Been using AI to attack $DGB DigiDollar system design. Very interesting AI observations: ----- "The key insight: This isn't trying to be $DAI or $USDC. It's a different beast entirely - a "patient capital stablecoin" that trades short-term volatility for long-term stability." ----- **Natural Arbitrage**: If DD ever trades below $1, it becomes profitable to buy and hold for future $DGB redemption ---- ### The Time-Lock Advantage With positions locked for years: - **No panic selling** of collateral - **DGB price has time to recover** - **System can weather severe downturns** ----- FUL TEXT----- ## How the DigiDollar System Actually Self-Stabilizes With Extreme $DGB Price Volatility. ### No Bad Debt Accumulation Since there are no forced liquidations: - **Underwater positions just wait** - they're time-locked for years - **No "bad debt" exists** - the DGB is still there, just worth less temporarily - **System automatically rebalances** through the DCA & ERR: ### 1. **Dynamic Collateral Adjustment (DCA)** When system health drops: - New mints require much higher collateral (up to 2x) - This immediately improves system-wide collateral ratio - Example: If system at 110%, new mints need 1000% collateral instead of 500% ### 2. **Emergency Redemption Ratio (ERR)** When system below 100%: - Redeemers must burn MORE DigiDollars - Example: At 80% system health, burn 125 DD to unlock position that minted 100 DD - This **reduces DD supply** while keeping same DGB locked - Mathematically forces system back toward health ### The Time-Lock Advantage With positions locked for years: - **No panic selling** of collateral - **DGB price has time to recover** - **System can weather severe downturns** ## The Real Attack Vectors (Revised) ### 1. **Confidence/Perception Attack** Even if the system is mathematically sound: - Traders might not understand the self-healing mechanism - DD could trade below $1 based on **fear**, not fundamentals - This is more a PR/education problem than a technical flaw ### 2. **Liquidity Mismatch** The core tension remains: - **DD trades instantly** on exchanges - **Redemption is time-locked** - This creates a temporal arbitrage problem ### 3. **Oracle Front-Running** Sophisticated actors could: - Predict oracle price updates - Mint DD just before DGB price increases - Or redeem just before decreases (if their lock expires) ### 4. **System Gaming Through Cycles** Traders could potentially: - Wait for system health to drop - Buy cheap DD on exchanges - Hold until system recovers via DCA/ERR - Profit from the recovery ## Why The System Might Actually Work Your correction highlights why this could be more resilient than I initially thought: 1. **No Death Spiral**: Higher collateral requirements for new mints prevent cascading failures 2. **Supply Reduction**: ERR naturally reduces DD supply during stress 3. **Time Heals**: Multi-year locks give DGB price time to recover 4. **Natural Arbitrage**: If DD ever trades below $1, it becomes profitable to buy and hold for future redemption ## Remaining Concerns ### Exchange Price Discovery You're right that 1:1 stable swaps help, but: - What happens when first major exchange lists DD/USD with order book? - Market forces will eventually create price discovery ### The "Patient Capital" Problem The system essentially requires: - Users who can lock capital for years - Faith that DGB will maintain/increase value long-term - Understanding of the complex stabilization mechanisms This might limit adoption to sophisticated users initially. ## Conclusion (Revised) The system is more robust than I initially assessed. The combination of: - No forced liquidations - Dynamic collateral requirements - Emergency redemption ratios - Multi-year time locks Creates a self-healing mechanism that doesn't rely on immediate liquidations. The main challenge isn't technical collapse but rather: 1. **Market perception and education** 2. **Maintaining DD peg on exchanges despite time-locked redemption** 3. **Ensuring sufficient liquidity and adoption** The key insight: This isn't trying to be $DAI or $USDC. It's a different beast entirely - a "patient capital stablecoin" that trades short-term volatility for long-term stability.