About SPOT Configurations

SPOT has a number a number of configurable hyperparameters. These will eventually be controlled by the FORTH governance community. For an overview of how the SPOT system works please see About SPOT.

Tranche Configurations

The Tranche configuration parameters described below are relevant for understanding the system's tolerance. They determine how much contraction the Ampleforth network can endure before senior AMPL tranches become impaired and how likely this is to happen. For an overview of the systems degradation scenarios see About Stability & Durability.

  • Tranche Ratios: A list of values, adding to 1, that determines the distribution and order with which supply changes propagate to two or more tranche tokens. Currently the values are set to (20, 80) (senior, junior) respectively. This means from the time of issue the AMPL network supply has to contract by 80% within the period of the tranche before senior AMPL tranches start becoming impaired. For an overview of how tranching works please see About Tranching. In code this variable is referred to as _trancheRatios.

  • Bond Length: A number representing the number of days to maturity from the time of issuance. Currently this value is set to 28 days. This means after 28 days senior and junior AMPL tranches become redeemable for raw AMPL. For an overview of how tranching works please see About Tranching. In code this variable is referred to as _maxMaturityDuration.

  • Issue Frequency: A number representing the number of days that must elapse at minimum before a new vintage of tranches can be issued as part of SPOT's collateral set. Currently this is set to 7 days. This means that at any given time there can be at most 4 vintages of senior AMPL tranches in the collateral set. At steady state the oldest vintage is at most 1 week from maturity and can be rotated out and the newest vintage is at most 4 weeks from maturity and SPOT can be minted by depositing into the newest vintage. In code this variable is referred to as minIssueTimeIntervalSec_.

  • Rotation Window: Tranches are made available to be rotated out before they reach maturity. This provides sufficient time for rotation before tranches convert to the underlying AMPL. The minimum maturity time left for a tranche before it can be rotated is called _minTrancheMaturitySec. This is currently set to 6.875 days, slightly shorter than the issue frequency to avoid overlapping intervals. This means the rotation window for the oldest tranche opens three hours after the newest bond issuance..

For reference the fee parameters and values are presented in a table here:

BondIssuer

trancheRatios_

A / Z = [20, 80]

maxMaturityDuration_

28 days

minIssueTimeIntervalSec_

7 days

issueWindowOffsetSec_

Wednesday 21:00 UTC

Putting it all together

The active bond issuer is configured with (.20, .80) (senior, junior) tranche ratios. This means AMPL supply has to contract by > 80% within the period of the bond before senior tranches are impacted. For more information about how AMPL works see the Ampleforth Documentation.

At present, the maximum rate of AMPL contraction is 7.77% per day if the price per AMPL is $0. Thus, an entirely debasement-proof bond duration can be computed as follows:

0.2=(1.10)bond_lengthlog(0.2)=bond_lengthlog(0.923)bond_length=log(0.2)/log(0.923)0.2 = (1 - .10)^{bond\_length}\\ log(0.2) = bond\_length*log(0.923) \\ bond\_length = log(0.2)/log(0.923)

Based on the current configurations, the AMPL network can contract at a price of $0 for ~19.89792 days before senior AMPL tranches begin to be impacted, but the bond length is currently configured to 28 days. This means that although the likelihood of AMPL price falling to $0 is extremely small, it is mathematically possible for senior AMPL tranches to become impaired. However, historically AMPL supply has never contracted more than 52% in a 28 day period.

Recall that even in the case where senior AMPL tranches in the collateral set become impaired the system does not suddenly break, trigger runs or require bailouts.

For more details on this see About Stability & Durability.

Fees

The protocol fees are controlled by the FeePolicy contract. The FeePolicy is owned by the Forth DAO Timelock, so changes can only be enacted through DAO governance.

  • Spot Mint Fee: The percentage fee a minter pays when minting SPOT. A 1% mint fee means a minter would receive 1% fewer SPOT tokens for a deposited amount of AMPL A-tranches. This is non-extractive, so the all the input tranches go to the SPOT collateral base, enriching SPOT.

  • Spot Burn Fee: The percentage fee for redeeming SPOT tokens for the underlying collateral. A 1% burn fee means a redeemer would get 1% less collateral for an amount of SPOT tokens being redeemed. Similar to the mint fee, this is non-extractive. The remainder stays in the SPOT collateral set, enriching SPOT.

  • Flash Mint Fee: The percentage fee for flash mints. Since flash mints are facilitated by liquid AMPL in the Rotation Vault, this fee goes to the Rotation Vault stakers in the form of increasing the collateral base in the vault. The normal Spot Mint Fee still applies and goes to the Spot collateral set as usual.

  • Flash Burn Fee: The percentage fee for flash burns. Since flash burns are facilitated by excess Z-tranches in the Rotation Vault, this fees goes to the Rotation Vault stakers in the form of increasing the collateral base in the vault. The normal Spot Burn Fee still applies and goes to the Spot collateral set as usual.

  • Rotation Vault Mint Fee: The percentage fee a depositor pays when depositing into the Rotation Vault (stAMPL). This is non-extractive, and goes to existing vault stakers.

  • Rotation Vault Burn Fee: The percentage fee a redeemer pays when redeeming from the Rotation Vault (stAMPL). This is non-extractive, and goes to remaining vault stakers.

Fee SettingsValue

Spot Mint

1%

Spot Burn

1%

Flash Mint

4%

Flash Burn

4%

Rotation Vault Mint

0%

Rotation Vault Burn

5%

The Dynamic Rotation Fee & Reward curve, which controls Enrichment and Debasement, is also handled by the FeePolicy. This curve controls the exchange rate of tranches between SPOT and stAMPL during rotation.

Rollover Curve SettingsValue

Rollover Fee Lower (Max Debasement)

-10% / yr

Rollover Fee Upper (Max Enrichment)

20% / yr

Rollover Fee Growth

7

Mint Caps

We’re approaching this launch with the understanding that SPOT is a new system and is open to the same implementation risks all new systems are. SPOT is launching small and is expected to grow slowly over time with the maturity of the market. The bootup stage initially includes supply caps which can be changed or removed through governance. There is an overall supply cap, and a “per-tranche” supply cap which resets with the bond cycle every week. The per-tranche minting logic simply ensures that the current minting tranche doesn't exceed 50% of the tranche collateral base, to ensure mostly even collateral maturation through time.

Mint Caps

maxSupply

4,500,000

maxDepositTrancheValuePerc

50%

If the supply ceiling is reached, it is possible for SPOT to become overvalued in the market vs its collateral, until there is more supply minting unlocked for arbitrage to occur. Mint ceilings are primarily a tool to ensure a smooth growth period, and not meant to be a long term governance consideration.

In the next section we'll cover Providing SPOT Liquidity.

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