DIP-8.1: Sustainably Adjust vDEUS and bDEI Incentives

Background: The Deus team announced the introduction of DEIv2 and the closure of bDEI, shifting all USDC backing to DEIv2, thus fundamentally changing the incentive structures that were in place. Due to this, the only incentive left was for everyone to redeem their DEIv1 and stake it for 12 months at 40% APR. After the Scream Exploiter also redeemed their DEIv1 and deposited their vDEUS into that contract, it became clear that in light of recent changes, some of the incentives introduced in DIP-8 must consequently be adjusted as well.

Sustainable APR proposal: The previous vDEUS staking APR had a minimum floor of $40 and associated 40% APR (as well as 10/20% staking options which became pointless after DEIv2).

We suggest to separate the new staking contracts into early and late redeemers. Early redeemers helped the protocol pay debt and they aligned themselves with the protocol and tend to hold their APR DEUS reward, as can be seen from the recent price action. Late redeemers held onto their DEIv1 and were ultimately left no other choice than to redeem and stake and were thus - generally speaking - less aligned with Deus and its goals. That way early redeemers are rewarded for their commitment and late redeemers given less of a chance to put negative price pressure onto DEUS.

Furthermore we propose to raise the APR floor to $100 from the previous $40 floor.

Early redeemers get 30% APR at a DEUS price of $100 or above. Late redeemers get 10% APR at a DEUS price of $100 or above. Below $100 the APR decreases linearly to zero as can be seen in the chart below:

The inflation from those newly adjusted APRs is negligible and represents around 1/10th to 1/15th of the outstanding debt. It also won’t interfere with reaching payouts, as those can only be reached with the launch of v3, associated use-case (DEIv2 minting) and liquidity incentives. Slashing APRs to 0% for everyone, as some suggest, will not meaningfully help in reaching the vDEUS debt payments faster and would only negatively impact redeemers more, who already suffered the most so far from changed terms.

In retrospect, bDEI bonders were supposed to receive back their DEIv1 after their bonding period expired and for locking up their capital they were rewarded an APR. With the recent changes redeemers essentially bailed out all bDEI bonders and are now carrying all weight in terms of uncertainty. The APRs for bDEI don’t make sense anymore since their contract got upgraded to the best-case scenario. As can be seen from the chart above, we suggest to slash the bDEI APR to 2.5%. DEI/bDEI LP incentives are completely removed as they serve no purpose.

All DEIv1 liquidity incentives across DEX protocols should the slashed to 0% as well, if they haven’t been already.

Finally and importantly, the APRs paid out from now on will be deducted from the total debt.

Instant Liquidity: Because the previous exit options introduced in DIP-8 don't make sense anymore, 2 options for instant liquidity should be offered:

1. Instant redemption of DEUS with a formula proposed by the Deus team (initial idea: Price / 250 * x)
2. Reversal into DEIv1, giving users the option to exit instantly or bond DEI for bDEI (future bDEI/DEIv2 markets will offer an instant exit in that case).

DIP-8: Most of the parameters put in place by the previous community proposal still stay in place, this proposal only serves to modify previous incentives, as the underlying incentive structures got changed completely. APRs will still permanently stop at a DEUS price of $250 (3 consecutive days) and will not re-initiate at a lower price again.