought $BAS at $150 at a dip.

2. For the Snapshot vote that has been already uploaded, let's see what our community thinks on the future seigniorage threshold would be. I'm thinking of the dynamic threshold; just working on the math part at the moment.

I want people to vote on the minimum ceiling for the dynamic threshold.