ICE DAO
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ICE DAO
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# Why do we need ICE DAO in the first place?

There is a demand for a decentralised reserve currency. Dollar-pegged stablecoins have become an essential part of crypto due to their lack of volatility as compared to tokens such as Bitcoin and Ether.
Users are comfortable with transacting using stablecoins knowing that they hold the same amount of purchasing power today vs. tomorrow. But this is not exactly true. The dollar is controlled by the US government and the Federal Reserve. This means a depreciation of dollar also means a depreciation of these stablecoins.
ICE DAO aims to solve this by creating a free-floating reserve currency, ICE, that is backed by a basket of assets. By focusing on supply growth rather than price appreciation, ICE DAO hopes that ICE can function as a currency that is able to hold its purchasing power regardless of market volatility.

# Is ICE a stable coin?

Nope. ICE is not a stable coin. Rather, ICE aspires to become an algorithmic reserve currency backed by other decentralized assets. Similar to the idea of the gold standard, ICE provides free floating value its users can always fall back on, simply because of the fractional treasury reserves ICE draws its intrinsic value from.

# ICE is backed, not pegged.

Each ICE is backed by 1 MIM, not pegged to it. Because the treasury backs every ICE with at least 1 MIM, the protocol would buy back and burn ICE when it trades below 1 MIM. This has the effect of pushing ICE price back up to 1 MIM. ICE could always trade above 1 MIM because there is no upper limit imposed by the protocol. Think pegged == 1, while backed >= 1.
You might say that the ICE floor price or intrinsic value is 1 MIM. We believe that the actual price will always be 1 MIM + premium, but in the end that is up to the market to decide.

# How does it work?

At a high level, ICE DAO consists of its protocol managed treasury, protocol owned liquidity (POL), bond mechanism, and staking rewards that are designed to control supply expansion.
Bond sales generate profit for the protocol, and the treasury uses the profit to mint ICE and distribute them to stakers. With liquidity bonds, the protocol is able to accumulate its own liquidity. Check out the entry below on the importance of POL.

# What is the deal with (3,3) and (1,1)?

(3,3) is an achievable dream for the ICE protocol. is the idea that, if everyone cooperated in ICE, it would generate the greatest gain for everyone (from a game theory standpoint). Currently, there are three actions a user can take:
• Staking (+2)
• Bonding (+1)
• Selling (0)
Staking and bonding are considered beneficial to the agreement, while the sale has no effect. Staking and selling will also cause price changes, while Bounding will not (we believe that buying from the market is a prerequisite for staking, which leads to price changes). If these two actions are beneficial, then participants in mobile prices also get half of the benefits (+1). If these two behaviors are contradictory, the bad guys with mobile prices get half the benefits (+1), and the good guys with mobile prices get half the benefits (-1). If both of these actions are harmful, which means that both participants are selling, Then they will be punished by the system (10% trade fee).
Thus, given two actors, all scenarios of what they could do and the effect on the protocol are shown here:
Text
Stake
Bond
Sell
Stake
(3,3)
(1,3)
(-1,1)
Bond
(3,1)
(1,1)
(-1,1)
Sell
(1,-1)
(1,-1)
(-3,-3)
• If we both stake (3, 3), it is the best thing for both of us and the protocol (3 + 3 = 6).
• If one of us stakes and the other one bonds, it is also great because staking takes ICE off the market and put it into the protocol, while bonding provides liquidity and DAI for the treasury (3 + 1 = 4).
• When one of us sells, it diminishes effort of the other one who stakes or bonds (1 - 1 = 0).
• When we both sell, it creates the worst outcome for both of us and the protocol (-3 - 3 = -6).

# Why is PCV important?

As the protocol controls the funds in its treasury, ICE can only be minted or burned by the protocol. This also guarantees that the protocol can always back 1 ICE with 1 MIM. You can easily define the risk of your investment because you can be confident that the protocol will indefinitely buy ICE below 1 MIM with the treasury assets until no one is left to sell. You can't trust the FED but you can trust the code.
As the protocol accumulates more PCV, a longer runway is guaranteed for the stakers. This means the stakers can be confident that the current staking APY can be sustained for a longer term because more funds are available in the treasury.

# Why is POL important?

ICE owns most of its liquidity thanks to its bond mechanism. This has several benefits:
• ICE does not have to pay out high farming rewards to incentivize liquidity
providers a.k.a renting liquidity.
• ICE guarantees the market that the liquidity is always there to facilitate sell or buy transactions.
• By being the largest LP (liquidity provider), it earns most of the LP fees which represents another source of income to the treasury.
• All POL can be used to back ICE. The LP tokens are marked down to their risk-free value for this purpose.

# What will happen if there is a bank run on ICE?

Fractional reserve banking works because depositors don’t withdraw their funds all at once. A depositor’s faith in the banking system rests on regulations and agencies like Federal Deposit Insurance Corporation (FDIC).
ICE does not have FDIC insurance but it has an incentive structure that protects stakers. Let’s take a look at how it performs during a hypothetical bank run. In this scenario, we assume the majority of stakers would panic and unstake their tokens from ICE - the staking percentage which stands at 92% now quickly collapses to 3.3%, leaving only 55,000 ICE staked.
Next, we assume the Risk-Free Value (RFV) inflows to the treasury completely dry up. For context, RFV is currently growing at about $1 million every 2 days. However, during a bank run this growth will likely stop. Finally, we assume that those last standing stakers bought in at a price of$500 per ICE. The initial investment of these stakers would be:

# Do I have to unstake and stake ICE on every epoch to get my rebase rewards?

No. Once you have staked ICE with ICE DAO, your staked ICE balance will auto-compound on every epoch. That increase in balance represents your rebase rewards.

# How do I track my rebase rewards?

You can track your rebase rewards by calculating the increase in your staked ICE balance.
1. 1.
Record down the Current Index value on the staking page when you first stake your ICE. Let's call this the Start Index.
1. 1.
After staking for some time, if you want to determine by how much your balance has increased, check the Current Index value again. Let's call this the End Index.
1. 1.
By dividing the End Index by Start Index, you would get the ratio by which your staked ICE balance has increased.
$ratio = endIndex / startIndex$
1. 1.
In this example, the ICE balance has grown by 1.5 times.
$ratio = 13.2/8.8 = 1.5$