BDIP12 (Formal vote): Reduce threshold for seignorage and bond redemption

Objective of this proposal: Reduce threshold for seignorage and bond redemption from $1.05 (at present) to $1.01.

Background to this proposal: Basis Cash is implementing a lower threshold (albeit dynamically) because of the following issues:

1. At $1.05, there is a range between $1.0 and 1.049 when BAC investors (staked in boardroom) do not receive seignorage incentives.
2. This also affects bond redemptions as bond holders need to have confidence that it reaches 1.05 before they can redeem their bonds for BAC.

By lowering the threshold, the protocols targets a more narrow peg closer to $1, which is the project’s ultimate value proposition.

References to the contract code: With reference to the contract code at https://etherscan.io/address/0xebb54967c52a39c21cbd3a91a4e6c3e175d88630#code

Lines: 982 dollarPriceOne = 10**18; 983 dollarPriceCeiling = dollarPriceOne.mul(105).div(100);

1135 function redeemBonds(uint256 amount, uint256 targetPrice) external onlyOneBlock checkCondition checkOperator { 1136 require(amount > 0, “Treasury: cannot redeem bonds with zero amount”); 1140 require( 1141 dollarPrice > dollarPriceCeiling,

1170 function allocateSeigniorage() external onlyOneBlock checkCondition checkEpoch checkOperator { 1178 if (dollarPrice > dollarPriceCeiling) { 1179 // Expansion ($BSD Price > 1$): there is some seigniorage to be allocated

Based on existing parameters set out in line 983, the threshold is set at $1.05 for both bond redemption and seignorage expansion.

Mechanism (how it works):

Propose to amend threshold to $1.01 for both bond redemption and seignorage expansion.

Advantages:

1. Positive impact for bond holders: Lower threshold for bond holders to redeem bonds. Less trapped cash. Otherwise have to wait till >1.05.
2. Positive impact for BSDS holders: Lower threshold to start receiving BSD rewards. Otherwise have to wait till >1.05.

Disadvantages:

1. While “lowering the threshold is a must for any trustworthy algo-based stablecoin” (in BAC dev’s words), the risk of lowering the threshold has been discussed elsewhere i.e. seignorage and bond redemptions trigger expansion of BSD circulating supply and the usual risks of BSD being sold into DAI and USDC. The long-run use case of BSD e.g. as a yield farming asset, is important to develop also.