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 Degradation Scenarios.
• 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. For an overview of how rotation works please see About Minting, Redeeming, and Rolling Over. 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: $0.2 = (1 - .10)^{bond\_length}\\ log(0.2) = bond\_length*log(0.923) \\ bond\_length = log(0.2)/log(0.923)$ 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.

### Fees

There are four configurable fee parameters in the system. The fee parameters, when positive, are paid by the users into the fee buffer. And when negative, are paid to the user from the fee buffer. All of them are currently set to 0 except the Burn fee.
• Mint Fee: A percentage based fee taken at the time of minting. Mint fees go to a fee buffer used to reward future rollovers. Currently this value is set to zero. Note that rollover rewards can also be granted by emission. For more information see About System Incentives.
• Burn Fee: A percentage based fee taken at the time of redemption. Burn fees go to a fee buffer used to reward future rollovers. Currently this value is set to zero. Note that rollover rewards can also be granted by emission. For more information see About System Incentives.
• Rollover Fee / Reward: Typically set as a negative value. This is a percentage based reward given at the time of rollover. Rollover rewards first draw from the fee buffer and if that is exhausted they draw from emission rewards. For more information see About System Incentives.
• Protocol Fee: A protocol fee can be enabled that allocates a subset of mint, burn, and rollover fees to a DAO controlled address. Unlike Mint, Burn, and Rollover fees that are strictly used to incentivize present and future maintenance actions, the protocol fee is extractive.

### 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. There are novel mechanisms involved, there may be smart contract bugs, and markets may need time to mature and learn about SPOT’s behavior.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 each new bond cycle.
Mint Caps
maxSupply
750,000
maxMintAmtPerTranche
125,000
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.