Overview
This proposal explores the introduction of a staking mechanism for USTC on-chain, modeled after the existing LUNC staking system, to reduce circulating supply, stabilize the price, and support for Market Module 2 (MM2) implementation.
Utilizing USTC “Zombie” Pools
We propose leveraging abandoned USTC pools, starting with the following pool:
terra1q00r9whldewsktqne5sux6gtaxn2vlfvu5geej.
This pool contains 15 million USTC paired with a defunct project (C2X), which migrated to a new chain and was delisted from all centralized exchanges (CEXs). The project team provided a migration portal for holders to swap tokens, and officially terminated the C2X-USTC LP staking program on Terra Classic. Relevant details:
- Termination of C2X-UST LP Staking
- Withdrawal Process for LP Tokens
- C2X DeFi Pool
- C2X Staking Balance
If this proposal advances, a window will be provided for any remaining holders to swap their CTX tokens for USTC or remove any residual liquidity from the pool.
Staking Goal and APR
The goal is to stake at least 532 million USTC on-chain, removing it from circulation, with an estimated APR of 1.4%. This would provide sufficient rewards for approximately two years. Additional “dead” pools can be utilized in the future to sustain the system.
Proposed Solution
Governance and Rewards
- The USTC staking mechanism will not grant governance voting power, only APR rewards.
- To incentivize validators to run a USTC price feeder (required for Market Module 2), rewards will only be distributed to USTC stakers if their validator operates a USTC price feeder, “similar” to the LUNC staking system.
Motivation
Reducing Circulating Supply
Currently, Binance accounts for ~29% of USTC’s daily trading volume (~200 million USTC), with total daily volume across all exchanges at ~400 million USTC. Staking 532 million USTC would remove approximately 8.8% of the circulating supply, significantly reducing available tokens in the market.
Price Stabilization
Reducing the circulating supply could stabilize and potentially increase the USTC price. Additionally, as the LUNC staking system rewards both LUNC and USTC, a higher USTC price would increase the dollar value of staking rewards, encouraging more LUNC staking. This could create a snowball effect, reducing the circulating supply of both LUNC and USTC, further supporting price stability across the Terra Classic ecosystem.
Preparation for Market Module 2
The staking system would incentivize validators to run USTC price feeders, facilitating the testing and implementation of Market Module 2.
Implementation Steps
- Develop test a staking mechanism for USTC on-chain.
- Create a USTC price feeder (to be addressed in a separate MM2 proposal).
- Audit & Implementation
Community Feedback
This is a signal proposal to gauge community sentiment regarding the USTC staking system. If the community supports this initiative, a detailed technical proposal will follow.
Please provide feedback to help shape the future of this proposal and the Terra Classic ecosystem.