Hey Empty Set Dollar Community! It’s been a while, and we’ve missed you. In the last month there has been a lot of work on V1.5. This means there hasn’t been much to post about here, because we were in a bit of a holding pattern. However, there have been some critical updates in the last week that are important to highlight. This weeks newsletter will consist of an ESD V1.5 review, and an update on the status of Continuous ESD.
V1.5 Review
Why transition at all?
ESD V1 was incredibly successful incredibly fast, but that experiment wasn’t able to withstand the reflexivity and ultimately V1 was not able to return to peg. If you’d like to read more about what happened, I’d recommend a read of the analysis from Bradley. There is also a breakdown of the entire space from Messari Capital that can be found on the Discord, under the Resources tab.
What is V1.5?
If you haven’t seen it already, read the Medium article written by the ESS, and read the excellent write-up done by the Complement Capital. Additionally, there’s a Q&A, and a Youtube explainer. If you don’t like clicking links and reading, let’s summarize: V1.5 uses a two token system, where the first token acts as the stable instrument (ESD), and the second acts as the seignorage token (ESDS). The stable instrument (ESD) is backed 100% by USDC as collateral to start; this could change later to include other crypto, and/or collateral level could change. Arbitrageurs will help regulate the price of ESD; made possible because you can always mint 1 ESD for 1 USDC. The DAO will perform market operations with the USDC and that yield will be used to stabilize ESD, and then to buy and burn ESDS, creating buy-pressure on ESDS. Like any change to the protocol, in order to make V1.5 a reality, bonded tokens must vote to approve it.
Status Update
Audit
Currently ESD V1.5 is under audit by OpenZeppelin. When the audit wraps up the ESS team will need some time to fix any issues that may be found. Once the remediations are complete and launch partners are solidified, Continuous ESD will be born. During this time the ESS and SN2 are finding partnerships for the launch of V1.5.
Proposals
EIP-23 is the first proposal in a series to enable the migration process. This proposal turns off regulation for V1 ESD. This would also officially convert V1 ESD into the seignorage share of ESD system going forward.
Migration
Upon the passing of EIP-23, DAO lockups will be reduced to 1 epoch, coupons underlying will be immediately redeemable. Users should use this opportunity to prepare their positions for migration. Users can migrate directly from V1 ESD or from V1 ESDS (bonded ESD). Be mindful that the migration path you choose may have differing tax implications. The final migration proposal in the series will remove bonding/unbonding and users may only migrate from their holdings at that time.
More Info/Get Involved/Rabbit Hole
ESD SN2 Youtube Channel - Community Calls