FAQ
Why do we need the D3 Protocol?
Dollar-pegged stablecoins are an integral part of the crypto ecosystem. However, the problem is they are pegged to the dollar, and therefore suffer from the same problems as real world dollars. The value of the dollar is controlled by the centralized U.S. Government and their Federal Reserve.
The dollar is suffering from an inflation problem. A lot of dollars are being printed, which in turn depreciates the value of the dollar (and any pegged stablecoins). To be truly decentralized and independent, DeFi 3.0 needs an index that is not attached to the dollar. This is the problem D3 Protocol was designed to address.
What makes D3 Protocol unique?
The original innovation behind OHM and some of the forks were great, but they are not without their deficiencies; such as the lack of a clear use case, inefficient treasury management, and excessive inflation. D3 Protocol was designed to address these shortcomings and provide a long-term sustainable solution and as such, become the decentralized DeFi 3.0 index.
D3 Protocol is on Binance Smart Chain (BSC), offering low fees so everyone can participate. We’ve added our [3.3.3.3] tokenomics and APY halving algorithm to make our model far more sustainable than other OHM forks. We are integrating with the entire DeFi 3.0 ecosystem, auto-acquiring a basket of yield bearing DeFi 3.0 assets into the treasury, immediately generating returns for the treasury and offering DEFI stakers exposure to a DeFi 3.0 index through staking DEFI.
What is the link with CCF?
D3 Protocol and CCF are a linked set of products under the 4dot brand. 4dot's mission is to offer a full suite of decentralized finance options akin to those you would find in traditional finance, but with the backbone of decentralization.
CCF allows users to earn via a protocol managed yield farming treasury and D3 Protocol is the underlying index that supports the eco-system. Users are able to "bank" their profits to generate sustainable returns via D3 Protocol. This offers a full suite of secure services for users to buy, hold, and earn optimized returns.
Initially D3 Protocol will auto-buy CCF tokens as part of the [3.3.3.3] taxation protocol, using those tokens as a treasury asset to back DEFI, and receiving reflections and farming dividends via this ownership of the CCF token.
Could D3 Protocol dump on CCF holders?
D3 Protocol will use CCF as a treasury asset to back the price of DEFI, selling CCF would put both protocols at a disadvantage. D3 Protocol will also receive reflections on CCF tokens from CCF buys and sells, and dividends on CCF farming profits, making it advantageous for D3 Protocol to hold and compound CCF.
In addition, most are attracted to the idea of Farming-as-a-Service (FaaS) returns, but not willing to wait to accrue and compound the benefits; they just want to see token price go up exponentially. D3 Protocol will diamond hand and lock CCF in the treasury, effectively taking tradable CCF tokens out of supply, creating a supply shock, and increasing buying pressure and the price floor on CCF.
D3 Protocol will be the ultimate diamond hand whale partner for CCF, taking tokens out of supply, and benefitting in the process. The same will apply to any token that D3 Protocol offers mints against, or acquires. Win-win for all. This is game theory of the highest order, inextricably linking D3 Protocol to all assets it acquires.
Am I going to get rugged?
No, we hate rugs and scammers just as much as you. Rago, our lead developer, is also a YouTuber who dedicates his time to exposing rugs and scams, while educating users on associated risks. As with CCF we operated a fair launch, we have locked initial liquidity until 2025, and we get our smart contracts audited by HashEx.
There are inherent risks involved when it comes to exploratory, volatile assets so please make sure you understand those risks and read through all the documentation and the rest of the FAQs beforehand. But getting rugged is one risk you do not have to worry about as we will not be stealing your money. Our aim is to help you to profit on a safe and secure platform.
Is DEFI a stablecoin?
DEFI is not a stablecoin. DEFI is a decentralized index backed by other crypto assets. In the same way that the dollar used to be backed by gold, DEFI is backed by crypto assets, giving a free floating value that users can always rely on due to the value of D3 Protocol treasury reserves that are there to back every single DEFI minted.
Whilst every DEFI is backed by a minimum of 1 BUSD, this does not mean it is pegged to the value of the dollar. The floor price of 1 DEFI is 1 BUSD, but this is purely a mechanism to maintain the intrinsic value of DEFI, which is 1 BUSD plus premium, as derived from the assets within the D3 Protocol treasury (which in time will increase substantially beyond 1 BUSD).
How does it work?
This is covered in full detail throughout our documentation, but in brief; D3 Protocol consists of it’s protocol managed treasury, Protocol Owned Liquidity (POL), Protocol Controlled Value (PCV), [3.3.3.3] tax system, yield smoothing algorithm, minting mechanism, and staking rewards, which are designed to control D3 supply and expansion and prevent any excessive inflation.
Profits for the protocol are generated through mints. These are used to mint additional DEFI, which are in turn distributed to stakers. Mints enable the protocol to accumulate and control its own liquidity and provide staking rewards, and [3.3.3.3] taxes help to further strengthen liquidity, manage inflation, and incentivize stakers to remain within the D3 Protocol ecosystem.
DeFi game theory?
These below numbers are derived from game theory concepts, and the actions that any users of the D3 Protocol can take. Staking (3) provides the most benefit for all, minting (1) provides a secondary benefit, and selling is bad for all (-1). As the chart below shows 8 out of 9 outcomes are neutral or positive making this a positive sum game.
We’ve added an additional layer to the original OHM game theory through our [3.3.3.3] tokenomics on DEFI buys and sells. In doing so we have addressed the problems faced by the likes of OHM, TIME, and the other forks, many of whom have faced big problems with excessing inflation and sell-offs due to their game theory and tokenomics.
A part of the [3.3.3.3] tax goes to DEFI stakers in the form of BUSD dividends. This is a further incentive not to sell DEFI and to earn consistent liquidity whilst staking. The long-term utility of DEFI is as a DeFi 3.0 index, via exposure to a basket of yield bearing DeFi 3.0 assets held in the D3 Protocol treasury. We are moving from stake, mint, sell... to stake, mint, earn.
What are the [3.3.3.3] tokenomics?
This was an innovation that the team originally came up with when launching CCF. They then realized this model could be adjusted and deployed on top of the OHM model to build a far more sustainable ecosystem that rewards stakers and punishes sellers. This is known as our [3.3.3.3] tokenomics, outlined here.
Burns: 3% of every buy and sell transactions automatically burns DEFI. This removes this DEFI from supply forever and helps to moderate inflation.
Treasury: 3% of every buy and sell transaction is routed to the treasury and held in reserve for discretionary buybacks to help manage inflation as and when required.
Dividends: 3% of every buy and sell transaction is utilised as a BUSD dividends reward pool that is claimable by stakers based on how much DEFI they are staking versus total DEFI staked.
Auto-buy: 3% of every buy and sell transaction is used to auto-buy CCF (and in the future other DeFi 3.0 tokens) to back the price of DEFI and grow the treasury through reflections and dividends.
In order, this does four things; burns DEFI on every buy and sell controlling inflation, provides funds for discretionary buybacks in extreme scenarios, rewards holders with liquid dividends, and suck yield bearing assets into the treasury. Even in a case of excessive sell volume, the treasury and stakers are benefitting, enabling long-term sustainability.
What is Protocol Controlled Value (PCV)?
The D3 Protocol controls the funds in the treasury, and as such DEFI can only be minted or burned by the protocol. This guarantees that the protocol can always back 1 DEFI with 1 BUSD. This makes it easy for users to define investment risk, as the treasury will indefinitely buy DEFI below the 1 BUSD fixed price floor, until there is no one left to sell.
As the protocol accumulates more Protocol Controlled Value (PCV), a longer runway is guaranteed for stakers. This means that stakers can be confident that staking APYs can be sustained for the long-term due to the size of the treasury. [3.3.3.3] adds an extra layer of built in assurance and sustainability that other forks lack.
What is Protocol Owned Liquidity (POL)?
Due to the minting mechanism D3 Protocol owns most of its liquidity pool (LP). This means that the protocol does not have to pay out high farming rewards to incentivize liquidity. It also guarantees the market that liquidity is always available to buy and sell DEFI. The protocol also earns LP fees boosting the treasury. Finally Protocol Owned Liquidity (POL) can be used to back DEFI.
We also have the option to create LP mints of other DeFi 3.0 tokens, controlling a portion of their liquidity. This benefits D3 Protocol through LP fees, whilst also offering an additional source of liquidity for these tokens, creating a virtuous circle for the DeFi 3.0 ecosystem.
What happens if there’s a bank run?
Traditional banking works because depositors don’t withdraw all their funds at once. This is largely because banks are trusted due to the strict regulations, with funds often secured by insurance. Whilst D3 Protocol does not have insurance, it instead has a strong incentive structure that protects stakers.
If a significant percentage of stakers withdrew and sold their DEFI remaining stakers would start to receive very high APYs (more than accounting for DEFI price depreciation). These high APYs would quickly attract stakers back into the system. This is (3, 3) in action. The added layer of [3.3.3.3] tokenomics further strengthens the proposition.
With every sell the protocol would burn DEFI, acquire DEFI into the buyback fund, reward remaining stakers with high BUSD dividends, and acquire more CCF (or selected other DeFi 3.0 asset into the treasury). When other projects have faced this situation they have collapsed, but D3 Protocol benefits and sustains even under heavy selling pressure.
What about DEFI price volatility?
Whilst D3 Protocol offers a very exciting proposition, it is based on a very new set of concepts. Initially the system is primed for growth and expansion meaning minting of new DEFI and higher rewards which can lead to volatile price swings as people buy in, compound rewards, and take profits. This is to be expected with a free floating currency.
However, we have noted this issue with OHM and other forks, and this is one of the key reasons why we have tailored sensible APYs, added our [3.3.3.3] tokenomics and yield smoothing algorithm. This adds an extra layer to enable sustainable growth and long-term rewards for stakers new users enter the ecosystem.
Why buy DEFI if it is trading at a premium?
On the D3 Protocol website dashboard you can see the level to which 1 DEFI is backed by BUSD. It starts at 1 BUSD and increases over time as the treasury grows. This is the baseline price for 1 DEFI. However, in a free market speculators may well decided on a market rate of 1 DEFI that is substantially higher (see TIME or OHM for examples). So, why do people pay a premium to acquire DEFI on the open market?
By buying DEFI you are capturing a percentage of the supply (market cap) which will remain close to constant. This is because you can immediately stake your DEFI and increase your balance along with circulating supply. Buying at a lower market cap means you will capture a larger percentage and maintain your investment value even if price decreases.
It is up to users to decide on their own personal strategy and preferences, and whether it makes more sense to mint or buy DEFI depending on their own criteria. It is also up to users to assess the mint and market value of DEFI versus the backing price, and to adhere to their own due diligence and risk management practices.
What is sDEFI?
You will see that by staking DEFI you are receiving an equal amount of sDEFI. This is simply a mechanism to enable automatic rebases (auto compounding of your staked DEFI). 1 sDEFI will always equal 1 DEFI. When you unstake, your sDEFI is converted back to DEFI, which can be re-staked, used to mint more DEFI, or sold.
What is a reward yield?
The reward yield is the percentage by which your staked DEFI balance increases on the next epoch (at the next rebase). It is also known as a rebase rate. Information about shorter, and longer terms yield percentages are displayed on the DEFI Protocol website dashboard. There is also a calculator for users to analyze different price and yield scenarios.
What is APY?
APY stands for annual percentage yield and is the real rate of return on your principal capital, taking into account the effect of compound interest. Staked DEFI is your principal and the compound interest is added with every rebase via the rebase mechanism.
Note that with APY balances grow exponentially (not linearly) over time. For example, OHM use the example of a daily compound interest rate of 2%, a starting balance of 1 OHM on day 1, will grow to 1,129 OHM after one year. Impressive, but unsustainable.
However, even with a more sensible representative example (used purely for illustrative purposes), with a 1% daily compound interest rate, a balance of 1 DEFI on day 1, will grow to 34 DEFI after one year. Still an excellent return, and an example highlighting our sustainable model.
This shows the benefits of staking, but also highlights the importance of our innovations to control inflation via our tax system (that automated burns, buyback fund, and treasury growth, whilst incentivizing holders with BUSD dividends) and highly controlled minting.
How does the protocol maintain staking APY?
Our aim is to maintain good yields that benefit stakers, and are also sustainable. Please note that the following are just representative examples. For example, if we are targeting a consistent APY range of 1,000% this would require a minimum reward yield of around 0.2105% (daily growth of 0.6328%).
If 100,000 DEFI are staked now, the protocol would need to mint an additional 632.8 DEFI to match this daily growth. This is achievable as the treasury will generate the minimum 632.8 BUSD required to back these new DEFI mints. Even if it did not, previously accumulated reserves give a long runway to maintain such an APY (see dashboard for current runway).
How do I track my rebase rewards?
You can track your rebase rewards by calculating the increase in your staked DEFI balance. Record the current index value on the staking page when you first stake your DEFI, your “start index”. This is your start index. After staking for a while you can check the current index value again, your “end index”.
By dividing your end index by your start index you will get the ratio by which your staked DEFI balance has increased. For example a start index of 3 and an end index of 4.5 will mean your DEFI has grown by 1.5 times. Note that staking rewards are auto distributed at the end of each epoch, you do not need to claim and re-stake them.
How often are rebases?
Given the variables within our control, our solution is to reduce the occurrence of the compounding event (rebases). In doing so we can have a direct impact on the APY straight away, in order to make it far more sustainable. We have tapered rebases over 4 week repeating cycles. The longer you stake DEFI, the more you are rewarded.
| Week | Daily Rebases | Annual Rebases |
|---|---|---|
1 | 2.00 | 730.00 |
2 | 2.25 | 821.25 |
3 | 2.60 | 949.00 |
4 | 3.00 | 1,095.00 |
The average rebase over the 4-week period will be 2.46 rebases per-day. Once the 4-week cycle is complete (when daily rebases are at 3), the protocol will reset the rebase amount to 2 for week 5, and begin a new 4 week increasing rebase cycle. This encourages long-term staking of DEFI as individuals benefit from more rebases the longer they hold whilst helping to control inflation.
Why is the long-term price of DEFI irrelevant?
As discussed, your staked DEFI balance will grow exponentially over time due to compounding. Essentially the APY is designed so that your compounded returns will lower your average entry price and outstrip any potential price decrease, leaving long-term stakers in profit regardless of DEFI price.
However unlike OHM and TIME are are focusing on farm more sustainable APYs, and have integrated our APY smoothing algorithm, and [3.3.3.3] buy and sell tax to ensure a balance between rewards and price volatility. This model yields greater sustainability, leading to a more stable price floor and less panic in the markets.
What is the long-term intrinsic value of DEFI?
As DEFI is a free floating currency it is a complex question to answer. We know that the minimum value is 1 BUSD and the upside value is uncapped. If the treasury were to grow large enough the DAO could decide to back each DEFI with more than 1 BUSD. However, this must be balanced against staking rewards and sustainability.
Ultimately D3 Protocol will acquire a series of DeFi 3.0 assets that give DEFI stakers access to a wide range of cross chain yield bearing assets simply by staking DEFI. This will enable simple, safe and secure access to the world of DeFi 3.0, and enable DEFI stakers to receive sustainable long term yields. Think of it as decentralized asset management.
Hence the value of DEFI itself is as a decentralized index for DeFi 3.0. Our vision is that DEFI becomes the go to token for gaining exposure to the entire cross-chain DeFi 3.0 ecosystem. There are a series of strategic steps that must be taken to get there, and these will be voted on by members of the DAO (DEFI stakers).
Having read the FAQ, if you require further information then please read through the rest of the documentation. This goes through the entire D3 Protocol ecosystem in a methodical and detailed manner and should give you all the answers you need. If you still have questions then please contact the team via Discord or Telegram.
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