Goal
Use a high, stable interest opportunity to create an effective method of growing stable coin market share in a new domain.
Problem
In cross chain markets, high interest opportunities such as Anchor act as a sink to decentralized stable coins such as TerraUSD. Any user who obtains TerraUSD is incentivized to deposit into Anchor for the highest, safest yield instead of using it to trade with, provide liquidity, or use elsewhere. This Anchor deposit token is not composable because its value is greater than one USD, not externally incentivized, and therefore it’s rarely used. These factors make it very difficult to grow TerraUSD on external markets. Therefore, it is challenging for TerraUSD to become integrated and heavily used in a new ecosystem, which should be a primary goal of any stable coin.
Solution
Soluna aims to solve this by using a two token system. The first token in the system is a stable coin that is a wrapper over Anchor UST. The Soluna protocol accepts UST, deposits it into Anchor, and issues an equivalent amount solUST against the deposit while retaining the Anchor deposit token in its reserves. solUST is a direct peg to UST because it can be minted or redeemed for 1 UST at all times.
Over time, the protocols Anchor UST holdings become worth more than the issued amount of solUST. This yield is tokenized in the form of solUST and can be minted by anyone at any time. This yield is split between single staking for solUST and a payment that goes to the governance token (SLNA) stakers.
When yield is distributed to single staking, it forms a rebase token called staked solUST. This program is modeled after xSushi, where the token can be rebased and it is worth an increasing amount of the underlying token, which in our case is solUST. Staked solUST opens the door to many interesting leverage opportunities because of its constantly increasing value with respect to USD.
SLNA is the second token in our two token system. This governance token, can be used to vote on the direction of future token emissions and the portion of yield that should be redirected from the reserve. The remaining yield from Anchor is distributed to governance token stakers, using the voting escrow model. This system mints veSLNA, a non-transferable token, in exchange for locking SLNA. The amount of veSLNA received is based the amount SLNA locked and the duration of the lock.
This reward to veSLNA holders is a revenue share from the protocol back to its stakeholders. The solUST payments from the interest generated on Anchor offer cash flow to veSLNA holders. Because veSLNA holders also control the future emissions of the valuable SLNA, it is in their best interest to vote in a way that would grow the principle supply of solUST over the long term. This is because a larger principle of solUST generates more interest in Anchor and leads to high payments to these veSLNA holders.
Outcome
solUST is a decentralized stable coin with all the properties of UST plus incentives in the form of SLNA to be used across Solana. The single sided deposits of solUST should be at or above the Anchor rate and the rewards are paid out in both solUST and SLNA. This model also causes cases such as liquidity providing, lending and borrowing, and derivative products to be incentivized with SLNA rewards as a way to grow the issuance of solUST. SLNA gives a way for users to speculate on the issuance of solUST because of its unique revenue generating properties. veSLNA holders also earn solUST for being a long term believer in the protocol and voting on ways to grow the protocol with the voting escrow system.
