Tl;dr / I don’t like maths tell me in words
Currently, if STAB trades at 95% of its peg for an entire day, the interest rate changes by -8.3%. I think it could be thrice as high. What do you think? Also, we could set some preset interest rate parameters that an authorized member can pick from at all times to react to changing market conditions without having to go through a proposal first. This is not necessary at all, but something to consider.
Hi all, currently the interest rate for the STAB Protocol seems to move rather slowly. I (and I think a couple others) think it should move faster.
Situation now
When I first set the interest rate parameters, I didn’t think the interest rate would reach values as extreme as we are seeing now. Because of that, the parameters that determine its change were set fairly low. The exact parameters we are using now are:
Kp = 0.00000000229553571
Ki = 0.00000000076517857
The first one determines how the price error at the time of measuring influences the interest rate, and the other one determines how the last couple of price errors determine it. The exact calculation can be found here:
Proposed change
I propose to first tweak Kp, as that one’s effect is just straightforward: it merely uses current price information of STAB.
Due to the redemption system, STAB’s market price is unlikely to fall below 95% of its peg. Let’s calculate the effect of Kp in this extremest situation to get a better understanding of the current parameters. The relevant formula would be:
interest_rate -= (kp * (price_error / internal_price)) * passed_minutes
Filled in:
interest_rate -= (0.00000000229553571 * (-0.05 / 1)) * 86400 = -0.000000165278
From an interest rate of 1 (0% interest) this would lead to an interest rate of 0.99999983472 within a day’s time. Which translates to an interest rate of 0.99999983472^(525600) = 0.91679615776. In other words, a change in interest rate of around -8.3%.
Summarized: we can see that if STAB trades at 95% of its peg for an entire day, the interest rate changes by -8.3%.
Personally, I think it could be around thrice as high. So that’d mean a Kp of 0.00000000688660713.
How fast do you think the interest rate should change?
Parameter presets
I have one other suggestion that people might think would be useful: we could set a couple of “allowed” Kp values that an authorized member (or multiple) can pick from at will. If there’s a need for fast interest rate changes, he can set the Kp value to the high preset value, and the other way around.
By only allowing a couple of preset values, we ensure safety of the protocol is never in danger. Adopting such a system would enable us to react to changing market sentiment without going through an entire proposal first. Is this something we think could be useful?
