What is Smart Dollar?
Smart Dollar (SD) is an BEP-20 self-stabilizing decentralized censorship-resistant non-collateral backed BUSD stablecoin.
How is SD different from other stablecoins?
SD is a fully decentralized stablecoin that unlike centralized coins, e.g. USDT, has no 1:1 backing through a centralized USD treasury. To be highly capital efficient it does not use any collateral, like DAI or sUSD. The voluntary elastic supply mechanic is different from Ampleforth (AMPL) and Based (BASED). It is inspired by Empty Set Dollar (ESD) yet responds faster to market demand through more frequent epochs, extended supply caps, and a modified supply extension/contraction formula.
If SD is a stablecoin, is it always worth 1 USD?
The goal of a stablecoin is not to always be worth 1 USD, but to always be almost worth 1 USD. Even centralized stablecoins such as Tether experience price volatility. Decentralized stablecoins such as DAI can experience even greater price amplitudes. Different stablecoins employ different mechanics to return to the USD peg. SD is built to become more stable over time. Due to its self-stabilizing mechanism SD is expected to experience elevated volatility in the initial stages. At maturity, SD aims to vacillate close to 1 USD.
How does SD’s supply grow?
SD uses an elastic supply mechanic. As market demand for SD increases, the price of SD increases above the 1 USD peg, which causes new SD to be minted. This increases the supply of SD, returning the price of SD to the peg. There are several ways newly minted SD are distributed. In the event of supply extension, 60% of the newly minted SD will return to SD holders that have bonded SD inside the DAO, while the remaining 40% return to Pancakeswap Liquidity Providers (Oracle). Lastly, SD features a built-in debt market that handles supply contraction phases (SD price < $1). Once debt has been created, SD token holders can burn their SD to acquire Coupons. Coupons will be redeemable for newly minted SD during a supply expansion event. When burning SD for Coupons, there is always a discount applied depending on the debt ratio.
Important to note is that the supply of SD changes through voluntary actions of users. Your wallet balance will never increase or decrease without your volition.
Will SD become a sustainable, useful token?
This is our mission. SD combines the strengths of different stablecoin projects that came before it. By utilizing the knowledge and experiences of former stablecoin designs, SD precedes to improve various factors, e.g. capital efficiency, stabilizing requirements and governance. For SD to become a sustainable and useful stablecoin, we aim for integrations with all sorts of DeFi applications, most importantly lending and borrowing platforms and exchanges.
Token Mechanics
What is an epoch?
An epoch defines a period within the SD ecosystem in which the total supply of SD is being adjusted. 1 epoch equals 1 hour, 24x daily. Within the epoch, the token price will be measured in order to decide if a supply extension or supply contraction is necessary. It also allows governance proposals to be raised and voted on by token participants.
What are a Coupons?
When the total token supply contracts, the DAO incentivizes users to voluntarily burn their SD for Coupons at a discounted SD rate depending on the debt ratio. In the event of supply extension, Coupon holders will be able to redeem their Coupons for SD. Coupons expire after 1440 epochs=60 days.
What is bonding?
Bonding enables you to participate in supply extension and allows voting on proposals concerning SD’s DAO. Users can stage SD into the DAO, which can then be bonded. Also, they can bond their Pancakeswap LP tokens and earn rewards by providing liquidity,
This prevents manipulations and flash loan attacks during supply expansion and contraction events. Token holders with bonded SD can vote on DAO governance proposals.
What do “frozen” and “fluid” states mean?
Frozen means you are available to transact. Fluid means you are committed to only bonded or unbonded SD tokens until the end of this epoch. Once you have deposited some funds into the DAO you have entered the available state. In the frozen state:
- You can withdraw SD from the DAO or stage more SD
- You can bond your SD
By bonding your SD you enter the fluid state. In the fluid state:
-You can bond or unbond your SD.
-You cannot withdraw or stage SD.
When your SD is bonded but you wish to withdraw, you first have to unbond your SD. You cannot withdraw in the fluid state. At the beginning of the next epoch, you will return to the available state, which lets you withdraw your SD.
You can deposit and bond in the same epoch. Once you have bonded your SD, you enter the fluid state and can no longer withdraw or deposit until the next epoch starts.
Frozen and fluid states appear on the wallet page and the Liquidity Pool Reward page of the DAO.
How do I advance an epoch?
Epochs advance every 1 hour. They are advanced manually by a user. This allows the DAO to apply state transformations like Coupon expiry and supply regulation on advancement. To incentivize this behavior, the DAO mints reward SD tokens to the sender upon successful advancement. As a new user, it is unnecessary to concern yourself with this technical detail.
Why do some epochs grant rewards and some do not?
Rewards can only be granted during token supply expansion events. If a supply contraction event occurs or no event takes place, then no rewards can be granted. Supply expansion events occur when the price of SD rises above 1 USD, which causes the minting of enough new tokens to return the price back to the peg, as well as clearing all remaining debt. The newly minted SD are used to redeem all Coupons held by users. Once the Coupons are redeemed and the debt is cleared, bonded token holders and Liquidity Providers will be rewarded with the newly minted SD.
How do we know if any given epoch will have rewards and how much rewards?
The DAO determines the token price of SD through Pancakeswap time-weighted average price (TWAP) algorithm. TWAP is measured and weighed over the course of 1 epoch, 1 hour. This means, if the price changes drastically in the final minute of the epoch, it will not have an outsized impact on the TWAP since for the majority of the 1 hour the price remained steady.
You can estimate the chances of a supply extension event and the number of rewards possible by doing the appropriate calculations.
Maintaining SD’s price peg
How do I participate in maintaining the peg?
The easiest way to help maintain the peg is by bonding SD, providing liquidity to the Pancakeswap Liquidity Pool, or doing both. Optionally, SD holders can take part in the Coupon market.
How do I buy SD?
Currently, the best place to buy SD is from the Pancakeswap pool. The prices you see may be over or under the peg by a non-trivial amount. Pay attention to the price you are paying when you buy it. SD is a self-stabilizing system, which means initially there will be more volatility. Over time the price will fluctuate closer and closer to the 1 USD peg.
Do I gain rewards for buying SD?
If you just buy SD it has the same reward opportunities as BSDT or USDC. You can buy SD below the peg and sell it at or above the peg, gaining the difference. Passively holding SD without bonding them in the DAO does not earn rewards.
How can I receive SD rewards?
SD provides three active methods to generate rewards to token holders. All require staging SD into the DAO. Once your SD is in the DAO you can:
- Bond your SD
- Provide liquidity to the Pancakeswap Liquidity Pool, then bond the LP tokens
- Purchase Coupons on the DAO’s debt market and redeem them during a supply expansion event. Always remember that coupons expire after 60 days = 1440 epochs.
What can I do with rewards from bonding to the DAO?
Rewards that you earn from your bonded SD are automatically bonded. Your bonded rewards will continue to compound automatically.
If you wish to sell SD, first unbond them, then unstage them. After 36 epochs you will return to the available state, where you can withdraw your SD.
What can I do with rewards from bonding Pancake LP tokens?
Your rewarded tokens from providing liquidity to the Pancake Liquidity Pool will appear on the LP Reward Pool page of the DAO under the rewarded header. Unlike bonded rewards, LP rewards do not automatically generate any further rewards.
If you wish to add your rewards to the liquidity you are already providing in the Pancakeswap Liquidity Pool, you can do it easily with one click. On the bottom of the LP Reward Pool page, you see a “Provide” section.
