Lower bond inflation & prioritize naked bonds

We are planning to add new bonds to Euphoria, but before doing so we believe it's time to revise the current bond strategy.

When the project initially launched we configured the protocol to heavily incentivize bonding to quickly bootstrap the treasury.

This has a negative dilutive effect for those who simply stake without purchasing additional bonds.

Euphoria has now been live for a full month and we believe it's time to reduce emissions for the current bonds.

We also believe it's beneficial to further incentivize naked/stablecoin bonds compared to LP bonds.

Why might it be a good idea to incentivize naked bonds vs LP bonds?

The Euphoria treasury has currently accumulated ~$35.7m worth of assets.

Of those ~$35.7m assets ~$20.1m are LP tokens/liquidity. Expressed in percentages the Euphoria treasury currently consists of 56% LP tokens.

While $20m liquidity might not be a lot in absolute terms (especially in DeFi), we feel that prioritizing improving the backing per token ratio and extending the runway might be more important at the current stage of the project.

Before we go into the details of the proposed changes, let's quickly talk about BCV.

What is the Bond Control Variable (BCV) and why is it important?

The BCV acts as a scaling factor for a bond's debt ratio. The larger the BCV, the faster the bond prices decay from the debt ratio.

The protocol can utilize the BCV to target specific outcomes:

• If the protocol wants to increase liquidity: lower the BCV for LP bonds
• If the protocol wants to increase the stablecoin reserves & runway: lower the BCV for the naked bonds

Proposed changes

Overall changes

We propose the following changes for all bonds:

• Lower max payout to 50% of the current value (1000 -> 500)
• Lower the minting fee awarded to the DAO to 50% of the current value (10000 -> 5000)
• Reduce max debt (1000000000000000000000000 -> 1000000000000000000)

(All values listed above are the raw onchain data values)

Naked bond changes

We propose the following changes for naked/single stablecoin bonds:

• DAI: decrease BCV to 80 (200 -> 80)
• UST: decrease BCV to 100 (200 -> 100)
• USDC: decrease BCV to 100 (200 -> 100)
• BUSD: decrease BCV to 120 (200 -> 120)

LP bond changes

We propose the following changes for LP bonds:

• WAGMI/DAI: increase BCV to 180 (75 -> 180)
• WAGMI/ONE: increase BCV to 220 (120 -> 220)
• WAGMI/UST: increase BCV to 250 (120 -> 250)

BCV changes won't be enacted directly. They'll gradually change during the span of multiple days to ensure the changes are enacted incrementally.

Voting choices

• YES: enact the proposed changes in this proposal
• NO: do not change the bond configuration