SIP#19 Protocol Balance

Problem:

Currently the Stargate protocol sits out of ideal balance due to stables accruing in pools on destinations due to different rates of transfer from various source chains.

When a user bridges on Stargate, funds are deposited on the source chain and a corresponding amount of funds are removed from a destination chain. If these funds are not bridged back to the original chain, imbalance can exist within Stargate until those funds are returned.

When imbalance exists, the protocol is not fully utilizing all of the liquidity within its system. This leads to smaller paths between some chains that in theory can result in an ability to transfer less stables through Stargate than would be otherwise possible.

A perfectly balanced protocol allows full utilization of the protocol. This means that more volume can effectively transfer through Stargate, resulting in more fees accruing to POL and veSTG stakers.

Proposal:

The Stargate Foundation proposes that it will manually rebalance all pools back to the optimal state to “reset” the protocol to optimal health. After this state is achieved, The Foundation will continually work to maintain protocol health while bringing forward a follow-up proposal to ensure the protocol is balanced in the future without the need for a large-scale balancing effort.

The Foundation will do this at no cost to protocol owned liquidity (POL) and any rewards captured while balancing will be added to the POL.

Success:

After a successful rebalancing effort is undertaken the protocol will have liquidity on each chain equal to the deposited liquidity. This will allow the protocol to function more efficiently.

Execution:

To achieve a full rebalancing the FeeLibrary will need to be updated to whitelist a foundation address to do this rebalancing and allow it to ignore fees so it can efficiently transfer liquidity through Stargate.

Summary:

Stargate operates as a protocol best when liquidity is optimally balanced. Currently the protocol sits out of ideal balance. The Stargate Foundation will manually reset the balance of the protocol to the ideal state and bring forward a proposal to ensure optimal balance is more effectively maintained in the future.