Dexy is an alternative stablecoin design that uses seigniorage, currently in development.
You can read the draft whitepaper here
The first instantiation will be DexyGold, which is pegged to USD/XAU v2 oracle pool.
Below are the main design aspects of Dexy.
One-way tethering: There is a minting (or "emission") contract that emits Dexy tokens (for example, DexyUSD) in a one-way swap using the oracle pool rate. The swap is one-way because we can only buy Dexy tokens by selling ergs to the box, and we cannot do the reverse swap.
Liquidity Pool: The reverse swap, selling of Dexy tokens, is done via a Liquidity Pool (LP), which also permits buying Dexy tokens. The LP primarily uses the logic of Uniswap V2. The difference is that the LP also takes the oracle pool rate as input and uses that to modify certain logic. In particular, redeeming of LP tokens is not allowed when the oracle pool rate is below a certain percent (say 90%) of the LP rate.
If the oracle pool rate is higher than the LP rate, then traders can arbitrage by minting Dexy tokens from the emission box and selling them to the LP.
If the oracle pool rate is lower than the LP rate, then the Ergs collected in the emission box can be used to bring the rate back up by performing a swap. We call this the "top-up swap".
The swap logic is encoded in a swapping contract.
- The LP uses a "cross-tracker" to keep track of the height at which the oracle pool rate drops below the LP rate after a swap, that is, the height at which the oracle pool rate was above the LP-box in the rate but was below the LP-box out rate.
- When this happens, R5 of the LP box will store the height (within an error margin) at the time which this happened.
- If the oracle pool rate again becomes higher than the LP rate, the register is set to
- This register can only be changed when the oracle pool and LP rates cross each other during an exchange. At all other times this register must be preserved.
- The swap contract looks at R5 of the LP box, and if the value is below a certain threshold (say 50 blocks), then the swap is allowed. This implies that a swap is valid only when the oracle pool rate falls below the LP rate and stays below for at least 50 blocks.
Consider the following attack:
- When profitable, mint some Dexy tokens and sell them on LP
- When not profitable, top-up LP using Dexy till it becomes profitable
- Go to step 1
The process will repeat until the emission box runs out of ERG, and the attacker will have made a profit.
We can take one or more of the following measures to prevent this attack.
- Lock the minted Dexy tokens in a box until a certain time.
- Lock the Ergs in the emission contract until a certain time.
- Don't allow minting when it's profitable.