YIP-1: MaxSlippage Modification

Forum Discussion: https://forum.yam.finance/t/yip-rebase-parameter-modifications/452

Basic Summary

Based on recent market conditions, we propose to modify key parameters of the Yam protocol to mitigate market impact of treasury purchases. These are levers built within the protocol to adjust on an as needed basis. While several levers exist, the simplest to achieve the desired effect are limiting the MaxSlippage allowed by a treasury purchase and increasing the RebaseLag, which will lessen the change in supply of each rebase and create a more gradual rebasing effect. We propose to limit MaxSlippage to 5%.

On-chain action: Target: rebaser Function:setMaxSlippageFactor(2597836 * 10**10), which is equivalent to 0.02597836 as new maxSlippageFactor in human readable decimals.

Abstract

It was always likely that the initial protocol parameters would need to be fine tuned according to market dynamics. Within the first few rebases, we have seen this to be true, as market impact from treasury purchases has had adverse market reactions.

It is also true that we have begun effectively bootstrapping a high potential treasury, but we must consider how to grow in a consistent and sustainable manner. As such, we will be creating proposals for the modification of the following parameter:

MaxSlippage: Decrease from 10% to 5% maximum market impact of treasury purchase

Motivation

The below expands on how each parameter will likely impact the Yam protocol and market dynamics. Each will receive a Snapshot proposal, and successful Snapshots will be grouped into a single on-chain proposal.

MaxSlippage decrease - This would limit the market impact that a treasury purchase can have. It is currently set to 10%. Decreasing this limit would result in smaller treasury purchases and a larger backlog of YAM in treasury, but also less market impact.