I like the theory behind the proposal. My question is: could a much simpler, quicker to market model be just as effective?
Simply placing a large buy order on the market at peg - 5%, and a sell order at peg + 5% would have a similar effect? Traders will arb the pool prices bringing balance between these prices and the orderbook. Bot can adjust these prices in real time using the RWA price. Investors have some price certainty, and a much simpler model to understand. LSTR benefits from the 10% spread, and can use now token issuance to set the +5% sell order - raising capital.
Am I missing something? Seems an easier way to achieve the same goal.
I certainly like the simplicity of the idea.
This is an interesting idea and it's possible we could do this for some amount of the conversions (effectively a subset)
There are some reasons a more direct conversion process is useful. Also, much of this will be handled by our UI.
In the doc above, its mentioned that the RCBF should be seen more as a "buyer of last resort" when it comes to conversions
The secondary market / arbitragers should be doing exactly what you described above. We want the free market to do this as opposed to LeoStrategy.
Instead of LeoStrategy doing this, arbitragers can confidently buy/sell around the peg. This healthy secondary market actually leads to direct profits for LeoStrategy (via our Market Makers).
In terms of conversions, LeoStrategy merely offering the conversions with a haircut will give the market confidence + breathing room to self-correct. Right now, the only thing maintaining the pegs is anyone who trusts LeoStrategy will continue to pay the yield.
Since you hold a lot of RWAs, its clear you trust this. We obviously know that we will continue with yield in perpetuity.
But your average arbitrager/user may not trust this (yet, but trust grows with time). Instead of solely relying on this, adding the conversion mechanism releases some pressure from the system and allows the pegs to more quickly correlate to the underlying. This doesn't mean that all RWAs will suddenly convert. We actually expect conversions to be infrequent. Similar to our USDT example in the post above: most users will never use conversions. Those who do will use the secondary market to be active participants (HE order books, pools, etc.) to actively arb the pegs and create the exact effect you outlined above.
We hope this answer covers what you're asking. We love your outside the box thinking, please keep feedback like this coming. 🦁