In this discussion, members will mainly focus on the amount of ETH that is available in the pools immediately after launching the mechanism, in the short term and in the long term.
The aim is to get members to agree on a path forward for opening redemptions at a high level before discussing the parameters themselves in more detail in Part 2.
During Part 1, we have the three (3) main questions listed below that members need to discuss and share their view of how much ETH will be needed in the pools at launch and over a longer-term period.
At the end of the first week, members should have several options that can be used to create a Snapshot signalling vote, which will be used to gauge member sentiment on the liquidity provided in the short and long term.
Question 1: What is the amount of NXM/ETH that should be able to be redeemed and exit in the short-term at a price close to book value (BV)?
One of the aims of the tokenomics revamp is to provide some level of exit liquidity at a price close to Book Value. This aim was set as a result of the current situation with the bonding curve, which prevents redemptions directly from the protocol while liquidity is less than the current MCR floor.
The answer to this question should aim to address the needs of members:
- Who wish to exit but feel like they haven’t been able to do so with the current bonding curve and MCR floor; and
- Who are long-term aligned and wish to retain capital in the mutual
The answer to this question will inform parameters related to initial liquidity and the additional liquidity provided in the short term, which will be discussed in more detail during Part 2 of this discussion.
Similarly to Question 1, the balance is between members wishing to exit as soon as possible and the interests of long-term aligned members who see the current size of the capital pool as crucial to cover growth. Achieving an outcome that works for both groups will help to smooth out the immediate likely loss of capital.
The answer to the initial exit period question will inform parameters related to initial liquidity injection and ratchet speed, which will be discussed in more detail during Part 2 of this discussion.
Question 3: In the long term, how long should it take to get down to the Minimum Capital Requirement (MCR) based on the current cover amount, assuming everyone exits at maximum speed?
This question is equivalent to ‘How long should we give the mutual to use the current capital pool size to back new covers?’
The current size of the capital pool is ~145,700 ETH. The MCR based on the current cover amount is ~5,000 ETH.
The capital pool we currently have represents a competitive edge and is attractive to cover buyers and staking pools building on top of Nexus Mutual, and the protocol should be given some time to achieve growth and utilise this capital to realise the benefits of it. On the other hand, keeping underutilised capital locked in the pool cannot be a permanent outcome. The answer to this question should find a balance between those two viewpoints.
The answer to this question will inform parameters related to the long-term liquidity injection speed, which will be discussed in more detail during Part 2 of this discussion.
This discussion will take place from Monday (14 August) until Saturday (26 August).
- During the first week (14–20 August), members can discuss, share analysis, and come to a consensus on the potential answers to these questions.
- Once members have shared their views, the R&D team will use the community’s responses to create a non-binding Snapshot signalling vote to gauge sentiment around how much initial liquidity should be provided.
Once members share their views and several options are available, three (3) Snapshot signalling votes will be created to gauge members’ sentiment on the answers to the three questions posed above.
The Snapshot signalling votes will be open for voting from 21–26 August.
We’ve outlined the scope of the Liquidity Parameters Discussion in the Overview post. You can refer to this post for an introduction to both Parts 1 & 2 of this discussion.
If you have questions about the Ratcheting AMM (RAMM) or you want to learn more about the RAMM itself, please see the Pre-Discussion Phase: RAMM Education Guide, Call for Questions post.