SIB (short for “Stabilization Incentive Burn”) is protection against both inflation and downside volatility.
All the details on how SIB is calculated can be found here. And SIB Protection is part of a bigger picture that involves balance.
We all understand the importance of balance in life. Balanced systems are what create healthy ecosystems, robust architecture, resilient bodies and minds, and vigorous civilizations.
The importance of balance also applies to monetary systems. And for a monetary system to remain healthy, it needs to maintain a careful balance between adding new currency (“sources“) and removing existing currency (“sinks“).
One of the biggest and most common balance problems a monetary system can have is when too much new currency is added without enough existing currency being removed. The result is that your currency continually loses value over time, and this is what causes the well-known effect of inflation.
So how does SIB protection work to help maintain a healthy balance?
ndau is a monetary system with a unique and carefully designed monetary policy. This monetary policy allows ndau to increase in value as demand increases while mitigating downside volatility, all while providing simple and self-sovereign staking rewards of up to 25%.
These staking rewards (as seen above in the ndau wallet app) are provided by ndau’s EAI feature.
Whenever ndau holders earn staking rewards, that earned ndau is brand new ndau being added to the total amount of ndau in circulation.
In other words, staking rewards is a source that adds new ndau in the system. And to keep everything balanced to mitigate issues like inflation, SIB protection is a sink that removes ndau from circulation via SIB fees.
When a user pays SIB fees, those ndau are “burned” which means they are permanently destroyed and removed from circulation forever.
SIB protection also motivates people to not sell their ndau when doing so could cause the market price to drop to undesireable levels. If ndau’s market price drops significantly below the desired Next Issue Price, then SIB fees grow higher to provide an increasing disincentive to sell. And remember, ndau holders are always able to move their ndau to an exchange to sell it if they wish no matter how high SIB fees may get, and ndau holders are always notified of existing SIB fees in the ndau wallet app when they are sending ndau.
In summary, SIB protection is a feature of ndau for maintaining balance, providing protection against both inflation and downside volatility.
The result is a unique monetary system that is built for healthy growth and staking rewards, now and in the future.