Simple Summary:
Raise the Supply Cap of ETH2x-FLI from 1,200,000 to 2,000,000.
ETH2x-FLI is currently at 850,000 units supplied, or 70% of the 1,200,000 units available to be minted as defined by ETH2x-FLI Parameter Update #8. In order to further grow the product safely, the FLI work team suggests raising the cap to 2,000,000.
Abstract:
Adjust the following parameter for ETH2x-FLI:
- Raise the Supply Cap from 1,200,000 to 2,000,000.
Motivation:
In order to enable the product to grow safely, the FLI work team plans to change one parameter related to ETH2x-FLI.
The Supply Cap defines the total amount of tokens that can be minted. Gradually raising the Supply Cap enables the FLI work team to monitor the growth of the product and ensure that it is always operating within safe thresholds.
We assess the safety of the product by measuring its delever speed.
Selecting appropriate parameters requires optimizing for both safety and efficiency. We optimize for efficiency by targeting a maximum rebalance transaction cost of 1% (fees + price impact). In current liquidity conditions, this enables us to set a Max Trade Size of 2,000 ETH on Uniswap V3, our main source of liquidity. This is the current parameter setting based on ETH2x-FLI Parameter Update #8.
Based on this Max Trade Size of 2000 ETH, the FLI work team is able to select an appropriate Supply Cap and determine a delever speed that can be achieved during market turbulence. Additionally, we project a 30% price increase in order to future proof our projections. Based on these projections we suggest a new Supply Cap of 2,000,000 units. This will enable us to target a delever speed of 0.058 while optimizing for a maximum of 1% cost to transact.
Context
As per IIP-45: Delegation of FLI Parameter Changes 2, management of FLI product parameters has been delegated to a small team of subject matter experts from DeFi Pulse, Set Labs, and the Index Coop community in order to enable more rapid, responsive changes to product parameters.
The FLI work team is comprised of individuals from three sub-groups:
- DeFi Pulse: @snasps @Jo_K
- Set Laboratories: @puniaviision @setoshi @richard
- Index Coop Community: @allan.g @afromac @emault
The process for updating FLI parameters is as follows:
- The FLI work team discusses and identifies parameter change requirements via discord / calls etc.
- Member(s) of the FLI work team will post a short description of the reasoning for the change to the forum and state that the FLI work team is in agreement; no poll is required
- The forum post must be active for 24 hours and have no dissent from FLI work team members
- The change(s) can then be made once these criteria are met
