[CDIP-5] – Temporarily Cap the CDF at 1M BAC and Incentivize BAS+BAB staking pools

[CDIP-5] – Temporarily Cap the CDF at 1M BAC and Incentivize BAS+BAB staking pools Authors: @yyctrader, @Morty

Summary The CDF currently stands at 1.28M BAC. We propose to temporarily cap the CDF at 1M BAC and reward the excess BAC over 1M to 2 newly created staking pools:

• 80% of staking rewards to the BAS staking pool
• 20% of staking rewards to the BAB staking pool.

Both staking pools will accrue rewards per block. The current excess of 280K BAC will be distributed as follows:

• 180K BAC in Week 1
• 100K BAC in Week 2

Going forward, staking rewards will be refreshed weekly based on the CDF balance.

Motivation As we work towards the launch of Basis V2, it is imperative that we continue to build on the momentum built over the last month and ensure the success of our bootstrapping phase. The predicament we face is that there is currently no incentive to hold BAS when the protocol is not in an expansionary phase. A similar situation faces BAB holders, who have to wait till we expand again to redeem their BAC with no idea as to how long they will be waiting. Subdued demand for BAS puts the whole system at risk since BAC farming APYs depend on it.

We continue to work on new integrations and use-cases but these things take time to finalize. The team believes that 1M BAC is sufficient for currently projected costs. The cap may be increased or removed in the future with another vote.

In conjunction with BIP-9 (splitting Expansion BAC rewards 80/20 between BAB holders and the Boardroom until the Treasury balance > BAB outstanding), we believe that the above solution would better align incentives by:

• Stimulating BAS demand during contractionary phases by providing a consistent stream of rewards.
• Give BAB buyers a reason to hold other than speculating that BAC will return to peg, thus stimulating BAB demand when we're below peg.