Empty Set V2

v2 Stability Design Thesis

Overview

In this iteration of the Empty Set protocol, we shift from novel mechanism design to usability. We aim to directly solve the need for a perfectly stable, yet censorship resistant asset that can be used as the basis for decentralized finance.

ESS: Empty Set Share

From v1, we will migrate to a two token model with ESS as the governance token, and seignorage share. ESD in its current form will migrate to ESS, preserving protocol ownership across the upgrade. After launch, the Empty Set DAO has the authority to issue or burn ESS as needed through governance.

DSU: Digital Standard Unit

We will issue a new stablecoin DSU and restart issuance from zero. Unlike ESD, this stablecoin will be fully backed and 1:1 redeemable. We aim to solve the censorship resistant problem directly without resorting to a novel synthetic stablecoin model which will provide significantly greater stability and security.

Stability

The primary mechanism for stability will be the ability to mint and redeem DSU from the reserve 1-to-1 with USDC. This will give DSU perfect stability and unlimited contractibility, two properties essential for real usage.

Future experiments enabled by decentralized governance may pave the road for a capital efficient model, but we do not necessarily endorse any particular model at this time, rather we wish to enable this path to maintain competitiveness with future algorithmic stablecoin developments.

Revenue

Governance may vote to purchase and burn some amount of ESS with the reserve when RR is above target as a result of yield generated from reserve management.

Migration

To migrate from v1 to this new model, a series of proposals will be made to pause regulation and bonding in the current DAO. From this we'll be able to solidify the final total supply of v1 ESD and ESDS.

To ensure all ESD holders have a fair conversion rate, ESS will be migratable:

• 1:1 from ESDS

• 1:n from ESD , where n is the final v1 bonding ESD:ESDS exchange rate

The final v1 migration proposal with pause governance and grant ownership over the v1 DAO to the v2 DAO.