Repaying Debt Method is economically unsustainable

[Artiume]

With the current situation, the Stability Fee will cause USDA owed to always be greater than total USDA. The easiest solution to fix this issue is to allow the Stability Fee to remain in USDA but must be paid from the original collateral type. This is because USDA is an IOU. If Arkadiko were a bank, it would be like paying the bank with IOUs, the bank doesn't need IOUs, it needs real money to function.

There's currently 5,418,699 USDA in the swap pools. If the Stability Fee is 3% for all USDA, that means with no change in growth, in one year's time. There will be an extra 162k USDA owed to those vaults which can only be repaid by the creation of new USDA.

This is a compounding issue. Those 162k new USDA which don't exist will continue to accrue debt. Even if the original 5.4 million USDA in the swap pools were paid off, that 162k new USDA would create 5k more debt of USDA which can never be completely removed from the system without a debt restructuring and/or cancellation.

While this debt structure is considered sustainable, and it very may well be for the time being, it has a mortality clock tied to it. The compounding debt will continue to grow, this'll be seen in the Debt-to-minted USDA ratio. Newly minted debt can offset this ratio but supply and demand should correct this ratio until it reaches a equilibrium closer to the original ratio before the minted debt was created. At which point, the ratio will continue to grow because the newly minted USDA has its own stability fee to contend with. It's a kicking the can down the road solution.

The easiest solution to this is the requirement to pay debt fees in the original form of money instead of using what is essentially an IOU. This small proposal will nullify the need for a debt-to-minted ratio.