tl;dr—The numa protocol is incorporating liquid staking, so that nu money stakers can take advantage of staked ETH yield.
Greetings, numans! We are excited to announce our new vision of real-world assets with real yield. First off, we’d like to thank our community for sticking with us through the uncertainty of the past six weeks while we figured out how we were going to accomplish paying yield on our synthetics. We understand how annoying this probably was, and we appreciate the support. We wouldn’t have spent the time working on this if we didn’t believe it was worth it. And now that we have everything mapped out, we are happy to report that it was worth it! Our new vision provides exponentially more value to users, and the prospects for the protocol are an order of magnitude larger.
As part of our new vision, we’ve updated our website and whitepaper, so make sure to check these out. Correspondingly, this has changed our development cycle a bit. In our last development update, we mentioned that we would begin working on the arbitrage dashboard. It quickly became clear the arbitrage dashboard doesn’t make sense in our new model, so we didn’t begin work on it. Instead, we spent the last few weeks working on synthetic swaps and LP staking. However, now that our new model has been finalized, we are pausing that development and moving to developing our vault as the number one priority (more details on the vault below). Because we’ve had to be nimble and adjust our plan, development of the vault has been a bit dynamic, and we can’t give an exact delivery date. However, we are expecting this to take about a month.
The two extra pieces that we didn’t expect to tackle until later in our original plan are the UX and the audit. We will be launching a first version of our web app with the vault, so we’ve needed to align our frontend resources earlier than expected. As far as the audit, we’ve talked to a couple of companies and are close to making a decision. There will eventually be two audits—one for the vault and another for the entire numa protocol when we launch our synthetics. The current audit should be quick, since it only covers the vault, and it’s not a large codebase.
So, what is it?
Why hold BTC when you can hold nuBTC and earn real yield?
Why hold USD when you can hold nuUSD and earn real yield?
Why hold GOLD when you can hold nuGOLD and earn real yield?
Our new model includes a vault that is used to mint NUMA tokens through depositing rETH. The vault has a number of benefits:
Depositing rETH explicitly backs NUMA tokens with rETH.
The vault is a collateral snowball which makes NUMA tokens continually gain value in ETH terms as the protocol continues to absorb more collateral—overcollateralizing nu money synthetics as a utility.
Single-stakers of nu money assets will earn sustainable real yield, as a structural part of the protocol.
The numa protocol will pay sustainable LP staking rewards to providers, which incentivizes liquidity and secures it for the long run.
The vault doesn’t rely on liquidity and is zero-slippage: all NUMA holders can exit their positions through the vault at the current market rate with a 5% fee. In fact, if every $NUMA holder decided to dump their tokens into the vault, the price per $NUMA would rapidly increase, such that the first "sellers" (burners) would get the market price and subsequent burners would get more and more rETH.
The vault provides transparent proof-of-reserves for the synthetics that are minted.
How does it work?
The vault is simply the means by which NUMA either come into circulation or out of circulation (burn or mint).
As with the existing method, users can buy or sell NUMA from the new LP on Uniswap, though it will now be paired with DAI.
Alternatively, users can mint NUMA by depositing rETH into vault, which incurs a 5% fee (4% retained, 1% to LP staking rewards).
Users can also remove rETH from the vault by burning NUMA, which also incurs a 5% fee (4% retained, 1% to LP staking rewards).
Price volatility between the vault and the LP creates arbitrage opportunities which allows for the vault to perpetually accrue collateral.
When we get closer to the launch date for the vault, a few things will need to take place. We will communicate the exact timing of the transition at a later date. Here are the steps:
Remove the existing ETH/NUMA LP from SushiSwap.
The ETH in the pool will be bridged to the Ethereum main net.
The ETH will be staked on Rocket Pool, in exchange for rETH.
The rETH will be bridged back to Arbitrum.
The rETH will be deposited in the vault, which will mint NUMA tokens.
The minted NUMA tokens will be permanently burnt, since the deposited rETH represents the NUMA tokens that we already in existence prior to the vault.
A new LP on Uniswap v3 will be created, which will pair DAI/NUMA.
Thanks again to our community for all their support through this process. We’re excited about bringing together real-world assets and liquid-staking yield, and we expect a lot of discussion from our community. As always, jump in our Telegram and join the discussion!
FAQs
What about the existing protocol?
Generally speaking, the existing numa protocol—which is under development—will be the same. The vault is simply an addition to what was already being built. The only thing that will change is the removal of the flex fee. The flex fee doesn’t work with our new model and isn’t necessary. Users will still burn NUMA tokens to mint nu money synthetics in the manner that was originally planned.
Why do this now?
Since we need to move the LP, we want to do this as soon as possible. It’s better to make a change like this while there are fewer eyeballs on the project. We also might as well start taking advantage of the yield! Further, the vault fundamentally changes the nature of the NUMA token, so we need to implement the vault before launching synthetics.
Do $NUMA holders need to do anything?
Nope! We will be migrating the LP, and there is nothing that needs to be done with your tokens.
Why use DAI in the new LP?
There are two main reasons to use a stablecoin and another reason for using DAI, specifically. As far as using a stablecoin, the vault mechanism thrives on price volatility between the vault and the LP. Since the vault is denominated in rETH and the LP is denominated in DAI, the two prices will diverge quite often: this creates arbitrage opportunities which will cause the vault to capture more value in rETH. Secondly, pairing with DAI provides more stability to the ecosystem. This sounds at odds with the previous point, but it is not. Having rETH in the vault and DAI in the LP creates more frequent arbitrage opportunities when there are price differences, but it also lessons the blow of large price differences or sudden extreme volatility; thus, creating more stability. And lastly, we chose DAI, since it’s the most decentralized and most liquid of the major stablecoins. Since our previous model used the LP for collateral, we didn’t want to use something like DAI; but the new model doesn’t really rely on the LP, since the vault overcollateralizes the protocol. So even though DAI isn’t truly decentralized (like nuUSD will be), that is not one of the requirements in our new model.
If I want to buy or sell, do I need to do anything differently?
The process for buying and selling will be the same as before, though bigger buyers or sellers may opt to use the vault to avoid any slippage.
How does this affect liquidity?
The vault mechanism doesn’t rely on liquidity in the way an LP does; as such, all NUMA holders can exit their positions through the vault at the current market rate with a 5% fee. In fact, if many users start to exit through the vault, the price of NUMA will actually increase. Conversely, when the vault launches, there will be little liquidity in the DAI/NUMA pair, though this should change quickly through market volatility, which the vault also incentivizes.
How does this affect the roadmap?
The development schedule is bit dynamic at the moment. We expect the addition of the vault to add about a month to our overall roadmap. However, we will have more clarity about the schedule in the coming weeks.
What about the sell tax?
When the new LP is created, there will be no sell tax.
