SIP: Dynamic Fees

[glasgowm148]

For more details on what this proposal entails, see the timestampted video here

The quoted comments below were taken from SIP Enthusiast during ERGOHACKVI

Good idea. Needs more discussion to define the best approach. Sigusd redeem should noy have higher fee, because it would effectively mean losing peg. Adjusting sigusd mint, sigrsv mint and sigrsv redeem, can all be used to incentivize optimal RR.

https://t.me/SigmaUSD/18685

[glasgowm148]

This comment is quoted from Telegram

Here is a sketch for the dynamic fees. It is not based on any analysis, just a starter for the discussion.

RR	buy-usd	sell-usd	buy-rsv	sell-rsv
<400	na	2	0	2
400-420	50	2	0	2
420-440	30	2	1	2
440-460	20	2	1	2
460-480	10	2	1	2
480-500	5	2	1	2
500-550	3	2	1	2
550-650	2	2	1	2
650-700	1	2	2	2
<700	1	2	2	0

• Locking: the contract can still become locked. Erg price can drop, which lowers rr, which locks the contract. Still, more room for rsv holders to exit before lock.
• Profits: if the minimum fee is below 2%, then there is a chance it produces even less profit for rsv holders. However, most likely, the scheme above would make more profit. The profits depend on sigmausd usage. If there is more in the future, then currently a good set of fees might be too high in the future.
• Scaling: effect of more scaling because contract is less likely to lock, which means more arb opportunities. There is another Effect of less scaling due to a de facto tighter RR range.

High SigUSD demand: sigusd is bought until 500% RR --> sigusd on Ergodex has higher than oracle price --> arbitrage according to the rr thresholds. If this coincides with erg price going down, then the arb will effectively stop working quite fast.

Threats: reduction in whale manipulation threat. The rr range of buying a large amount of sigusd is smaller.

I will put this on the GitHub, when I get a chance to make an account there.

I will do a similar overview for the simultaneous minting.