sDOLA

sDOLA is a yield-bearing, synthetic stablecoin that derives its yield from Inverse Finance’s FiRM fixed rate lending market revenues. Users who stake DOLA receive a constant stream of DBR’s, which are auto-compounded into more DOLA, resulting in yield-bearing sDOLA.

Depositing DOLA for sDOLA incentivizes the long-term holding of DOLA, resulting in significantly reduced liquidity costs per circulating DOLA and improved overall unit economics of the protocol. Importantly, there is a 1:1 relationship between DOLA staked into sDOLA and additional lending capacity on FiRM given the increased demand for holding DOLA, leading to greater FiRM revenue.

sDOLA Basics

sDOLA is designed as a tokenized ERC-4626 wrapper around a DOLA Savings Account (DSA) smart contract which continually streams DBR rewards to DOLA staked in the contract and auto-compounds those rewards into additional DOLA, leading to the DOLA:sDOLA exchange rate to continuously grow

Minting sDOLA

The underlying asset for sDOLA is Inverse Finance’s DOLA stablecoin, which is borrowable on FIRM or available on Automated Market Makers like Curve or Balancer. To mint sDOLA, a user stakes DOLA in a DOLA Savings Account (DSA) smart contract, which in turn is deposited in an ERC-4626 compliant vault, resulting in a new wrapped token, sDOLA, on Ethereum mainnet.

Important points about minting sDOLA:

DOLA staked to mint sDOLA is never rehypothecated or loaned to third parties.
The sDOLA token represents pro rata deposits within the ERC-4626 vault and is always withdrawable for DOLA stablecoins at the pro rata rate.
There is no maximum number of sDOLA that may be minted by a user depositing DOLA.

To stake DOLA for sDOLA, simply go to https://inverse.finance/sDOLA and follow the instructions:

First, select the "sDOLA" tab on the upper navigation bar:

And select "sDOLA" in the pulldown menu:

Connect your wallet:

Next, indicate the desired amount of DOLA to stake as sDOLA:

Approve the desired amount of DOLA in your wallet (gas required):

Confirm the transaction in your wallet (gas required):

You can keep track of your sDOLA deposits and earnings (along with INV, DBR, and FIRM borrowing positions on the dashboard page located at https://www.inverse.finance/dashboard

sDOLA Yield Accrual

sDOLA yield is derived from DBR revenue generated by borrowers on Inverse Finance’s FiRM fixed rate lending market. As DBR’s are spent by borrowers on FiRM, those spent DBR’s are recognized as revenue for the DAO, which is then re-distributed in three ways to:

INV stakers, in the form of DBR streaming rewards
The DSA (DOLA Savings Account) smart contract, powering sDOLA
The DBR XY=K Auction

The yield of sDOLA accumulates continually via growth of the dbrReserves accrued in the DSA (sDOLA) contract.

sDOLA Auto-compounding

A unique aspect of sDOLA is the automatic compounding of the continuous DBR yield accrual into additional DOLA. DBR yield auto-converts to more DOLA, so a user’s DOLA balance staked in sDOLA is continually growing. There is therefore no need to claim yield in separate, manual transactions and no human intervention is required by the user or by DAO contributors during the auto-compounding process.

To convert DBR yield into more DOLA for the user, the DBR yield must be first swapped for DOLA. sDOLA implements the DAO’s XY=K Auction contract, meaning this will create additional depth to DBR’s market and run in a fully automated manner via Miner Extractable Value (MEV).

The XY=K Auction operates as a virtual, x*y = k constant function market maker auction. The purpose is to provide a market-driven, continuous, Dutch auction for DBR, paid in DOLA. DBR reserves increase over time, pushing down the price of DOLA in the auction, until the price is low enough for an arbitrageur to extract profits. Upon a successful trade, the buyer will deposit DOLA in return for freshly minted DBR. Essentially the contracts function very similarly to a Uniswap V2 pool, except one side of the pair is virtual (DOLA), and the other (DBR) has a continuous stream of new tokens being added to the reserves.

After swapping DBR for DOLA, the additional DOLA is staked in the DOLA Saving Rate contract and will accrue value to sDOLA in the following week.

sDOLA Yield Distribution

Yield generated from sDOLA's DBR-DOLA swaps is allocated to sDOLA holders on a pro-rata basis over a 7-day period. This distribution cycle is structured on a weekly basis, with weeks starting and finishing at roughly Thursday 00:00 UTC each time. The yield for any given week is derived from auction activities in the preceding week.

This mechanism implies that as the supply of sDOLA increases, the current yield lags the projected yield, appearing lower. This is because the revenue earned in the previous week was from a comparatively smaller sDOLA supply than the present distribution base. Conversely, if sDOLA supply diminishes due to withdrawals, remaining holders experience a temporarily enhanced yield until the current and projected yields align. Importantly, sDOLA does not have a predefined minimum or maximum APY.

Withdrawing sDOLA

Users may unwrap their sDOLA at any time through a conventional un-staking transaction. There is no maturity date, no waiting period to withdraw DOLA, and users may re-stake into sDOLA at any time.

Contract Addresses

DOLA Savings Account (DSA): 0xE5f24791E273Cb96A1f8E5B67Bc2397F0AD9B8B4

sDOLA: 0xb45ad160634c528Cc3D2926d9807104FA3157305

sDOLA Helper: 0x5C1F6a62CC587e135280CbD59520Def551bB3C97

How To Buy sDOLA

DOLA can be acquired by using any of the following methods:

Staking DOLA and receiving sDOLA on inverse.finance/firm
Buy sDOLA from a decentralized exchange like Curve

sDOLA Cross-Chain Bridging

sDOLA Cross-Chain support is planned for Q1 2024.

DOLA Savings Account

The DSA smart contract allows users to stake their DOLA stablecoin and earn DBR. While the main use of the DOLA Savings Account (DSA) is expected to be via sDOLA, we anticipate that users and third party integrators who believe DBR is currently underpriced will utilize the DSA.

FAQ

What is sDOLA?

sDOLA is a yield-bearing stablecoin structured as an ERC-4626 wrapper around a DOLA Savings Account (DSA) contract that continuously streams DOLA Borrowing Rights rewards to staked DOLA and auto-compounds them.

What is the DOLA Savings Account?

The DOLA Savings Account (DSA) smart contract allows users to stake their DOLA stablecoin and earn DBR. While the main use of the DSA is expected to be via sDOLA, users who believe DBR may be currently underpriced may elect to utilize the DSA, as well as other protocol integrations.

What are the advantages of sDOLA?

Decentralized yield. sDOLA departs from other yield-bearing stablecoin products via its sourcing of yield from non-centralized sources. sDOLA’s reliance on DBR-based yield requires no centralized assets or custodians while DOLA itself is backed by decentralized debt. This contrasts with yield-bearing protocols which largely or entirely derive their yield from centralized, U.S. government sources.
Fixed-rate lending revenue as yield source. sDOLA relies on fixed-rate lending revenues as a source of yield. Compared to variable rate lending protocols, which on average generate a lower rate of return due to lower opportunity cost of capital, FiRM relies on fixed-rate borrowing revenue which are priced at a premium vis-a-vis variable rate lending protocols.
No rehypothecation of the underlying stablecoin. Unlike yield bearing stablecoins that loan user deposits to third parties, DOLA staked as sDOLA is never loaned and remains staked within the sDOLA smart contract until withdrawn.
Non-dilutive. Unlike yield bearing stablecoins which rely on new emissions of a governance token as a source of yield, sDOLA utilizes no emissions of INV governance tokens as a source of yield and only distributes revenue earned on FiRM.