Yield Derivation
USDR yield is derived from the rental income on these Property TNFTs and in certain circumstances the price appreciation of the underlying asset.
At launch, without incentives, USDR will yield ~4.25%. On average, Tangible properties yield 8.5%+ but while the market cap of USDR is small, a large portion of the treasury needs to be kept in DAI to meet the needs of sudden redemptions. Using duress redemption modeling, this portion can reduce over time as the market cap grows.
We think 4.5% is too low of a yield to gain quick traction, even considering the current state of the market. For this reason, we will be subsidizing the yield until USDR reaches a market cap between $500m and $1bn.
Yield \subsidies will be funded using Tangible Labs’ TNGBL tokens that will be converted into USDR. Existing, locked TNGBL positions held in the DAO’s treasury and Tangible labs wallet will be burned and re-minted as unlocked TNGBL. These unlocked tokens will then be used to fund the incentive programme and the affiliate programme. The unlocked token number should be sufficient for incentives to run until USDR reaches a $1bn+ market cap dependent on the market price of TNGBL during this period. These tokens won’t be entering circulation; they will simply be used to mint USDR and subsequently will end up in the USDR treasury (eventually they will be burned at 130% overcollateralization).
The TNGBL token has its own value accrual and utility independent of USDR, making it sound backing for the stablecoin. In addition, FRAX has proven that backing a stablecoin with upto 15% in a native token works well even in extreme market conditions.
As we progress through this launch phase, the percentage of treasury assets held in Property TNFTs will consistently increase, allowing the incentives to slowly tail off. Eventually, the incentives will be fully replaced by an increase in collected rental revenue as the real estate portion of the backing expands vs DAI. Once the treasury is 130% overcollateralized as a result of capital appreciation on the underlying properties, any further increase to the value will be added to the daily rebase. At this point TNGBL accrued in the treasury will be burned, leaving a stablecoin coin 130% overcollateralized by RWAs and DAI.
The following chart illustrates the sources and composition of the yield through the subsidized launch period as well as the targeted end-state, where the treasury is 130% over-collateralized. Multiple scenarios on treasury collateralization are presented as it’s unclear what asset allocation the duress redemption modeling will determine as ideal, though the highest feasible RE backing is always the goal.
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