Dynamic Supply Undergoes a Metamorphosis to Morph.Finance
Our mission is to balance inflationary growth with real value production from DeFi services
Dynamic Supply is an algo based stablecoin, inspired by Basis protocol, which launched less than two weeks ago. Since then, we’ve added some features such as a new website, and a coin zapper that allows users of other projects to join Dynamic Supply. However, we’ve noticed many critical problems with Basis’ tokenomics, which makes it an unsustainable algo stable coin, as pointed out by Andre Cronje in this tweet.
We originally intended to solve the algo stablecoin issues by introducing new mechanics to help arbitrage away lop-sided sell pressure. For example, you could burn DSTR into DST when DST is above $1, and DST into DSTR when DST falls under $1. Unfortunately, DST dropped below $1 before we could introduce our Burner mechanic, and before any DSTR was burned first. Since DSTR is capped supply, the Burner is no longer able to be introduced.
Furthermore, Dynamic Supply has emission rates that are quite accelerated that added to the downward pressure, especially as the Reoptimizer stopped producing inflationary rewards, compounding the issue by removing DSTR staking incentives. Regrettably, the original team burned the keys that allowed us to make emission rate adjustments into a more sustainable model. Because of the way Dynamic Supply tokens and the ecosystem contacts are setup, it is near impossible to reconfigure the tokenomics of Dynamic Supply, without breaking the system. Thus we need to make a full migration into something new and better — Morph Finance.
Morph into Better Tokenomics
The benefit of an accelerated version of Dynamic Supply allowed us to witness how the Basis system plays out in a concentrated true form. It is not sustainable as there is no outside value production factor that counteracts the inflationary expansion, which subsequently renders Notes useless as the system has no inherent means to remove such debt. We’ve therefore carefully calibrated a better balance and made some changes by introducing Morph Finance — a redeveloped version of Dynamic Supply with newly tweaked tokenomics:
- Notes (bonds) are now removed
- DST replaced with MORC (Morph Coin) and DSTR replaced with MORT (Morph Tracker)
- Epoch length is now 8 hours; inflation rate of 1.1x remains the same and requires 2 epoch minimum lock to claim rewards
- Selling MORC when it is <1 DAI in value introduces a scaling burn tax, at a percentage rate of 1 minus [MORC price].
- 75% of the taxed amount of MORC is burned, and 25% of the MORC goes into the Reoptimizer.
- DST and DSN will receive 1:1 conversion to MORC, and DSTR will receive 1:1 conversion to MORT for the first 100k DSTR only.
To recap, MORC aims to peg its price to 1 DAI via an incentivized elastic coin model. When the price of MORC is over 1 DAI, new MORC tokens are minted as expansionary growth, and will then be sent to the Reoptimizer, where stakers of MORT will earn a share this MORC. When the price of MORC is less than 1 DAI, a tax is placed on every sell to Uniswap, where 75% of that tax is burnt and 25% is sent to the Reoptimizer, so that stakers of MORT will continue earning rewards even when the price of MORC is less than 1 DAI and inflation stops.
The further away MORC is below 1 DAI, the higher the tax will be. For example, if the price of MORC is 0.95 DAI, 3.75% of the sold amount will be burnt, and another 1.25% of the amount will be sent to the Reoptimizer, totaling to 5%. If the price of MORC is 0.75 DAI, the total tax (amount to burn plus the Reoptimizer share) will be 25%. This in turn places upwards pressure back on MORC.
Value Backed Stabilization
The Burner and Regenerator mechanics will still be introduced into Morph Finance, consistent with our intended roadmap, in order to provide arbitrage mechanics and prevent unbalanced downward pressure on any one particular liquidity pool. More importantly, inflationary growth needs to keep in line with actual value production. We are replacing the bond system with various DeFi service platforms, with the first one being a Liquidity Pool swapper built on our Zapper system, for any farm-to-farm swap. Part of the fees will be used to create upwards pressure on MORC which keeps excessive inflationary growth in check, and keeps MORT participants that “mine” MORC further incentivized.
Dynamic Supply Migration
If you currently are a Dynamic Supply holder (DST, DSTR, or DSN), you will be eligible to swap your tokens to Morph tokens at a 1:1 rate. Every DST and DSN token are eligible to be swapped to MORC at a 1:1 rate, and DSTR can be swapped over to MORT at a 1:1 rate with a limit of 100k DSTR tokens, swapped at a first-come-first-serve basis. We’ve decided to limit the amount of DSTR that can be swapped to 100k, because that is the approximate amount of DSTR currently in circulation from DSTR farming at the time of the release of our migrator contract. We will distribute the remaining MORT tokens to LP farms throughout 60 days, with the MORC farm receiving 100k MORT to distribute and the MORT farm receiving 50k MORT, thus reducing the emission rate of MORT.
Dynamic Supply Reoptimizer will no longer issue rewards, and any new DSTR tokens minted beyond the 100k conversion limit will no longer be convertible.
You can begin the migration process now by navigating to morph.finance/migrate, to convert your DST, DSTR, or DSN to MORC and MORT. MORC and MORT will not be transferable or tradable until Saturday, January 16, 8pm ET/5pm PT (Jan 17th 1am GMT).
DISCLAIMER: Morph Finance, formerly Dynamic Supply, is an experimental DeFi ecosystem in an unregulated cryptocurrency space. Participation in the ecosystem does not constitute an investment and you risk any funds that you participate within the system.