FIP 48 - Dynamic Buyback/Recollateralize Functions
Discussion therad: https://gov.frax.finance/t/fip-48-dynamic-buyback-recollateralize-functions/773
Summary
Make the buyback & recollateralize functions 2 dynamically toggle when peg is below/above 1.0033 & .9966
Background & Motivation:
The FRAX peg has been practically unshakable and I’d like to suggest some improvements for both performance of both protocol functionality as well as FXS value accrual. Right now, per FIP 6 rules 4, the CR is changed periodically if the peg has not changed. This has been the case for many many months. I can’t recall when the peg has shifted even by a single 1/3rd of a cent. This proposal is to modify the Frax buyback/recollateralize function rules so that they are only activated when the peg deviates by 1/3rd of a cent between 1.0033 and .9966. This is for a few reasons: the protocol is extremely stable at CRs in this range and the CR adjustments occur much less frequently per FIP 6 rules. Secondly, large recollateralize functions mint a very large amount of FXS into circulation dramatically increasing the emission rate of FXS when it does not directly aid in any stability performing function. For example, just this week, over 50,000 FXS has been minted from recollateralize functions which almost has tripled the emission rate of FXS this week. That is a 300% inflation rate increase. If it was aiding in the stability of the protocol due to even slight peg deviation, that would be extremely valuable but as can be seen from the oracle price, the FRAX peg is at 1.000.
Regardless, there might come a day(s) when the peg price is deviating by more than 33% of 1 cent. This range is minimal but if this deviation occurs, this is exactly when the protocol will turn on buyback/recollateralize dependent on the CR and the direction of the peg to perform its core stabilizing function and bring the CR to target to restore confidence in the peg. I think this is a completely conservative and non-controversial improvement to the protocol which helps FXS value accrual by not causing excessive mints of FXS while also making sure it is possible to recollateralize if needed.
For: Make Buyback/Recollateralize dynamic to peg price
Against: Do nothing
| Voter | Cast Power | Vote & Rationale |
|---|---|---|
 0x947B...7D0277 | 25.493M | 100% for For: Make Functions Dynamic |
 0x88E8...0e7a12 | 5.09M | 100% for For: Make Functions Dynamic |
 0xE026...b54f89 | 1.592M | 100% for For: Make Functions Dynamic |
 0x3F3B...853fFD | 494,159 | 100% for For: Make Functions Dynamic |
 0xcfCc...B9038b | 64,413 | 100% for For: Make Functions Dynamic |
VOTE POWER
Proposal Status
- Mon March 07 2022, 10:00 pmVoting Period Starts
- Sat March 12 2022, 10:00 pmEnd Voting Period
Current Results
1-For: Make Functions Dynamic
32.819M
2-Against: Do Nothing
483.171