DEI Stablecoin Depegging

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DEI

DEI aimed to create a stablecoin which could be swapped across multiple chains without any cost. Unfortunately the protocol depended on the availability of liquidity in farming pools. In other words, the whole thing depended on there being persistent demand for the stablecoin token.

DEI tried a wide variety of different approaches to revive the coin and re-establish the peg, but were ultimately unsuccessful. Eventually, a new coin was launched which would allow users of the old coin to get back a fraction of the coins which they originally had. Most public sites such as CoinMarketCap and CoinBase have not yet listed the new token. It's only listed on CoinGecko so far.

This is a global/international case not involving a specific country.[1][2][3]

About DEI

[4][5][6][7][8][9][10][11][12][13]

"DEI is an advanced algorithmic cross-chain fractional-reserve stablecoin, with one native bridge that will connect to all chains within the DEUS ecosystem." "DEI is backed by cryptocurrencies. Twenty percent of its reserves are in Deus Finance’s native cryptocurrency while the remaining 80% is a combination of other stablecoins."

"DEI’s composition is free-flowing, comprising roughly 10% DEUS tokens and 90% of another trusted stable, depending on the chain in question. The collateral ratio of DEI is constantly monitored and adjusted via arbitrage bots."

"DEI’s mission is to bridge liquidity across all blockchains in a scalable and decentralized way. DEI will enable users to send a stablecoin to any chain and claim it on the other side with no slippage."

"DEI’s vision is to be the stablecoin of choice for users across all chains. Currently, there is an industry-wide dilemma in that users require a different stablecoin for each chain they wish to operate on. With DEI, users will have access to a stablecoin that is usable and redeemable across all chains."

"Another issue that DEI addresses is cross-chain liquidity. Bridging tokens to other chains can often be a very slow and sometimes risky process. Adding to that, bridges are only as useful as the liquidity on the other side."

"DEI’s mission is to bridge liquidity across all blockchains in a scalable and decentralized way. DEI will enable users to send a stablecoin to any chain and claim it on the other side with no slippage."

"During DEI minting, the DEUS collateral is burned (a process of removing the tokens from the circulation) unless a different form of collateral is used (such as USDC, FTM, or WBTC, for example). When redeeming DEI for the underlying collateral, DEUS tokens are also minted alongside the underlying collateral." "If you were to mint DEI using only USDC as collateral, for instance, when you redeem your underlying, you would receive 80% in USDC and 20% in DEUS."

"DEI is majority-backed by the collateral of a trusted stablecoin and fractionally backed by DEUS tokens. As mentioned previously, this ratio is dynamic and is kept in check by arbitrage bots. It is important to note that DEI’s behaviour and characteristics are isolated per chain. For instance, if for some reason USDC on Mainnet were to collapse, the circulating DEI on other chains would be unaffected. In such a rare event, the only users negatively affected would be those attempting to bridge to and from the compromised chain during the window of instability. The DEI bridges will have a decentralized failsafe mechanism to shut down during such an occurrence."

"Redemption is the process of swapping the stablecoin for its collateral." "If the price of DEI is above $1, users can mint 1 DEI using $1 worth of collateral and sell them in the market to pocket the difference as profit." "If DEI falls below a dollar, users can buy one DEI for less than a dollar on the open market and redeem them for $1 worth of collateral in USDC and DEUS."

"[D]ue to DEI’s free-flowing composition, users can always redeem DEI for $1 by tapping into the currently existing stablecoin liquidity of external protocols. Additionally, users are incentivized to add to this liquidity by providing their own through yield farms that will reside on all chains within the DEUS Finance ecosystem."

"The stablefarm is a low-risk, high reward farming pool designed to incentivize users to provide liquidity and suffer zero impermanent loss. The LP tokens are created by providing 50% DEI and 50% of a trusted stable, depending on the chain. This pool yields 50% APY with no downside."

"Looking for somewhere to #yieldfarm with your stables? There are a host of opportunities to stake your $DEI / $USDC on #Fantom" "The good people over at @LiquidDriver have added the "Another $DEI, another dollar" stablepool, powered by @beethoven_x."

"Users interacting with this software do so entirely at their own risk."

On May 14th, "$DEI Market Cap [was] $88,737,181".

"With UST collapsing, the stablecoin market was shaken." "$DEI The next stable to crash?"

"DEI – which traded 3 cents below its peg on Sunday – lost 20 cents on Sunday night as traders likely exchanged DEI tokens for USDC amid a small amount of liquidity on decentralized exchanges, which caused price fluctuations. Lower prices led to more traders selling DEI for other tokens, presumably to protect against risks, which further contributed to a price drop."

"Traders [we]re taking advantage of th[e redemption] arbitrage mismatch, buying up DEI coins and exchanging them for $1 worth of collateral, making matters worse. Deus Finance reacted by halting the redemption process in order to try and stabilize the coin."

"First of all, we have been aware of DEI being below 1$ for several days now." "Our team is working around the clock to restore the DEI peg. Mitigation measures were implemented immediately and solutions are being developed for long-term stability." "Further updates to follow."

"Read up on the long-term future for $DEI stability: DEUS Treasury bonds! A solution to automate an unbreakable backing of 1 DEI:1 USDC while also dampening $DEUS selling pressure into the future." "To regain DEI’s peg to the U.S. dollar, the Deus Finance team is selling their own quasi-treasury bonds that they hope will incentivize people to add to the stablecoin’s liquidity. In a blog post, a member of the Deus Finance DAO said the stablecoin didn’t have enough USDC to back it because of a hacking in March in which $3 million of crypto was stolen."

"If DEI is below 1$ for a longer time, the interest rates of overcollateralized Loans increase every second. That mechanism pushes borrowers to buy back DEI below 1$ to pay back their loans more often."

"The collateral ratio of DEI is constantly monitored and adjusted via arbitrage bots, which continually trade $1 worth of the underlying tokens for 1 DEI, or vice versa, to ensure a peg." "Arbitrage bots, which simultaneously buy and sell the same asset to profit from small differences, were ensuring the peg by trading $1 worth of an underlying token for 1 DEI and vice versa."

"AMO v2 will imitate natural user behavior, using lending, borrowing, repaying buyback, and collateralizing."

"AMOv3 the peg-savior. Additionally, we will implement that at a random time. Without any notice, we will use the AMO to bring the price back to 1$, but this will “punish” all borrowers by increasing interest rate by more significant percentages, so they will need to buy DEI above peg."

"With this dynamic, we will decrease the global risk by writing the balance to the isolated risk side when DEI trades below 1$; additionally, the increasing interest rate will naturally lead to increased demand for DEI below 1$."

"We deactivated the AMO today in anticipation of what happened at UST, to cooldown the market and not deploy further treasury assets. AMO will get activated again over the night, with a new monetary policy model that will be rolled out in parts today and in the future."

"We believe a confident peg at $1 and fully collateralized backing is the only answer to resolve short-term peg stability."

"The $DEI redemption and bond contracts have been closed. Almost 40m DEI has been removed from circulation and we want to say a huge thank you to the community for their support and cooperation thus far." "The DEI contract is being updated and additional layers of security are being implemented. DEUS v3 development is ongoing and after some final internal tests we will be deploying a public testnet very soon, so stay tuned."

"So why is DEI dumped so hard?" "Why is $Dei down about 50% in 24 hours while $Deus is up 30%. Im really confused."



This is a global/international case not involving a specific country.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

  • Known history of when and how the service was started.
  • What problems does the company or service claim to solve?
  • What marketing materials were used by the firm or business?
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  • Business registration documents shown (fake or legitimate).
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  • Public warnings and announcements prior to the event.

Don't Include:

  • Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
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The Reality

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  • When the service was actually started (if different than the "official story").
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What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - DEI Stablecoin Depegging
Date Event Description
April 18th, 2022 6:30:00 AM MDT Yield Farming Marketing Promotion on Twitter about lots of placed to Yield Farm DEI/USDC on Fantom[14].
May 4th, 2022 9:24:00 AM MDT No Impermanent Loss Marketing DEI is marketed on Twitter as having no impermanent loss[15].
May 12th, 2022 6:16:09 AM MDT Discord Hangout May 11th A video of the Deus Dao Discord hangout is uploaded to YouTube[3]. TBD finish processing transcript.
May 13th, 2022 6:30:00 AM MDT Scream Integration Set Up DeusDao announces that DEI can now be lent or borrowed on the third party Scream.sh platform[16].
May 13th, 2022 9:30:00 AM MDT Quest For Twitter Lead DeusDao announces they are looking to hire a Twitter lead, and candidates should apply online[17].
May 14th, 2022 5:25:00 AM MDT Total Market Supply Update The market cap of DEI is reported as $88,737,181[18].
May 14th, 2022 6:30:00 AM MDT Appreciation The community expresses appreciation and shares the weekly video[2]. TBD
May 15th, 2022 5:20:08 AM MDT Treasury Bonds Medium Post The DEUS Protocol announces plans to launch fixed-rate DEUS Treasury bonds with maturities ranging from 8 weeks to 52 weeks, aiming to stabilize the DEUS stablecoin's peg at $1 through fully collateralized backing. Initially, the bonds will be sold in exchange for stablecoins like USDC, DAI, and FRAX, with plans to include volatile assets later. DEUS Treasury bonds function similarly to US Treasury bonds, with the principal repaid in stablecoin after maturity. The protocol currently holds 65 million DEI tokens backed by 35 million DEI acquired through the AMOv3, and the bond program will temporarily remove 35 million DEI from circulation while adding collateral. Bondholders can redeem their bonds for collateral and earn fixed interest until maturity. The protocol aims to mitigate selling pressure on DEI by offering attractive programs to bondholders and repurchasing DEI to offer as Treasury Bonds. The bond sale follows a reverse Dutch auction model, and bonds may be implemented as NFTs. DEUS Treasury bonds offer low-risk fixed-interest products with a dynamic redeeming mechanism based on the USDC balance in the treasury[19].
May 15th, 2022 9:30:00 AM MDT Treasury Bonds Announced The DeusDao announces the launch of the DIP-7 Treasury Bonds program, "a treasury bond program aimed at securing peg stability". "These treasury bonds allow users to deposit collateral and earn a fixed interest based on the maturity date." They include a link to the posted Medium article[20].
May 15th, 2022 1:48:00 PM MDT CoinMarketCap Crash Speculation CoinMarketCap community member "bots4trading" speculates that DEI may be "[t]he next stable to crash"[21].
May 16th, 2022 6:18:00 AM MDT CoinDesk Article Published CoinDesk reports that Deus Finance's stablecoin DEI, which operates within the Fantom-based decentralized finance (DeFi) project Deus, has lost its peg with the US dollar and dropped to as low as $0.54. This loss of peg follows a trend of other algorithmic stablecoins experiencing similar issues. Algorithmic stablecoins are designed to automatically maintain a peg to another currency, unlike centralized stablecoins backed by actual dollars. DEI consists of 10% DEUS tokens and 90% other stablecoins and uses arbitrage bots to adjust its collateral ratio and maintain the peg. The decline in DEI's value can be attributed to liquidity issues, with traders selling DEI for other tokens amid price fluctuations and concerns about risks. Deus developers paused the redemption mechanism for DEI, further impacting liquidity. Despite the drop, DEI has recovered to around $0.72, and developers have a repegging plan in place to prevent future peg collapses. The loss of peg by DEI follows the collapse of Terra's UST stablecoin, which also caused panic and sell-offs in other stablecoins[22].
May 16th, 2022 7:38:00 AM MDT DeusDao Working Around The Clock The DeusDao team announces that their "team is working around the clock to restore the DEI peg. Mitigation measures were implemented immediately and solutions are being developed for long-term stability."[23]
May 16th, 2022 12:12:58 PM MDT Decrypt Article Published Decrypt reports that DEI, the algorithmic stablecoin from DEUS Finance, has lost its dollar peg and plummeted in value by 30%. DEI, which resembles Terra's UST stablecoin, currently trades at $0.66 after hitting an all-time low of $0.55. Unlike UST, DEI is collateralized, with users able to mint 1 DEI by depositing $1 worth of collateral such as USDC, FTM, DAI, WBTC, or a combination of DEUS and USDC. However, DEUS Finance recently experienced two flash loan attacks, leading to a loss of over $30 million and depreciating the collateral value of DEI. With the collateral ratio falling to 43%, the redemption process for DEI has been halted to stabilize the coin, and plans have been announced to make it fully collateralized[24].
May 17th, 2022 3:53:06 AM MDT Finbold Article Published Finbold reports that DEI has lost its peg to the U.S. dollar, following the trend of other algorithmic stablecoins. At the time of the article, DEI is currently trading at $0.64. Deus Finance's DeFi protocol uses DEUS and DEI tokens, with 1 DEI requiring $1 of collateral. The low collateral ratio of 43% has made it difficult to redeem DEI tokens, as there is not enough capital backing the stablecoin. Traders are taking advantage of the situation, buying DEI coins and exchanging them for $1 worth of collateral. Deus Finance has halted the redemption process to stabilize the coin. The volatility in stablecoins could impact the crypto market, and investors should monitor the movement of USDT, the largest stablecoin, to gauge market direction[25].
May 19th, 2022 5:00:00 AM MDT Fortune Article Published Fortune publishes an article on the DEI collapse. "Last week’s collapse of cryptocurrency UST spelled trouble for the entire category of stablecoins. Now another one, DEI, has lost its peg to the U.S. dollar."[26]
May 19th, 2022 9:30:00 AM MDT Remaining Busy Behind The Scenes DeusDao posts to announce that they remain busy behind the scenes working on repegging the token[27].
May 19th, 2022 11:08:37 PM MDT Kalkine Media Report on YouTube Kaline Media publishes a general overview of the stablecoin collapse, covering both TerraUSD (UST) and DEI . Stablecoins, a category of cryptocurrencies designed to maintain a stable value, have been experiencing a significant dip in value, causing concern within the crypto community. Stablecoins are typically pegged to assets like fiat currency or precious metals, with the expectation that their value will remain constant. However, both prominent stablecoins have lost their peg, triggering negative sentiment. DEI is part of the DEUS Finance project, which aims to be a decentralized finance ecosystem offering services such as crypto loans. DEI is supposed to maintain a peg with the US dollar but has recently suffered a substantial loss, losing over 25% of its value in one day. Similar to TerraUSD, the fall of DEI may be linked to issues with how algorithmic stablecoins maintain their reserves to back the asset. This instability in stablecoins has raised concerns about the reliability of these types of cryptocurrencies[28].
May 23rd, 2022 6:00:00 AM MDT Redemptions Starting To Stabilize Peg DeusDao reports that the redemptions appear to be starting to stabilize the peg. "As per announcements in our community, $DEI redemptions have begun to stabilise the peg. $DEI holders can now redeem their DEI for USDC & vDEUS (a voucher that can be redeemed for DEUS in the future) in tranches."[29]
May 24th, 2022 5:30:00 AM MDT Tranche 3 Redemptions Open The Tranche 3 opens for DAI redemptions as a price of $1.1. The team also promises more information in the future[30].
May 24th, 2022 9:30:00 AM MDT DEUS Treasury Bonds Announced DEUS treasury bonds are promoted again on Twitter. "A solution to automate an unbreakable backing of 1 DEI:1 USDC while also dampening $DEUS selling pressure into the future."[31] A reference to the treasury bond proposal is included.
May 25th, 2022 5:54:00 AM MDT Redemptions Available Now The DeusDao team announces that redemptions are now available and links to their redemption page on Twitter[32].
May 27th, 2022 5:00:00 AM MDT Dynamic Redemption Tranches The DeusDao team announces dynamic redemption tranches on Twitter and links to a Medium page[33]. TBD get details from Medium page.
May 30th, 2022 7:14:00 AM MDT Redemption Reminder The DeusDao team announces that $9.6m worth of DEI has already been redeemed, and encourages more users to redeem[34].
June 4th, 2022 10:00:00 AM MDT Encouraging DAI Redemption TBD "Redeem your $DEI, play your part, and receive additional value in return"[35].
June 7th, 2022 9:30:00 AM MDT DEI Stability Plan Released The DeusDao account on Twitter releases the DEI stability plan with the goal of repegging DAI[36]. TBD more details.
June 7th, 2022 4:46:11 PM MDT DEI Bond Introduction Lafayette Tabor introduces DEI bonds on the DEI Medium article, as an extension to the redemption program. DEI Bonds offer a lower risk/reward option for DEI holders who are not willing to swap DEI for higher-risk assets like vDEUS. These bonds allow users to get their DEI back at the end of the bond maturity period, which is individually based on the NFT received at the bDEI mint. bDEI, a liquid ERC20 token, can be traded for DEI on stableswaps and can be deposited into staking contracts to earn yields in DEUS and potential DEX tokens. The target annual percentage rates (APRs) for bDEI/DEI LP staking and bDEI single staking are 20% and 10%, respectively. The earliest bonders receive NFTs that reduce their bond maturity time, providing additional protocol profits and one-time interest. Overall, DEI Bonds aim to reduce DEI circulation, increase backing for remaining DEI, and provide an exit strategy for different risk profiles[37].
June 8th, 2022 9:30:00 AM MDT DEI Bonds Announcement DeusDao announces the DEI bonds program on Twitter as "low risk/reward"[38].
June 10th, 2022 9:30:00 AM MDT DEI Bonds Announcement Another announcement about bDEI. "$bDEI is bonded $DEI. Minting $bDEI removes $DEI out of circulation" "Tradable ERC-20 token. Can be swapped for $DEI at maturity. Can be staked to earn $DEUS rewards. Farming as $bDEI-$DEI[39]."
June 11th, 2022 6:00:00 AM MDT DEI Bonds Announcement "Rewards for bonding $DEI. Staking $bDEI to earn $DEUS rewards, Farming with $bDEI-$DEI LPs on liquidity pools. Bond $DEI today."[40]
June 11th, 2022 9:00:00 AM MDT DEI Bonds Announcement "$bDEI quick recap: -$bDEI will be redeemable for $DEI 1:1 after maturity -Minting $bDEI takes $DEI out of circulation"[41]
June 17th, 2022 6:00:00 AM MDT DEI Bonds Announcement "How to bond $DEI? Bond $DEI at https://app.dei.finance/deibonds Early bonders receive a “Time reduction NFT” How does it improve $DEI stability? Bonding $DEI takes $DEI out of circulation, Thus increasing the collateral ratio of $DEI"[42].
July 13th, 2022 4:26:00 AM MDT Honourable Mention Twitter user Proof of No Work mentioned this case along with other failed stablecoin projects in his Tweet[43].
July 15th, 2022 9:43:00 AM MDT Redemption and Bond Contracts Closed DEI announces that the redemption and bond contracts have now been closed, and that $40m in DEI has been successfully burned through the process[44]. More information can be found on Discord[45].
July 17th, 2022 1:12:00 PM MDT Lafachief Announces New DEI Deployment Lafachief announces that they are working on a new DEI deployment with 95% backing and links to a Medium article with further information[46].
August 11th, 2022 3:30:00 PM MDT Dawn of a New DEI A Twitter promotion announces the new DEI platform being launched[47].
August 16th, 2022 7:00:00 AM MDT Launching On WednesDEI The platform will reportedly launch on Wednesday[48].
August 17th, 2022 10:58:00 AM MDT Improved vDEUS Tokenomics An announcement is posted with improved vDEUS tokenomics[49]. TBD read more detail.[50][51][52]
August 19th, 2022 4:00:00 AM MDT Another DEI Another Dollar Liquidity Pool Launched The Deus Finance team announces the launch of their "Another DEI Another Dollar" liquidity pool[53].
August 22nd, 2022 7:30:00 AM MDT Total Value Locked Exceeds $8m USD Deus Finance announces that the total value locked in the "Another DEI Another Dollar" liquidity pool now exceeds $8m[54].
August 30th, 2022 4:41:00 AM MDT Fantom Intern Tutorial [55][13].
September 3rd, 2022 6:56:00 PM MDT Total Market Supply Update The total market supply of DEI is 7,560,345 (+ 3,208,172 minted in 12D)[56].
September 16th, 2022 2:41:00 PM MDT Move To Ethereum Announced A thread is posted on why the DeusDao protocol will be moving to Ethereum[57].
September 17th, 2022 7:22:00 AM MDT Move To Ethereum Announced A relocation of the protocol to Ethereum is announced on Twitter[58].
September 23rd, 2022 11:57:00 PM MDT DEI Redeployment The DEI redeployment is announced on Twitter[59][60][61]. "$DEI/ $USDC pools have been set up on and yield farming opportunities will be available in the coming hours & days"
October 4th, 2022 8:45:00 AM MDT Deus V3 Live Discussion A live discussion is posted on Twitter about Deus V3[62].
October 6th, 2022 6:53:00 AM MDT Migration Period Ending An announcement highlights that there are only a few days left to migrate[63].
October 10th, 2022 6:52:00 AM MDT Another DEI Another Dollar A new liquidity pool is announced named "Another DEI Another Dollar"[64].
January 14th, 2023 10:04:08 AM MST Clearing Up Old Debt Lafayette Tabor posts another Medium article about a plan to clear up old debt by deploying a new version of DEI that is 95% backed by USDC, utilizing the remaining 20 million USDC from the old DEI. This migration aims to ensure a fully backed DEI and generate immediate profits to repay debts and improve the protocol's financial health. Pools on multiple decentralized exchanges (DEXs) will be incentivized to create demand and help clear the existing bad debt. The bad debt currently amounts to around 5.7 million DEI owed to Scream lenders and 3 million DEI owed to DEI bonders affected by impermanent loss (IL) and non-NFT bDEI holders. When minting the new DEI, users will deposit 1 USDC, of which 95 cents will be used as collateral, 4 cents will be allocated to clearing the bad debt, and 1 cent will be used to buy back DEUS and burn it. Current DEI holders have two options: they can hold DEIv1 until there is a protocol-surplus in USDC backing to swap it for bDEI and then redeem it for DEIv2, or they can swap DEIv1 for vDEUS and wait for DEUS to reach $250[65].

Technical Details

Total Amount Lost

The total amount at risk has been estimated at $88,737,000 USD. The total amount lost has been estimated at $74,539,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

[66] TBD Tweet was deleted and can't be found anymore.

Twitter Community Reactions

[67]

You disabled the redemption mechanism without any notice. Now people that were leveraged are liquidated. You are not even mentioning it in this post. Are you looking for exit liquidity ? Sketchy

Twitter Updates From DeusDao

[23]

An initial update from the DeusDao team was posted to assure the community they were working on restoring the peg[27].

We remain busy making progress behind the scenes, until formal announcements can be made you can join our TG & Discord channels to stay updated with direct feedback from the team & founders regarding the DEI re-peg progress

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

"[W]e are working on a newly deployed DEI that will have a 95%+ backing again & laid out a clear plan how future revenues can compensate for past debts." "[W]e are also in contact with Scream to make sure future protocol profits will directly benefit Scream debt."

"As per announcements in our community, $DEI redemptions have begun to stabilise the peg."

"It’s clear that only with a fully intact and backed DEI, DEUS can generate revenue needed to clear up past debt. Free circulating DEI is jeopardising current and future profits until health is installed."

"What is $bDEI? $bDEI is bonded $DEI. Minting $bDEI removes $DEI out of circulation." "$DEI bonds are live. These are low risk/reward and $DEI in the process."

"On top of the WednesDEI redeployment, lafachief is preparing an article on the vDEUS revamp. The changes will create a maximum supply cap of 600k $DEUS. vDEUS will become an ERC20. Liquidity Pools will be available & incentivized."

"Until now Market Forces should have made everyone realize that we cannot offer an early non-dilutive repayment." "Such early repayments are dilutive and extract value from the protocol and ultimately from the people that should be repaid, as repayments become slower and slower."

"Even the current “optimistic” outlook is a repayment over 3–7 years at a yearly rate of 40% of your DEI redeem value, given the price of DEUS stays stable at $40, as currently debt is repaid in DEUS tokens its more likely the price goes down more, crippling repayments further until they stall completly."

"vDEUS becomes an ERC20 token, migrations will be possible approx next week." "vDEUS staker are receiving real yield as compensation for the waiting time in form of 25% APR in vDEUS that can be traded to DEUS on DEXs for instant liquidity or held until conversion for maximum value."

"revamping the vDEUS model enables the protocol to have a maximum inflation of 260k DEUS. ((50m *1.25) times 1/250 DEUS) which adds to the (100k+APR) veDEUS. With current circulating supply and farming rewards, leading to a maximum supply just short of over 600k DEUS, a modest increase from the pre-blackswan max-supply of 300k DEUS."

"vDEUS APR is guaranteed for one year or until DEUS price hits $250. bDEI is non-dilutive for DEUS, it guarantees legacy DEI holders fully-backed DEI when the protocol has enough cash."

"Contract theory studies the incentives needed to reach a pareto improving equilibrium: Redeemers make DEUS savings possible by being repaid later. They get a compensation in the form of being paid back more later (a 25% APR accrued)."

"DEI token contract has been redeployed with a 99/1 mint/redeem gap." "As an official @SolidlyETH Partner @DeusDao We will follow them on their move to Ethereum." "With the upgraded Solidly moving to Ethereum, we are planning to join suit by moving our $DEI minter and collateral."

"$DEI has been redeployed, currently with 1% seigniorage. The minting ratio is 100% with a redemption ratio of 99/1. The 1% in seigniorage will primarily be used to buy back and burn $DEUS." "The redeem ratio will begin at 99% and gradually trend towards 90% over the coming weeks leading up to the first bDEI maturity date at the end of September." "This will result in up to a 10% $DEUS burn per minted $DEI."

"A new-look app accompanies this redeployment, with a revamped dashboard containing all stats at a glance. An extensive analytics (with historical charts) page is being built and will be released very soon." "This redeployment also sees the implementation of the Lossless protocol. Lossless offers an additional layer of security and mitigates the impact of exploits by utilizing threat identification tools and unique monitoring systems." "Ontop of the amazing wedsnDEI redeployment, there is a new article that outlines new changes to vDEUS including creating a 600k soft cap to the $DEUS supply."

On October 5th, "Only a few days left before the migration period ends." So it would seem that the migration period is over. "We wont be allowing any adjustments to these newly implemented changes, these ideas were discussed & formalized internally with great input from people experienced in debt restructuring." "We hope all parties can be happy with the revamped plan, since it is aligned with all financial principles and maximizes value for all parties."

"And I with 14.000 ust Lost in the Old DEI. I [hope] that New DEI are not the New Old DEI." "Better have some money to back this coin this time." "Fool me once shame on you..."

Successful Redemptions Of DEI Bonds

An announcement[44].

The $DEI redemption and bond contracts have been closed.

Almost 40m DEI has been removed from circulation and we want to say a huge thank you to the community for their support and cooperation thus far

The DEI contract is being updated and additional layers of security are being implemented.

DEUS v3 development is ongoing and after some final internal tests we will be deploying a public testnet very soon, so stay tuned.

To read the full announcement and latest news on DEI and DEUS v3, please join the DEUS Discord.

Total Amount Recovered

The total amount recovered is unknown.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

Working To Clear Up Old Debt

The plan involves deploying a new version of DEI that is 95% backed by USDC, utilizing the remaining 20 million USDC from the old DEI. This migration aims to ensure a fully backed DEI and generate immediate profits to repay debts and improve the protocol's financial health. The new DEI will target a 95% USDC backing, but during the minting process, 100% USDC will be required until the debt is cleared. Pools on multiple decentralized exchanges (DEXs) will be incentivized to create demand and help clear the existing bad debt. The bad debt currently amounts to around 5.7 million DEI owed to Scream lenders and 3 million DEI owed to DEI bonders affected by impermanent loss (IL) and non-NFT bDEI holders[65].

When minting the new DEI, users will deposit 1 USDC, of which 95 cents will be used as collateral, 4 cents will be allocated to clearing the bad debt, and 1 cent will be used to buy back DEUS and burn it. The goal is to have 250-600 million USDC in open interest to cover the total bad debt, with additional profits from V3 and other protocol revenues. Current DEI holders have two options: they can hold DEIv1 until there is a protocol-surplus in USDC backing to swap it for bDEI and then redeem it for DEIv2, or they can swap DEIv1 for vDEUS and wait for DEUS to reach $250[65].

Promotions of Bonded DEI

[40]

"I am really curious, when do we get our hands on b-bDEI?"[68]

Another DEI Another Dollar Liquidity Pool

[54].

Community Skepticism

[69].

General Prevention Policies

The DEI stablecoin did not have reserves to back the coin, following an earlier March hack. The primary problem was due to the security or insurance of those funds lost in March.

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.

References

  1. ↑ New Dei Peg Mechan (Oct 26, 2022)
  2. ↑ 2.0 2.1 DeusDao - "Your work is seen and appreciated, sir Thanks for taking the time to breakdown the latest community hangout call." - Twitter (Oct 26, 2022)
  3. ↑ 3.0 3.1 DEUS Finance Community Discord Hangout 11 May - YouTube (Oct 26, 2022)
  4. ↑ https://coinmarketcap.com/currencies/dei/ (Oct 26, 2022)
  5. ↑ https://app.dei.finance/dashboard (Oct 26, 2022)
  6. ↑ https://deus.finance/ (Oct 26, 2022)
  7. ↑ https://www.coingecko.com/en/coins/dei-token (Oct 26, 2022)
  8. ↑ DEI Money Markets (Oct 26, 2022)
  9. ↑ DEI Money Markets (Oct 26, 2022)
  10. ↑ DEI stablecoin (Oct 26, 2022)
  11. ↑ https://www.coinbase.com/price/dei (Oct 26, 2022)
  12. ↑ Dei Cross Chain Liquidity With A Fractional Reserve Stablecoin (Oct 26, 2022)
  13. ↑ 13.0 13.1 Fantom Intern - "Decentralized exchanges are one of the three pillars alongside money markets and a decentralized stablecoin that is the bedrock on which DeFi is built. Today I will cover three different varieties of DEXes on the Fantom Ecosystem." - Twitter (Jun 19, 2023)
  14. ↑ DeusDao - "Looking for somewhere to #yieldfarm with your stables? There are a host of opportunities to stake your $DEI / $USDC on #Fantom." - Twitter (Oct 26, 2022)
  15. ↑ DEIstable - "No impermanent loss = pure APY #yield" - Twitter (Oct 26, 2022)
  16. ↑ DeusDao - "$DEI is now supported by @Screamdotsh! $DEI lending and borrowing on Scream is one of many third-party $DEI integrations to come" - Twitter (Oct 26, 2022)
  17. ↑ DeusDao - "Want to join the DEUS team? We're looking for a #Fantom-loving, #DeFi knowledgeable candidate to join us as our lead right here on Twitter!" - Twitter (Oct 26, 2022)
  18. ↑ DEImarketcap - "$DEI Market Cap is $88,737,181" - Twitter (Oct 26, 2022)
  19. ↑ Dip 7 Treasury Bonds - Lafayette Tabor Medium (Oct 26, 2022)
  20. ↑ DeusDao - "We are proposing a treasury bond program aimed at securing peg stability. These treasury bonds allow users to deposit collateral and earn a fixed interest based on the maturity date." - Twitter (Oct 27, 2022)
  21. ↑ bots4trading - "$DEI The next stable to crash?" - CoinMarketCap Community (Oct 27, 2022)
  22. ↑ Fantom Stablecoin DEI Becomes Latest to Lose Dollar Peg - CoinDesk (Oct 27, 2022)
  23. ↑ 23.0 23.1 DeusDao - "Our team is working around the clock to restore the DEI peg. Mitigation measures were implemented immediately and solutions are being developed for long-term stability." - Twitter (Oct 26, 2022)
  24. ↑ Algorithmic Stablecoin From DEUS Finance Loses Dollar Peg, Plunging 30% - Decrypt (Oct 27, 2022)
  25. ↑ Warning: Another stablecoin loses peg - DEI team working to restore the peg - Finbold (Oct 27, 2022)
  26. ↑ After Terraform's UST collapsed, stablecoin DEI did too - Fortune (Oct 27, 2022)
  27. ↑ 27.0 27.1 DeusDao - "We remain busy making progress behind the scenes, until formal announcements can be made you can join our TG & Discord channels to stay updated with direct feedback from the team & founders regarding the DEI re-peg progress" - Twitter (Oct 27, 2022)
  28. ↑ Kalkine Media - DEI stablecoin loses USD peg after TerraUSD. Why? - YouTube (Oct 27, 2022)
  29. ↑ DeusDao - "As per announcements in our community, $DEI redemptions have begun to stabilise the peg. $DEI holders can now redeem their DEI for USDC & vDEUS (a voucher that can be redeemed for DEUS in the future) in tranches" - Twitter (Oct 26, 2022)
  30. ↑ DeusDao - "Tranche 3 for $DEI redemptions is currently live... $1.1 is the tranche redeem value (1 DEI = $0.1 USDC/$1 vDEUS) ~$6M USDC & ~$60M in vDEUS are redeemable at this tranche, and will stay open for ~3 days." - Twitter (Oct 27, 2022)
  31. ↑ DeusDao - "Read up on the long-term future for $DEI stability: DEUS Treasury bonds! A solution to automate an unbreakable backing of 1 DEI:1 USDC while also dampening $DEUS selling pressure into the future." - Twitter (Oct 27, 2022)
  32. ↑ DeusDao - "Redemptions are available now... To learn more & speak with our team directly, join our community" - Twitter (Oct 27, 2022)
  33. ↑ DeusDao - "Introducing $DEI dynamic redemptions! Play your part and maximize your rewards" - Twitter (Oct 27, 2022)
  34. ↑ DeusDao - "Currently, 9.6m $DEI has been redeemed. A reminder that early redeemers have a higher value return and a shorter vesting period." - Twitter (Oct 27, 2022)
  35. ↑ DeusDao - "Thank you, anon. Redeem your $DEI, play your part, and receive additional value in return: https://app.dei.finance/redemption" - Twitter (Oct 27, 2022)
  36. ↑ DeusDao - "An overview of the $DEI stability plan from @lafachief" - Twitter (Oct 27, 2022)
  37. ↑ Lafayette Tabor - Introducing — DEI Bonds "Bdei" - Medium (Oct 27, 2022)
  38. ↑ DeusDao - "$DEI bonds are live. These are low risk/reward and [burn] $DEI in the process." - Twitter (Oct 26, 2022)
  39. ↑ DeusDao - "What is $bDEI? $bDEI is bonded $DEI Minting $bDEI removes $DEI out of circulation" - Twitter (Oct 26, 2022)
  40. ↑ 40.0 40.1 DeusDao - "Rewards for bonding $DEI. Staking $bDEI to earn $DEUS rewards, Farming with $bDEI-$DEI LPs on liquidity pools. Bond $DEI today." - Twitter (Oct 26, 2022)
  41. ↑ DeusDao - "$bDEI quick recap: -$bDEI will be redeemable for $DEI 1:1 after maturity -Minting $bDEI takes $DEI out of circulation" - Twitter (Oct 26, 2022)
  42. ↑ DeusDao - "How to bond $DEI? Bond $DEI at https://app.dei.finance/deibonds Early bonders receive a “Time reduction NFT” How does it improve $DEI stability? Bonding $DEI takes $DEI out of circulation, Thus increasing the collateral ratio of $DEI" - Twitter (Oct 26, 2022)
  43. ↑ ABettaMeta - "Yeah flexUSD, UST, DEI, TITAN, BitUSD, NuBits, Basecoin, One Cash, Dynamic Set Dollar, unified Stable Dollar, bDollar, Midas Dollar, Freeliquid, Stand Cash, BondAppetite, Empty Set Dollar, Coffin Dollar, OpenDAO, Wault Finance, BeanStalk, & DefiDollar holders are all doing great!" - Twitter (Jul 13, 2022)
  44. ↑ 44.0 44.1 DeusDao - "The $DEI redemption and bond contracts have been closed. Almost 40m DEI has been removed from circulation and we want to say a huge thank you to the community for their support and cooperation thus far" - Twitter (Oct 26, 2022)
  45. ↑ DeusDao - "To read the full announcement and latest news on DEI and DEUS v3, please join the DEUS Discord." - Twitter (Oct 26, 2022)
  46. ↑ lafachief - "[W]e are working on a newly deployed DEI that will have a 95%+ backing again & laid out a clear plan how future revenues can compensate for past debts" - Twitter (Oct 26, 2022)
  47. ↑ DeusDao - "The dawn of a new $DEI approaches..." - Twitter (Oct 26, 2022)
  48. ↑ DeusDao - "wednesDEI. Thats the message" - Twitter (Oct 26, 2022)
  49. ↑ Improved vDEUS tokenomics - A Wealth Creating Revamped Redeem Plan - Lafayette Tabor (Oct 26, 2022)
  50. ↑ DeusDao - "The redeem ratio will begin at 99% and gradually trend towards 90% over the coming weeks leading up to the first bDEI maturity date at the end of September. This will result in up to a 10% $DEUS burn per minted $DEI " - Twitter (Oct 26, 2022)
  51. ↑ DeusDao - Yield Farm Addresses For Beethoven, Spirit Swap, and Spooky Swap - Twitter (Oct 26, 2022)
  52. ↑ DeusDao - "On top of the WednesDEI redeployment, @lafachief is preparing an article on the vDEUS revamp Some sneak peeks. The changes will create a maximum supply cap of 600k $DEUS. vDEUS will become an ERC20. Liquidity Pools will be available & incentivized." - Twitter (Oct 26, 2022)
  53. ↑ DeusDao - "The "Another DEI, another dollar" pool is live on @beethoven_x. Earn $DEUS rewards in this $DEI / $USDC stablefarm." - Twitter (Oct 26, 2022)
  54. ↑ 54.0 54.1 DeusDao - "TVL of the $DEI / $USDC pool on @beethoven_x has exceeded $8m. Grab some DEI, jump in, and earn those tasty $DEUS rewards." - Twitter (Oct 26, 2022)
  55. ↑ DeusDao - "@Fantom_Intern providing some real value, explaining some key terms and topics, giving insights into the biggest DEXs on #Fantom, and explaining a few of the more technical aspects of AMMs." - Twitter (Oct 26, 2022)
  56. ↑ DEImarketcap - "Total supply of $DEI is 7,560,345 (+ 3,208,172 minted in 12D)" - Twitter (Oct 26, 2022)
  57. ↑ lafachief - "As an official @SolidlyETH Partner @DeusDao We will follow them on their move to Ethereum. A [thread] on why I think this is the right action and hits precisely the nerve of time." Twitter (Oct 26, 2022)
  58. ↑ DeusDao - "With the upgraded Solidly moving to Ethereum, we are planning to join suit by moving our $DEI minter and collateral." - Twitter (Oct 26, 2022)
  59. ↑ DeusDao - "$DEI has been redeployed, currently with 1% seigniorage." - Twitter (Oct 26, 2022)
  60. ↑ DeusDao - "Ontop of the amazing wedsnDEI redeployment, there is a new article that outlines new changes to vDEUS including creating a 600k soft cap to the $DEUS supply." - Twitter (Oct 26, 2022)
  61. ↑ DeusDao - "$DEI/ $USDC pools have been set up on and yield farming opportunities will be available in the coming hours & days" - Twitter (Oct 27, 2022)
  62. ↑ DeusDao - "We had a great livestream on the weekend discussing the $DEUS v3 system" - Twitter (Oct 26, 2022)
  63. ↑ DeusDao - "Only a few days left before the migration period ends." - Twitter (Oct 26, 2022)
  64. ↑ DeusDao - "The good people over at @LiquidDriver have added the "Another $DEI, another dollar" stablepool, powered by @beethoven_x" - Twitter (Oct 26, 2022)
  65. ↑ 65.0 65.1 65.2 Deiv2 How To Clear Old Debt - Lafayette Tabor Medium (Oct 27, 2022)
  66. ↑ @DeusDao Twitter (Oct 26, 2022)
  67. ↑ Dindon Sauvage - "You disabled the redemption mechanism without any notice. Now people that were leveraged are liquidated. You are not even mentioning it in this post. Are you looking for exit liquidity ? Sketchy" - Twitter (Jun 13, 2023)
  68. ↑ Silverlightwa - "I am really curious, when do we get our hands on b-bDEI?" - Twitter (Jun 16, 2023)
  69. ↑ Grifto Ponziconomist - "Not falling for this again" - Twitter (Jun 20, 2023)

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