The Seven Wonders of MITH Cash V2: Day 7 — Value Reallocation from Sub-$1 MIC Sales to MIS holders and others
We conclude the Seven Wonders of MITH Cash V2 with the final change to the MITH Cash protocol : Value Reallocation from Sub-$1 sales of MIC V2.
As we have seen, bonds are insufficient to maintain the peg, and we believe that active measures are necessary to incentivize market participants to bring MIC towards its peg. One of our Bounty Hunters, Eep, wrote about this recently:
Restoring Algorithmic Stablecoins to Their Peg
Over the past few months, multiple algorithmic stablecoin projects have launched, with the goal of creating a…
Prolonged sub-$1 trading will increase the risks to the project, and as such we intend to make it unattractive for speculators to sell MIC V2 below peg, and to reward long term project supporters through value reallocation.
Because of MIC V1's rebase to MIC V2, all MIC V2 will start trading at $1 USDT. This means all existing holders will not be subject to value reallocation at the beginning. However, once speculators begin to speculate on price while MIC V2 is below peg, value reallocation will occur to ensure this is highly unprofitable:
Value Reallocation: Removal
MIC V2 sales under 1 USDT will be charged a fee according to the formula:
Fee = 1 — price²
Example: If the price of MIC V2 is 0.5 USDT and someone sells 100,000 MIC:
- Fee rate = (1–0.5²) = 75%
- He / she receives after fee = 100,000 * (1–0.75) * 0.5 = 12,500 USDT
- Fee proceeds are 87,500 MIC, or 85% of the tokens traded.
Value Reallocation: Accretion
The MIC V2 collected as fees will be distributed as follows:
- 25% to MIS V2 staked in the Boardroom
- 75% to the MITH Cash Stabilization Fund (MSF). MSF will discuss, with the support of MITH Cash governance voting, how best to reallocate the value here, through various mechanisms to support peg, including but not limited to: Stabilization fund for buyback, sub-1 buy rewards, allocation to MIS holders, burn, etc.
To start, for the first 30 days after migration, 1/3 of the MSF allocation will be rewarded to MIS V2 staked in the Boardroom, so all fees (from sub-1 MIC V2 selling) collected are distributed according to the following breakdown:
- 50% to MIS V2 staked in the Boardroom
- 50% to the MSF for other stabilization purposes
MITH Cash governance may determine the best use of the fees collected in the MSF (buyback, burn, buy rewards, stabilization fund, single-asset lending etc.)
Note: Usage of MSF funds requires MITH Cash governance voting.