Staking Mechanism for USTC

Breaking This Topic Into Parts (Repeg USTC)

https://commonwealth.im/terra-luna-classic-lunc/discussion/17245-repeg-ustc

Introducing a Mechanism for Staking USTC On-Chain

Today, let’s focus on the possibility of introducing a staking mechanism for USTC on-chain, similar to what we have for LUNC.

Utilizing USTC Reserves

We have USTC reserves in the Oracle Pool (421 million at the time of writing) that could be used for this initiative.

Staking Goal and APR

Our goal is to take at least 1 billion USTC out of circulation on-chain and achieve an APR similar to LUNC. This would provide enough rewards for approximately four years(fees from MM will allow to keep this for much longer). However, we need to consider the impact on LUNC stakers, who currently receive both LUNC and USTC as APR. Diverting rewards to USTC staking could reduce the amount of USTC received by LUNC stakers.

#### Proposed Solution

To address this, we could reserve 200 million USTC specifically for USTC stakers. This would provide a competitive APR for USTC staking without affecting to much LUNC staker earnings.

Alternatively, we could freeze the wallet containing the 1.8 billion USTC and later use that as rewards for the mechanism.

Governance and Rewards

The USTC staking mechanism would not grant governance voting power, only APR rewards. As a preparation for testing the Market Module (which will need an oracle price feeder for USTC), rewards for USTC stakers will only be given if the Validator is running a price feeder for USTC, similar to the existing system for LUNC.

Motivation for This Proposal

Reducing Circulating Supply

To illustrate the potential impact, consider today’s market: Binance has a daily volume of 200 million USTC, and the total volume across all exchanges is around 400 million coins daily. By introducing USTC staking and aiming for 1 billion staked, we could significantly reduce the circulating supply. In theory, we could remove a substantial portion of USTC from real circulation.

Price Stabilization

This reduction in circulating supply would help reveal and stabilize the price of USTC. Additionally, it would serve as good preparation for reopening the Market Module.

Implementation Steps

- Create a staking mechanism for USTC.

- Develop a price feeder for USTC.

• Possibly freeze the wallets containing 1.8 billion USTC, which could later be used as part of the rewards for the staking mechanism.

Vegas