SIP: Protocol controlled equity

[glasgowm148]

For more details on what this proposal entails, see the timestampted video here

The quoted comments below were taken from SIP Enthusiast during ERGOHACKVI

This is important. Market chosen level of collateral will always drive risk too high. Sigmabank should take a very small proportion of the fees to start building protocol owned equity (POE). For example, 5% of gathered fees, which is less than the UI fee.

Initially it would not make any difference. At 400% POE human rsv holders would always be able to exit. At 800% POE humans might lose incentive to hold rsv due to diluted profits. If the RR drops back down, humans can re-enter.

At 1200% POE the reserve would be on such a safe level, that no competitor could offer as high stability guarantee. Together with dynamic fees, sigmabank could also become cheaper than competitors.

However, it should not grow indefinitely. At 10000% POE the stability would not be materially different, but it would become a huge incentive for oracle pool to collude to steal the reserve. Therefore, at for example 1200% POE, excess retuns could be moved to a separate smart contract, which slowly distributes the pot to oracle pool members.

This way, sigmabank would have built in support and incentive for continued oracle pool members, which it relies on.

https://t.me/SigmaUSD/19087