Maybe, but what would have been the alternatives?
If I understand the parking correct, the 18% is the annual rate for a minimum parking duration of 3 months, which still is high.
18% annually equals 4.2% for three months (compound interest included) or 1.38% per month.
That is still far below the interest that can be made in the liquidity pools. But paying for liquidity pools is the better choice. I’ll come back to that later in this post.
That’s true, but as other effective means for regulating the tilt between supply and demand were not available with short lead time in that situation. Raising the parking rate interest was the only way to treat the situation.
It may be that the blooming decentralized liquidity providing helps a big deal here.
I believe that the tiered model of liquidity operations needs to be reworked.
Currently parking rates are on tier 5 and NSR sale / NBT burning is on tier 6.
It’s my firm conviction that tier 6 is more effective than tier 5:
- it takes a lot of time for the parking rate interest to really climb by a substantial amount
- it creates only more liability that needs to be covered by tier 6
The only instrument that is missing is a way to quickly, reliably (and ideally on protocol level) determine a ratio for NSR/NBT conversion.
So far this can only be achieved by NSR grants that are used for buying and burning NBT, which is obviously not operating on protocol level.
In my eyes the ideal solution for keeping the peg deals with an appropriate compensation for liquidity providing and agile, reliable NSR/NBT burn mechanisms.
If something goes pear-shaped raising interest is too slow and people might not want to buy and park NBT depending on the kind of what goes wrong…
An idea how to address the lack of NSR/NBT burning (on protocol level!) is already available:
