[DRAFT] DLP indefinite performance
This is my amendment to try and reconcile P6 implementation plan with DLPs so we may move forward.
The implementation plan called for 30d grace period before realizing synth_units into liquidity_units, and thus realizing DLP positions' losses. This looks like a change in rules on the DLP, who while in many cases expected the synth leverage, also expected to be able to cling on for a future date at a better rune/asset ratio.
Alternative proposals have been offered, and they in most cases propose taking synth_units and paying them back to DLPs directly or through vesting. The problem here is those synth_units have equal claims by Savers and Lenders, and we cannot go "Chapter 11" with them but "Chapter 7" with DLPs and have a credible solution.
The new proposal is this:
- DLPs had a claim on the leverage. Have them keep it. Conditions are unchanged entirely for DLPs.
- Lock any new LP adds to pools with synth_units. Any new add of liquidity to those pools will be done by the protocol or by a future v3 liquidity type model with separate accounting. Stopping liquidity adds is necessary to stop non-incumbent LPs to take on the positive leverage, diluting the reflexivity and thus disfavoring incumbent LPs.
- Leave synth_units behaving like synth_units and rebalancing as a free float, but they will always back synth_supply which will remain fixed and protecting the principal with equal claims by lenders and savers, leaving that capital untouched in in-kind terms.
- DLPs now have an indefinite time frame to realize their loss or gain, as the protocol won't realize it anymore ever. They can now remain in the system for as long as they wish and realize their loss or gain at a time and ratio/price point of their choosing.
- DLPs are now also tied to the performance of the protocol as a whole for they payback, like TCY holders.
- The Protocol keeps some small upside tied to RUNE performance from its current PoL holdings that are already DLP. The rest is tied to exogenous asset performance, which is ok since that is what savers and lenders have a claim to as well.
This proposal is also easy to code and to launch quickly in Phase 1.
Just like Savers and Lenders got TCY, which is a right to a percentage of swap fees; DLPs essentially get a performance based option, dependent on RUNE price, that they may exercise at anytime.
Unwinding
If Thorchain performance has been excellent and DLPs have largely been made whole, adding LP can be opened up again to the pools after converting synths to dual sided liquidity at that point.