Decentralized Stablecoin (DSC) Arbitrage Scheme

General
1

I. Minting DSC (Decentralized Stablecoin)

  • Initial supply: 0. Minting is executed through arbitrage based on oracle prices.

  • Supply cap: 1/10 of the total minted Crypto Universecoin (CUC), with a maximum limit of 100 billion.

II. Minting CUC (Crypto Universecoin)

  • Total fixed supply: 1 trillion (non-modifiable).

  • Generated as block rewards for validators, with a linear decrease (from 10,000 to 9,000, 8,000, … down to 1,000) and adjustments every 1,000 days.

  • Entitles holders to governance voting rights.

  • Validator taxes are credited to Treasury 1.

How to Address Long-Term Selling Pressure?

Transaction fees are split into two parts:

  • 20%-80% distributed as rewards to validators.

  • 20%-80% allocated to Treasury 1.

IV. Arbitrage Mechanism Between DSC and CUC

1. Oracle

Establish a decentralized, upgradeable, verifiable, and governable on-chain oracle.

2. Arbitrage Trigger Conditions

  • Arbitrage is activated when 0.92 < DSC price < 1.08 USD.

    • When 1 USD < DSC price < 1.08 USD: Use CUC to mint DSC equivalent to 1 USD, and burn the used CUC.

    • When 0.92 USD < DSC price < 1 USD: Use DSC to mint CUC equivalent to 1 USD, and burn the used DSC.

  • Key considerations: Minting in each time slot must be sequential and quota-limited.

    • Sequential arbitrage implementation?

    • Arbitrage quota specifications?

    • Coordination with block rewards must be considered.

3. Arbitrage Tax

All arbitrage taxes are credited to Treasury 2.

4. Circuit Breaker (Arbitrage Suspension)

  • Activated when 0.80 USD < DSC price < 0.92 USD or 1.08 USD < DSC price < 1.20 USD.

    • If DSC price > 1.20 USD (low-probability event): Surplus net value is transferred to Treasury 2, and two-way minting is disabled.

    • If 0.80 USD < DSC price < 0.92 USD: Automatic sequential repurchase of DSC is initiated. To prevent depletion of Treasury 1 and 2, a maximum of 50% of total treasury funds can be used, with repurchases executed sequentially and under quota limits per epoch.

Virtual Government Bonds (SDR)

  • Issuance trigger: When DSC supply is N and its USD-denominated price is XN (X < 0.8), and the fair price remains below 0.8 USD for period T, the system automatically adjusts the supply to align with a 1 USD price (reducing DSC supply). The resulting net value deficit from the supply reduction is covered by issuing virtual government bonds (SDR). SDRs are burned once the DSC price recovers, concluding the bond period.

  • SDR Rights and Benefits:

    1. Interest rate: Determined by governance, funded from the remaining 50% of treasury funds.

    2. Transaction fee sharing.

    3. Tax revenue sharing.

    4. Tradability.

Treasuries

Three separate treasuries are established:

  • Treasury 1: Funds from transaction fees.

  • Treasury 2: Funds from arbitrage taxes.

  • Treasury 3: Holds major mainstream assets (e.g., BTC, ETH, USDT, USDC, Euro stablecoins, etc.).

Attack Mitigation

  • Large-scale short-selling attacks

  • Bank runs

  • Oracle attacks