BUSD Reserve Model (BRM)
By definition, a reserve refers to a supply that is not needed for immediate use but available if required. In a similar fashion, this model utilises a nominal amount of treasury-held BUSD as a backstop for bYSL. This will not only help bYSL remain stable and resilient to market manipulation but will also promote confidence that bYSL can always be burnt for BUSD at a predictable rate.
The components of BRM include:
- The BRM has been designed to protect the value of bYSL and encourage long-term participation in the protocol. Every time you sell bYSL for BUSD, the protocol will perform four separate checks, based on each component of the BRM. If any of the first three checks are not satisfied (DOQ, POL or BTR), the transaction will fail and be reverted.
- Only once the DOQ, POL and BTR checks have been satisfied, will the protocol proceed to the final check which will be based on your SPR. This final check will determine if either the bYSL protocol price or the bYSL backed price will apply to the exchange. These series of four protocol checks are illustrated in the infographic below:
- Your SPR represents the percentage of your bYSL balance that you're able to sell at the protocol price at any given time. Provided you do not make any outbound transaction of bYSL from your wallet, your SPR will continue to increase every 24 hours until it reaches its maximum of 25%.
- Your SPR will only be applicable when you sell bYSL (burn) for BUSD via the POL.
- SPR works by limiting the amount of bYSL that can be sold at the protocol price from a wallet, by taking into account when the holder first acquired bYSL or last sold/transferred bYSL.
- SPR is variable and will start at 0.25%, and every 24 hours it will increase by 0.25% - reaching a maximum of 25% on day 100. However, it will reset back down to 0.25% every time you make an outward transaction of bYSL from your wallet (except when you deposit into the bYSL vault or sacrifice bYSL to participate in the SuperNova).
- Your SPR for bYSL will initiate when your wallet balance for bYSL increases above 0. In other words, your SPR will commence the moment you receive bYSL in your wallet.
- This means, that once your balance for bYSL increases above 0 your SPR will be initiated - and it will remain at 0.25% for 24 hours, and every 24 hours it will increase by 0.25% - reaching a maximum of 25% on day 100.
- Yes, a user will always be able to sell above their SPR. However, if a user decides they want to sell above their SPR, they will obtain the lower backed price.
- When it comes to "selling bYSL" (aka sacrificing bYSL for BUSD via the POL), holders have the option of either selling at the protocol price or at the lower backed price.
- If a user decides they want to sell at the protocol price, they will need to sell a percentage of their balance that is less than or equal to their current SPR.
- So, essentially, users have the choice of getting more BUSD per bYSL by selling less than or equal to their current SPR, or they can opt to receive the less BUSD per bYSL by selling above their current SPR.
- Your SPR for bYSL will reset back down to 0.25% every time you sell bYSL via the POL for BUSD.
- Your SPR for bYSL will reset back down to 0.25% every time you transfer bYSL to another wallet.
- Your SPR for bYSL will reset back down to 0.25% when you use the Transfer All function to transfer your entire bYSL balance to another wallet (Note that your SPR will not re-initiate until your wallet balance for bYSL increases above 0).
- Every wallet will have a quota of one outbound transaction for bYSL every 24 hours - this represents your DOQ (or "Daily Outbound Quota").
- The DOQ works by limiting the outbound transactions a bYSL holder can perform from a wallet on a daily basis, by taking into account when the holder first acquired bYSL or last sold/transferred bYSL.
- The 24-hour period will be determined from the time your wallet balance for bYSL increased above 0, OR if you already hold bYSL it will be determined from the time you last performed an outbound transaction.
- If you attempt to make more than one outbound transaction of bYSL in a 24-hour period, the transaction will fail and be reverted.
- The POL (or "Protective Outer-Layer") is a security sublayer for the treasury contract. This is because no other contract apart from the POL will be able to interact with the BUSD held by the treasury contract. In addition, the POL has been purpose-built to only hold a maximum of 25% of the total BUSD held by the treasury. By capping the amount of BUSD that can be held in the POL, we ensure that the bulk of treasury-held BUSD is always insulated from external interaction.
- The POL will be rebalanced on a daily basis to hold 25% of the treasury-held BUSD, and the balance of BUSD held by the POL will act as a backstop for bYSL. In other words, every time a user decides to sell bYSL for BUSD, the protocol will burn the bYSL and draw upon the balance of the POL to provide BUSD for the exchange.
- The protocol has been designed with a rebalance mechanism to ensure the treasury contract holds 75% of treasury-held BUSD and the POL holds 25%. By default, the protocol will rebalance the POL contract every 24 hours, with the initial rebalance time being set at 24 hours from the time of the last rebalance.
- To ensure optimal security our protocol will implement a reset of the rebalance time each time the POL balance drops by 10%. As a result, the rebalance time can be reset up to 9 times (i.e. when the POL balance falls below 90%, 80%, 70%, 60%, 50%, 40%, 30%, 20% and 10%).
- This 24-hour delay will serve as an additional layer of security. To put its benefit into context, we'll look at a quick example. Let's say a bad actor were to somehow acquire a large amount of ill-gotten bYSL. In theory, if the rebalance time were to occur daily at a set time, the bad actor could drain the POL moments before the rebalance time, and moments later once the POL is rebalanced. But, implementing a 24-hour delay before the next rebalance occurs would limit the exposure to the BUSD held by the POL prior to the rebalance.
- Please note: this scenario would NOT be possible in reality thanks to the other components of the BRM - Sigma Portal Rate (SPR), Daily Outbound Quota (DOQ) and the BUSD Transmittance Rate (BTR). This is because, if the bad actor does attempt to sell their ill-gotten bYSL for BUSD - they'd only be able to immediately sell 0.25% of their bYSL balance (being a new holder their SPR will initiate at 0.25%) at the bYSL protocol price. Furthermore, due to the BUSD Transmittance Rate (BTR), the maximum amount of BUSD they'd be able to extract from the 0.25% of their balance is limited to 1% of treasury-held BUSD.
- The BTR (or "BUSD Transmittance Rate") is the maximum percentage of treasury-held BUSD that can be removed when bYSL is sold (burnt) for BUSD via the POL.
- The BTR is fixed at 1% per transaction. This means a user is only able to sell bYSL for BUSD that is less than or equal to 1% of the total balance of treasury-held BUSD.
- The BTR acts to minimise market manipulation by restricting the sale of bYSL per transaction in accordance with the total balance of treasury-held BUSD. Whilst this still allows for large sales from a single wallet per day, it protects the treasury from being depleted and ensures that there is sufficient BUSD available to meet demand.
- BTR will apply to every transaction when bYSL is sold (burnt) in exchange for BUSD.
- When you attempt to sell bYSL for BUSD via the POL, and the amount of BUSD that is to be returned is greater than 1% of the total balance of Treasury-held BUSD, the transaction will fail and be reverted.