*️⃣ Policy-Making Parameters

Important Parameters for system security and behavior guidance

Like any central bank, to make the DeFi reserve currency work, several parameters need to be programmed and adjusted, to balance the supply and needs, guide the participant's behaviour and make the protocol perform in a healthy and sustainable manner.

Minting / Bonding Cap

Different from buying SGT on the secondary market from Dexes, the minting or bonding mechanism does not have slippages. It means that the users may have the same discount in a single transaction, regardless of the trading volume. To protect the system from selling a large number of cheap SGT tokens, and better equality for the participants, the max amount per transaction is limited in the contract. It will perform like the price stairs. After a single minting transaction is executed on-chain, the minting price will be renewed for the next one.

BCV

BCV (Bond Control Variable) is the scaling factor at which bond prices change. The BCV parameter can be set differently among different bonds. And it is tuned regularly by the Policy team to meet the protocol goals.

A higher BCV means a lower discount for bonders and higher inflation by the protocol. A lower BCV means a higher discount for bonders and lower inflation by the protocol.

BCV is also a policy-making parameter to guide the bonders. For example, for a certain type of LP bonds, if the BCV is set to be lower, then the bond price will be increased slower when more users are bonding. The treasury is likely to have more assets of this very kind of LP tokens.

Pricing bond

Minting/Bond prices are calculated as 1+Premium.

The premium is the product of Debt Ratio and BCV. Higher BCV will result in a higher premium, and a lower discount when minting.

The Debt Ratio is the total SGT to be released to bonders divided by the total supply of SGT. This allows us to measure the current debt burden of the protocol.

As time goes by, the outstanding bonds will expire and hence the Debt Ratio is decreasing, if no more users are bonding/minting. It will gradually lower the bonding/minting price. When the price is lowered to a certain level that bonding becomes profitable enough, then users will be incentivized to start bonding again.

Also, there is a price floor set by the protocol, to protect the system from selling any abnormal cheap bonds, which is especially useful in bootstrap or black swan periods

vesting term

It is set to a fixed number BSC blocks or approximately five days for all minting Asset types. It can be changed to issue more bonds with flexible maturities.

Reward Rate

Reward rate is an important parameter setting to control the inflation and APY for the stakers. It is the configured percentage of SGT distributed to all stakers on each rebase relative to the total supply. The higher the Reward Rate, the higher APY will be and the Runway time will be lower.

Runway

The runway is the number of time that the APY can last at the given reward rate. It is calculated based on the compound rate and the assets in the treasury powering distribution. The lower the APY for stakers, the longer the runway will be. The more assets in the treasury, the longer the runway will be.

SGT distribution

Every time one Mints SGT, the proceed will go to the Stargate Finance Treasury. A corresponding amount of SGT will be minted and distributed to three parties:

• Minter - The Minter will receive SGT released linearly over the vesting term.

• DAO - The DAO receives the same amount of SGT as the minter. This represents the DAO profit.

• Stakers - After accounting for the SGT distributed to the minter and the DAO, the rest will be distributed among all stakers in the protocol, at the Reward Rate.