YIP: Rebase Parameter Modifications

Rebase Parameter Modifications

Basic Summary

Based on recent market conditions, we propose to modify key parameters of the Yam protocol to mitigate market impact of treasury purchases. These are levers built within the protocol to adjust on an as needed basis. While several levers exist, the simplest to achieve the desired effect are limiting the MaxSlippage allowed by a treasury purchase and increasing the RebaseLag, which will lessen the change in supply of each rebase and create a more gradual rebasing effect.

Abstract

It was always likely that the initial protocol parameters would need to be fine tuned according to market dynamics. Within the first few rebases, we have seen this to be true, as market impact from treasury purchases has had adverse market reactions.

It is also true that we have begun effectively bootstrapping a high potential treasury, but we must consider how to grow in a consistent and sustainable manner. As such, we will be creating proposals for the modification of the following parameters:

  • MaxSlippage: Decrease from 10% to 5% maximum market impact of treasury purchase
  • RebaseLag: Increase from 10 to 20, allowing rebasing to be smoother over 10 days rather than 5

Motivation

The below expands on how each parameter will likely impact the Yam protocol and market dynamics. Each will receive a Snapshot proposal, and successful Snapshots will be grouped into a single on-chain proposal.

  • MaxSlippage decrease - This would limit the market impact that a treasury purchase can have. It is currently set to 10%. Decreasing this limit would result in smaller treasury purchases, but less market impact.
  • RebaseLag increase - This would make each rebase less extreme. New supply is calculated by CurrSupply * DeviationFromPeg/RebaseLag, so increasing RebaseLag would result in smaller changes in supply, and a smoothing out of This would lead to a slower decrease in price due to positive rebases, though also a slower increase in price due to negative.

Specifications

More detailed specifications will be included in each Snapshot proposal as they relate to each solution.

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Seems like an easy “YES!”. Let’s roll!

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For
let’s go!!! We will win

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Definitely!

Great that we’re flexible and making adjustments in the face of market conditions.

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Very sensible modifications!

the best solution for now, stable the sell pressure from the treasury, and can be changed quickly…

100% agree, go ahead!

For those who want some additional context on the rebase mechanics: https://medium.com/yam-finance/the-yam-rebase-mechanism-and-game-theory-b8083ce044dd

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Agree with the MaxSlippage reduction.

I’m less sure about the RebaseLag increase. While it’s probably nice in the (very?) short term in that it’s gonna take a little longer until we hit negative rebase territory, I see a big mid-term danger here in locking us into a longer negative rebase cycle.

I’m not 100% sure what the rebase lag is with AMPL but if the last weeks have been any indication (even long before we hit the current market downturn) then it seems to be much harder to get out of the negative rebase death spiral than anyone would have hoped. And extending the rebase-lag could make it even harder to get out of a negative spiral :thinking:

I also don’t have a much better idea unfortunately other than to split this into two proposals maybe and start with only decreasing the MaxSlippage first.

Wdyt?

@trente One more thought, I’m sure there’s something I’m not factoring in here but still:

What if we kept the rebase lag as is while we’re in negative territory but implemented your increase proposal as long as we’re positively rebasing?

right now, we have the same rebase lag as AMPL, but twice as frequent rebases. This proposal to increase rebase lag to 20 would put us in line with AMPL adjustment speed.

The negative spiral has a lower bound on the value of the treasury! Any having positive spirals last longer with higher lag is beneficial for treasury building.

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Thoughts on separating posRebaseLag and negRebaseLag?

We could keep the current lag of 10 for negative rebases, while lengthening the lag to 20 for positive rebases.

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Nice job @willprice & @trente for making such strong clear cases for these and getting the YIPs out so swiftly! This is how YAM progresses!

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Sry, didn’t have time to check in on crypto, I see the vote is already up.

Maybe for now it’s fine to make the rebase lag similar to AMPL. We can always revisit this in case we get into a negative spiral.

@willprice tbh i don’t fully understand the argument that YAM price has a floor in the treasury. How exactly do you mean this?

According to Etherscan we’re at a total supply of roughly 8.7M YAMs. The current treasury is around $1.75M

Do you mean 1,750,000$ / 8,700,000 YAM TTS = ~0.20$ is the floor price per YAM?
If that’s the case, then it feels like it doesn’t help that much. AMPL has been hovering between $0.50-0.75 for weeks which is much higher than $0.20 and yet still can’t manage to break out of its negative spiral.

I guess the concern I have is that having seen the devastating psychological effects that a long negative rebase cycle has on people, I’m trying to find ways that would make it easier to return to peg a bit faster.

And making the negRebaseLag param equal to AMPL to me raises bad memories of prolonged negative rebases that slowly drains community spirits. Could argue that AMPL was overbought of course and the market is just doing its job right now, but due to the newness of the rebase mechanism, I’m not sure whether human psychology plays an outsized negative role, too.

just my 2 cents

How do we vote for this and make it happen?

@br4e