Stardust Dao: How it all works.
What is ORION?
ORION is the main token and the core component of the Stardust DAO wealth generator. A new, category-defining asset class allowing smart investors to build their wealth by hedging. It is a decentralized treasury-backed currency on Avalanche that maintains a value of at least 1 MIM. However, ORION is not pegged to anything and therefore can have a value worth more than 1 MIM providing its holders with a potential for great upside.
ORION is backed, not pegged.
Each ORION is backed by 1 MIM, not pegged to it. Because the treasury backs every ORION with at least 1 MIM, the protocol would buy back and burn ORION when it trades below 1 MIM. This has the effect of pushing ORION price back up to 1 MIM. ORION could always trade above 1 MIM because there is no upper limit imposed by the protocol. Think pegged = 1, while backed > 1.
You might say that the ORION floor price or intrinsic value is 1 MIM. We believe that the actual price will always be 1 ORION + premium, but in the end that is up to the market to decide.
With an example, how does staking and rebasing work?
The protocol distributes tokens by sending them to the staking contract without asking for sORION back. This increases the ratio of ORION staked to sORION outstanding, and results in a rebase to correct the difference.
For example: there are 500k ORION staked and 500k sORION outstanding. The protocol produced $5k profit for the day, which it uses to mint and back 5k ORION. It sends those ORION to the staking contract; there are now 505k ORION staked and 500k sORION outstanding. sORION supply needs to increase by 5k, or 1%, to return to balance. So, sORION is rebased up by 1%.
The only caveat is that rebases occur retroactively. The end of epoch 100 triggers a rebase of profits from epoch 99. This delay lets you see what you’re missing if you want to unstake or what you’ll get if you want to stake.
Staking is how we distribute profits equitably to participants. Through sORION, everyone receives the same percentage profit per epoch. Rebasing also allows us to compound yield with no need to harvest or do anything except hold.
Please explain bonding and the outcomes it produces.
Bonding is the process of trading an LP share to the protocol for ORION. The protocol quotes an amount of ORION and a vesting period for the trade. It is important to know: when you create your bond, you are giving up your LP share. The protocol compensates you with more ORION than you’d get on the market, but your exposure becomes entirely to ORION and no longer to ORION-MIM LP.
Note that sORION is the protocol’s profit accruing token and since bonders earn ORION (not sORION), stakers earn 100% of protocol profits (minus the DAO’s cut).
Why Do I Want to Bond?
Because it allows you to buy ORION at a lower cost basis. In return for selling your LP, the protocol will sell you ORION at a discount.
What is reward yield?
Reward yield is the percentage by which your staked ORION (sORION) balance increases on the next epoch. It is also known as rebase rate.
Why should I stake ORION?
Your ORION balance will grow exponentially over time thanks to the power of compounding. Let’s say you buy a ORION for $400 now and the market decides that in 1 year time, the intrinsic value of ORION will be $2. Assuming a daily compound interest rate of 2%, your balance would grow to about 1377 ORION by the end of the year, which is worth around $2754. That is a cool $2354 profit! By now, you should understand that you are paying a premium for ORION now in exchange for a long-term benefit. Thus, you should have a long time horizon to allow your ORION balance to grow exponentially and make this a worthwhile investment.
What will be ORION’s intrinsic value in the future?
There is no clear answer for this, but the intrinsic value can be determined by the treasury performance. For example, if the treasury could guarantee to back every ORION with 100 MIM, the intrinsic value will be 100 MIM. It can also be decided by the DAO. For example, if the DAO decides to raise the price floor of ORION, its intrinsic value will rise accordingly.
How does the protocol manage to maintain the high staking APY?
Let’s say the protocol targets an APY of 100,000%. This would translate to a rebase rate of about 0.6328%, or a daily growth of about 2%. If there are 100,000 of ORION staked right now, the protocol would need to mint an additional 2000 ORION to achieve this daily growth. This is achievable if the protocol can bring in at least 2000 MIM daily from bond sales. If the protocol fails to achieve this, the APY of 100,000% cannot be guaranteed.
Do I have to unstake and stake ORION on every epoch to get my rebase rewards?
No. Once you have staked ORION, your staked ORION (sORION) balance will auto-compound on every epoch. That increase in balance represents your rebase rewards.