mETH is not viable for the long-term, as the prices fluctuate, not being stable, there’s already many variables in generating the money off-chain, having problems on-chain such as price fluctuations would only disturb the general growth of DMM, if ETH busts to $100 after it was taken off-chain at $300 would mean a big + for the DMM ecosystem as a lot of money would be there, but at the same time if it blows up to $600 it would translate to a huge loss.
I think already from the stablecoins there’s enough fluctions, and ETH is the ultimate wildcard that can’t be controlled & used to the advantage of the DMM ecosystem, as the price is always impredictable, and call ( and maybe even put ) options to stabilize the from-chain to off-chain process translates to more costs.
Stablecoins are around 1$ net, but when talking about the dollar value, it’s actually very important when it’s 1.03$, because it would mean an extra 3% premium paid to bring the asset back on-chain.
DAI is constantly floating around 1.00$ & 1.05$, taking DAI off-chain to generate assets at a moment of 1$ and then having to return it on-chain at 1.05$ would mean a 5% increase in costs, this would reflect the bottom line and it doesn’t make sense to take the risk on the long term.
While it may make sense to actually extract the DAI off-chain when the value is higher by 1.00$ as it would increase the value of the money, it then needs to be taken on-chain only when the value is $1.00 or maybe even less, when it’s brought back up when DAI
USDT dropped at 0.91$ and peaked at 1.32 during certain points. DAI dropped at 0.92 and peaked at $1.06 during certain points.
Seems to make sense to extract the coins to generate yeild during peaks and re-introduced into the ecosystem when there’s busts, as the % fluctions themselves would mean extra revenue for the DMM, which translates to more token burns at the moment, and on the long-term more growth.
I think the key for best profits for the DMM is getting rid of the ETH wildcard, and focussing on moving the money from chain -> off-chain when there’s booms coin >= 1.03 ( or whatever param ) and having it prioritized to be bringed back ( not sure how long it takes, can also be partial ) when there's a bust < 0.97, This is a 3% net gain at the end of the day.
Taking the previous USDT high, only by taking the asset off-chain starts at a 32% gain ( not sure how this 1.32$ for 1 USDT price could’ve been achieved, but it was there at one point ).
Maybe I’m not seeing the full picture, what do you think ?