bonded DEI (bDEI)
What You Need to Know
TL:DR
bDEI tokens are able migrate to DEUS and SYMM at a TWAP ratio. This migration is accessible via https://app.deus.finance/migration.
Please note, if no additional USDC can be retrieved through law enforcement actions or exploiter negotiations, all bDEI will be automatically migrated to DEUS at the end of the waiting/migration period. It's important to underline that only DEUS or SYMM, not bDEI, can receive protocol profits.
You can learn more about the benefits of migrating early in the provided link #bdei. This process has been designed to offer our token holders the best potential returns and a streamlined token ecosystem.
Reasoning for a unified token system
The following Gitbook section is dedicated to illustrating why this migration to a simplified single token system stands as a beneficial move.
We dissect the complexities surrounding bDEI, outline the strategic choices at hand, and argue for the superiority of a consolidated ecosystem under the DEUS or SYMM umbrella. As we delve into this comprehensive analysis, we aim to provide clarity and guide our community through this significant transition.
Demystifying the bDEI Token and how it can repay debt.
The recent DEI incident led to users receiving bDEI tokens, representing their debt within the protocol. bDEI tokens currently have no liquidity, and achieving liquidity for bDEI will likely pose substantial future challenges. Given this scenario, users are left with three primary options.
Hold onto their bDEI tokens with hopes of recovering more USDC. (Short term next 4-6 months)
Migrate their bDEI tokens to DEUS or SYMM to profit from protocol revenue and market speculation.
Await repayment of bDEI through future protocol revenues. (long term next 6 - open months)
Option 3 will not be possible anymore, and this gitbook section is meant to explain the reasoning why
However, the latter option introduces complexities and potential drawbacks that we will elucidate here. It is crucial to understand why we have opted against repaying bDEI with future protocol revenues, which may seem like a viable option at first glance.
Even if bDEI, DEUS, and SYMM were treated separately in terms of repayment, there would be an inherent dilution effect across all token types.
This is because the amount repaid to bDEI holders would need to be a function of the total bDEI supply versus DEUS to maintain fairness. This model implies that bDEI holders would not receive their repayment any sooner than they would by holding DEUS or SYMM tokens.
One might argue that DEUS holders should receive no repayments until all bDEI debts are settled. However, this approach would threaten the sustainability of the entire project, leading to a situation where no one, neither DEUS nor bDEI holders, receives any profits.
This classic prisoner's dilemma showcases the complexity of the situation.
To navigate this dilemma, we propose consolidating a single token system for SYMM and DEUS that can absorb all the revenue, ensure the highest liquidity within the ecosystem, and can be sold by any participant at their convenience, whether at a haircut, break-even point, or profit. If bDEI and DEUS were to compete for liquidity, it would ultimately diminish the total liquidity within the system.
By promoting a unified token system, we foster a natural market that can pave the way for bDEI holders to receive their repayment. This strategy offers a pragmatic approach to managing the post-incident fallout, allowing for flexibility, profitability, and the potential for bDEI holders to recover their investments.
Evaluating Options: A Comparative Analysis of bDEI and the Potential Shift to DEUS or SYMM
The proposed idea leaves us with two major strategic options, each with advantages and potential drawbacks.
Maintaining the debt token separately as bDEI: This approach encompasses the following characteristics and implications:
Very little liquidity for debt holders
Repayment structures rely on protocol profits.
Speculation around the bDEI price, albeit with low liquidity, could lead to volatile price movements.
A complex ecosystem token system could deter potential new users and limit scalability.
Swapping the debt token bDEI into DEUS or SYMM: This approach offers the following advantages:
High liquidity for debt holders
Repayment structures rely on protocol profits.
Speculation around the DEUS or SYMM price could drive up the price of the tokens and enhance repayment abilities.
A simple ecosystem token system, which is user-friendly and can attract new users, further increasing liquidity and token value.
When these two options are compared, it becomes evident that migrating bDEI to SYMM or DEUS offers a more beneficial and strategic choice than maintaining bDEI as a separate debt token. The benefits of higher liquidity, equal profit payout structures, the potential for profit from price speculation around DEUS or SYMM, and an overall simpler ecosystem, all serve to strengthen the case for this migration.
Notably, this simpler ecosystem can make it easier for new users to enter, enhancing the overall liquidity and robustness of the system and assisting in the repayment of any obligations. Consequently, this strategy aligns with our mission to provide an accessible, transparent, and rewarding financial ecosystem to our community.
Title: The Restructuring Approach: A Discussion on Pricing and Token Liquidity
In addressing the issue of debt repayment within the protocol, we adopt a classic restructuring model: pay less now, pay more later.
As the protocol currently lacks excess reserves to repay the debt 1:1, fostering a healthier financial ecosystem is necessary before repayment can commence.
The question then arises as to why we offer bDEI holders a price of $185 per DEUS rather than the current price.
Reasoning
If we were to swap bDEI to DEUS at a 1:1 ratio immediately, we would likely trigger a rush to sell, which could destabilize the protocol. Early sellers might break even in such a scenario, but late sellers could hold the bag. This model fails as it inadvertently transforms debtors into immediate sellers to receive their repayment.
Instead, we effectively defer selling into the future by offering DEUS a haircut. While some might consider selling at a haircut, many will wait until the price reaches a certain level.
This approach results in each bDEI migrator having its unique price target to sell, creating a free market operation that is not forced. This natural, market-driven process proves more beneficial for all stakeholders involved.
A final point to consider is the direct correlation between the DEUS and SYMM price and their ability to generate yield. The yield generated results in a protocol surplus that can repay DEUS holders' obligations. Whether a DEUS holder bought at $1000 and now faces a loss or has been affected by the DEI incident, every user has a specific yield and price target in mind.
In essence, these elements are directly correlated. If the protocol fails to generate yield to repay its losses, there will not be any price increase. Therefore, by holding bDEI in hopes of future profits, users are betting on the price of the underlying token (DEUS or SYMM) to rise. If no yield is generated, the token's price will not increase.
Suppose users do not believe that DEUS can reach $185 per token. In that case, they also communicate that they do not anticipate the protocol to generate any protocol profits to repay bDEI as a whole.
We hope this correlation makes sense.
Thus, holding bDEI and waiting for protocol profits or migrating to DEUS are essentially the same. Similarly, migrating at a higher price is identical to waiting for protocol profits to repay bDEI.
The only change lies in the token users hold. At the same time, they wait, and we hope everyone agrees that simplicity is essential and that having to decide between a complex system and a simple system is essentially achieving the same thing.
Choosing the more straightforward system is always the wiser choice.
Conclusion:
As communicated previously, in the original split medium post
https://medium.com/deus-finance/deus-future-vision-independent-pathways-for-innovation-d572115974c7
bDEI as well as legacyDEI on all chains will cease to exist
in about six months if no more USDC can be recouped.
The essence of this change lies in its ability to simplify our token ecosystem, thus enhancing liquidity, user engagement, and the protocol's overall resilience. Regardless of holding bDEI or migrating to DEUS or SYMM, the anticipation of returns is tied to the protocol's ability to generate yield and maintain a healthy ecosystem.
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