AIP3: Automated Bond Redemptions

Right now we have three things the protocol does based on the price of Arth.

  1. Expansion
  2. Contraction
  3. Mint Arth for Arth B holders to redeem.

Now the third case is something which can and should be automated because it is based on the 1 hr TWAP of ARTH. So instead of manually checking the price every 1 hour and having issues to redeem it (Ex :during epoch 12 where the button doesn’t work) I would like to propose an Arth- ArthB pool where Arth B holders can stake their Arth B tokens and farm the freshly minted Arth meant for Arth B redemption.

The issue is the stability fee for maha which is currently paid while redeeming so I propose to make a change where the stability fees in Maha is paid while buying the bonds instead of when selling it. An alternative to this option would be to pay the 1% stability fees while claiming Arth from the Arth-Arth B pool.

Basically to buy arth B you will pay dai plus 1 % of fee in maha or you will claim your Arth by paying the 1% fee. Either way we will be able to collect 1% of fees in Maha which will be burnt

This would allow the following,

  1. Fair distribution based on your percentage of Arth B tokens. Whales with deep pockets right now can easily spike up the Gas prices or use bots to take the arth allocated for redemption each time leaving other bond buyers no chance to redeem their bonds since the Arth minted for redemption is significantly less than the Arth B available.

  2. No one needs to check the Twap 1 Hr price constantly to see if they can redeem the tokens. People from different timezones need to sometimes stay up or monitor the 1 Hr Twap just so that they can have a slim “chance” to redeem their Arth B.

  3. Reduces the complication with regards to the Arth B redemption and issuances. For example now you just buy the bonds when they are made available based on the 12hr Twap at the time of contraction and then add it to the pool. Later you just go to the pool to claim your Arth. When you claim your arth, the arth B tokens are automatically burnt. Every time the 1hr Twap is above 1$ the ARTH-ARTHB token is seeded with more Arth from the minted supply.

The farming rate should happen based on the Arth 1hr Twap

  1. if the Arth 1hr Twap < 1 the farming rate should be reduced.
  2. if the Arth 1hr Twap>= 1 the farming rate should be increased.

To make things even more automated. When the bonds are being bought they should be directly added to the ArthB-Arth pool by doing an extra transaction. We already have something similar when redeeming the bonds for Dai, the protocol sells the arth for dai by doing an additional transaction. In a similar fashion, we need to do an additional transaction of adding liquidity to the Arth-Arth B pool.

Conclusion : Implementing this proposal would not only keep the whales at bay and ensure an easy and fair distribution but it will also make the UX much better. Arth has shown that it works and the protocol is a gem so all we need now is to bring more users on board, make the whole process easy for them. As far as I know, its the complexity of the tasks , understanding of the protocol and dominance of whales and bots that is keeping users away from buying bonds. this proposal or change fixes all the above mentioned problems.

7 Likes

Nice one, for someone who is still trying to wrap around how ARTH, Bonding works. This proposal would really simplify the work.

This idea is really good. It would make investing easier and would easily increase adoption. I would also like to add a suggestion to this, ArthB holders should redeem their bonds for dai which should be made compulsory and would reduce the sell pressure as soon as bonds are redeemed.

Excellent proposal, nice idea.

Great idea :clap: :ok_hand: everything that will make the process and the protocol itself easier is much appreciated.

amazing ! hope they implement this asap

I really like this solution, as the protocol expands this would prevent the potential for whales and bots to take over the bond redemption process, and it would also simplify the process.

One thing to consider is to put a cap on the amount that you can farm, for example if you deposit 1000 ARTHB into the pool you should only be able to farm ARTH until it equals a 1:1 ratio (1000 ARTH), after that happens your ARTHB is burned, and the ARTH is there for you to withdraw or deposit into the distribution pool.

The reason for this is if you allow ARTHB to farm ARTH continuously, it will drastically slow down the time it takes to redeem your ARTHB in full . In order for the pool to be enticing you need to be able to deposit your ARTHB and be confident that you should be able to withdraw the equivalent amount of ARTH within a fairly short time period.

1 Like

Spending MAHA when claiming ARTH always makes more sense since we want to make it easier for people to buy ARTHB and not harder.

Basically the issue here is that we are looking at FCFS (first come first serve) model when redeeming bonds but instead it should be far more distributed. FCFS also leads to gas wars as we’ve seen in the first bond redemption that was made (the whale used a gas over 100% the average price)

This does make sense to me. I believe we should put this for a vote.

2 Likes

You stated a much more simplified approach to that meets the needs of all users. I particularly like that it relieves the anxiety of having to rush to redeem bonds before other users. Very important from a UX perspective that new and existing user should not feel like they have to compete with each and feel disappointed by not achieving their goal. Let’s work together and maintain stability in the protocol.

Proposal in now live for a vote: Snapshot

Excited about this! Any idea when it will be implemented?