BDIP08: Use the DAO to stabilize the system

Use the DAO fund to act as a stabilizer. Sell DAO assets when BSD >$1, use DAO assets to buy BSD when BSD <$1.

Summary:

1. During contraction, use DAO assets to buy up BSD to speed up return to $1.
2. During expansion, use DAO assets to sell BSD and BSDS to accumulate more resources for contraction.

How it works (Mechanism):

1. No check during an epoch change.

2. Check if spot price of BSD < $0.95 once per hour (except during epoch change). If yes, use up to 2% of DAI and USDC to buy up BSD from the LPs, subject to max. purchase price is $0.95 post-slippage, no more than 1% slippage. The $0.05 gap is to leave it to the market to close the remaining to $1.

3. Check if seignorage emitted during last epoch AND if spot price of BSD > $1.05 once per hour (except during epoch change). If yes, sell up to 2% of BSD held by the DAO for DAI and USDC (evenly, 1.0%+1.0%), subject to min. sale price is $1.05 post-slippage, no more than 1% slippage. The $0.05 gap is to leave it to the market to close the remaining to $1.

Sell BSDS when BSD > $1.05, every hour, no more than 1% slippage.

Advantages:

1. During expansion, builds up a pool of assets in the form of USDC and DAI in the DAO. Maximizes the value of DAO resources as it converts BSD (which is intended to be long-term stable at $1) into USDC and DAI at prices of more than $1. The DAO therefore collateralizes the system.
2. During contraction, the USDC and DAI in the DAO is used to support BSD price.
3. Complements the bond system. The bond system provides bonds to soak up excess BSD from the market. The DAO's purchases of BSD during contraction helps remove excess BSD from the market.
4. Sale of BSDS during expansion ensures community has ownership. DAO doesn’t own system – Community does.

Disadvantage:

1. DAO competes with market participants.
2. There is a risk that BSD remains permanently (just) under $1 in the event of a contraction cycle, if people feel that expansion will result in new flood of BSD. Hence, limiting bond redemptions is also key.