SIP 50: Add sYIELD synth Source

AuthorNocturnalsheet, IanC
Discussions-To<https://discordapp.com/invite/AEdUHzt>
StatusProposed
Created2020-03-09

Simple Summary

This SIP proposes to introduce sYIELD, an automatic sUSD which earns interest every block.

Abstract

sYIELD will be similar to other synths, freely traded on synthetix.exchange. Fees should be 0% between sUSD/sYIELD pair. Standard fees for any other sYIELD/sXXX pairs. This will allow traders to move into sYIELD to earn interest, even for short periods of time when they are waiting to re-enter their long/short positions

Motivation

Current debt pool has heavy exposure to sETH which is a systemic risk to the SNX minters as the impact of ETH price movement creates an imbalance to debt pool exposure for all SNX minters. Ideally the overall debt pool exposure should be neutral so that SNX minters will profit regardless of how sETH or sBTC prices move.

Specification

An initial annual fixed interest rate of X% (to be determined) will be set and the price of sYIELD will increase automatically at every price oracle update, accruing interest on every block.

Exchange of sUSD <-> sYIELD can be done via synthetix.exchange or an external simple UI (like defizap) which calls the underlying contract function. This swap will incur no fees and no slippage or limitation of size.

Interest rate options on sYIELD:

Fixed rate (recommended): Propose to start with an interest rate of 10-15% APR as a trial to monitor the demand and impact

Variable rate (In future): Rates will increase to neutralise the debt pool if the majority of synths are in long positions. Rates will decrease when the debt pool is balanced with more sUSD/sYIELD than long positions

Rationale

sYIELD is a solution which aims to:

1) Encourage traders to hold sYIELD in between trades and keep them in the ecosystem.

2) Attract people looking for higher stablecoins yield

3) Encourage SNX minters to hold their debt in sYIELD instead of sETH

4) Create more demand for sUSD, helping to maintain and restore the peg

5) Create more external borrowing and lending markets for sUSD as arbitrageurs will borrow sUSD to place into sYIELD if the interest rate of sYIELD is higher than the borrowing cost of sUSD

Test Cases

TBD

Implementation

TBD

Copyright and related rights waived via CC0.