diff --git a/AIPs/aip-5.md b/AIPs/aip-5.md index 19d9bce..c102f9a 100644 --- a/AIPs/aip-5.md +++ b/AIPs/aip-5.md @@ -13,41 +13,45 @@ requires (*optional): N/A The current Ampleforth rebasing function predisposes the network to short periods of rapid expansion and long periods of gradual contraction. This document proposes an update to the Ampleforth rebasing policy that would: -* Create symmetry between the speed of supply expansion and contraction. +* Create symmetry between the supply expansion and contraction. * Limit the protocol's sensitivity to short-lived demand shocks. The two above considerations should make the Ampleforth protocol a more balanced and robust building block for decentralized finance. ## Abstract -We propose to deploy a new contract that updates the current linear rebasing function with a modified sigmoid-shaped rebasing function. +We propose to deploy a new contract that updates the supply policy replacing linear rebase function with a sigmoid like shaped function. ## Motivation -At present, the Ampleforth rebasing function takes a `VWAP` as its input and offsets price differences of `X%` with supply changes of `(X%/rebase_reaction_lag)`. Two things to note about this. +At present, the Ampleforth rebasing function takes a `VWAP` as its input and responds to price differences of `X%` with supply changes of `(X%/rebase_reaction_lag)`. Two things to note about this. 1. Expansion and contraction do not react symmetrically to equal and opposite relative changes in demand. 2. The protocol has capped rates of contraction but uncapped rates of expansion. ### Motivation for Symmetry -A supply policy is asymmetric if the speed of contraction is not equal to the speed of expansion, given identical but opposite changes in relative demand. In the case of Ampleforth, the protocol currently experiences much slower contraction than expansion. Consider the example of an alternating series below: +A supply policy is asymmetric if the magnitude of contraction is not equal to the magnitude of expansion, given identical but opposite changes in relative demand. In the case of Ampleforth, the protocol currently experiences slower contraction than expansion. Consider the example of an alternating series below: **_Alternating Series Example_** -Imagine Price alternates between $0.5 and $2, every 24hrs, infinitely: +Consider the price alternating between $0.5 and $2, every 24hrs, infinitely:

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-For fixed-supply assets, the `market_cap` in our example above would simply alternate between two values. However, for any `rebase_reaction_lag` value other than 1, the current Ampleforth supply policy will drift upwards over time. +For fixed-supply assets, the `market_cap` in our example above alternates between two values. However, for any `rebase_reaction_lag` value other than 1, the current Ampleforth supply policy will drift upwards over time. ### Motivation for Capped Expansion Rate We also propose asymptotic limits on the rates of supply change, in order to reduce the protocol's sensitivity to short-lived, but extreme market conditions. +### Motivation for removing minimum deviation threshold + +TODO(naguib) + ## Specification