I appreciate the work that went into this proposal, and I agree that improving USTC utility is important. However, I believe the framework is fundamentally flawed because it relies on economic assumptions that may have worked in prior bull-market conditions, but are much weaker under current market conditions.
The core issue is that staking itself does not create value. It only redistributes value unless rewards are backed by external cash flows. In the past, high USTC yields did help drive higher USTC market cap because locking supply in a strong market environment created positive reflexivity. But that dynamic depended on broader bullish conditions and cannot simply be assumed today.
In today’s crypto market, releasing USTC from the Community Pool or minting USTC to fund staking rewards creates a serious risk of reflexive decline for two reasons:
(1) Stakers will rush to sell their yield before others, because the yield is not backed by external cash flows and current market conditions are bearish.
(2) Believers in the “repeg USTC” narrative will exit as APR-driven dilution undermines the original recovery thesis, even if increased total USTC supply might otherwise support net market cap growth in spite of a lower USTC price.
These two forces combine to incentivize ecosystem USTC holders to front-run the expected decline by selling into any price spike caused by reduced circulating supply. In other words, actors expecting to sell into narrative demand created by the proposal are likely to be disappointed. This is not recovery. It is a temporary subsidy structure that pays holders first from existing reserves, then from dilution.
The proposal itself points to the reflexivity problem. To reach an attractive yield target, it already relies on a very large annual minting assumption. That means the most appealing part of the proposal, the APR, is not actually supported by proven revenue. The source of the yield remains unresolved, and the likely result is dilution.
This matters because USTC is not just another token. Its remaining value is tied to the belief that there is still a credible path toward recovery. A staking model that depends on subsidized rewards without external cash flows at best risks repeating a familiar pattern: short-term narrative pump, followed by longer-term decline as confidence weakens and holders exit. At worst, it could accelerate downward price reflexivity as market participants sell ahead of the expected dilution cycle. Even if dilution could temporarily support market cap, it would damage the repeg-oriented narrative that still underpins much of USTC’s value today.
That is why I cannot support this framework as written. A much safer approach would be to ring-fence any USTC released from the Community Pool and use it only for productive purposes such as lending, liquidity, or collateral, with clear protections to ensure that Community Pool USTC holdings are preserved or increased rather than reduced over time.