🔥BBB (Burrow Buyback Burn)

BBB calculates all excess value in the system above the collateral ratio and uses this value to buy BURROW for burning. Every AMO (Algorithmic Market Operations) proposal must include an BBB function which calculates how much value over the collateral ratio (CR) there is accumulated. This value goes to burning BURROW.

BBB binds BURROW value capture on the AMO level. Because AMOs have an infinite, Turing-complete design space for conducting any market operation strategy, it's important to formalize how BURROW captures value across every possible AMO design.

Specifically, every time interval t, BBB calculates the excess value above the CR and mints MUSD in proportion to the collateral ratio against the value. It then uses the newly minted currency to purchase BURROW on MMF-BURROW AMM pairs and burn it. This will increase the price of MMF as well because of the way liquidity is routed from MUSD > MMF > BURROW.

Example:

There is 100m MUSD in circulation with $86m of collateral value across the protocol at an 86% CR (Collateral Ratio). The system is in equilibrium with MUSD trading at $1.00. Collateral is deployed through multiple AMOs, such as the Collateral Investor AMO and MMF AMO. The various market operations of the protocol earn yield, transaction fees, and interest. Each day there is $20,000 worth of revenue earned from various AMOs. This would increase the CR by .023% each day since it is a surplus of $20,000 of collateral value. After t = 24 hours, the CR is now 86.023% which is higher than the 86% target. Given that the CR is 86%, the protocol can rebalance to the CR in two ways. It can use the $20,000 worth of collateral profit to purchase BURROW from AMMs. However, a more efficient and advantageous method is to mint 20,000/(.86) = 23,255.814 MUSD.

It then takes the newly minted 23,255.814 MUSD and purchases BURROW from MM.Finance dex. The BURROW is then immediately burned. This second method has the distinct advantage of expanding the MUSD supply, accruing value to the BURROW token holders, as well as rebalancing the protocol to the CR.

Essentially, BBB is an in-protocol rule for every AMO to formally channel excess value above the current target collateral ratio to BURROW holders.