Right now we can believably handle inflation where supply is
- total ETH (E)
- circulating raw ETH (C)
To correctly handle a case where LST's (L) + C make the effective supply we'll need to model
- "low risk ETH rate" (~ geometric mea of Compound.fi supply APY)
- 30 day coupon conversion from stETH -> ETH
- how does tail of demand curve fall off?
- what are the dynamics of stETH peg? uniswap v2?
I think this can be done without modeling the full expected price distribution by assuming a function of the ETH-holdings weighted distribution of price expectations... essentially the amount of LSP should be determined by an integral of a kernel taking current price, and integrating over expected reward of stETH vs expected reward of ETH. If existing stock is greater than that, people redeem stETH -> ETH, otherwise they buy stETH.
this gets very complex though, so I intend to first
- understand strengths and shortcomings of supply = E, C models
- see how introducing a 30d coupon-redemption affects the above model
- make a simpler model focusing on just stETH vs. ETH price dynamics with simplified staking/total-supply assumptions.
Right now we can believably handle inflation where supply is
To correctly handle a case where LST's (L) + C make the effective supply we'll need to model
I think this can be done without modeling the full expected price distribution by assuming a function of the ETH-holdings weighted distribution of price expectations... essentially the amount of LSP should be determined by an integral of a kernel taking current price, and integrating over expected reward of stETH vs expected reward of ETH. If existing stock is greater than that, people redeem stETH -> ETH, otherwise they buy stETH.
this gets very complex though, so I intend to first