[Discussion] Change sUSD-V2 Pool A Factor from 100 to 200

[jiecut]

@KALEB Also a big change would be a pool where the sUSD reserves are available on secondary markets. Could make a big difference.

[michwill]

Ok, here’s the thing.
If you increase A, there will be more liquidity in a narrower range.
If we increase A now, while SUSD is ~1.01+, it will be easier for SUSD to break out upwards.

Tldr: A higher than now makes it easier for SUSD to break the peg.

My opinion is that A=100 is fairly optimal here

[KALEB]

@jiecut

@jiecut

I just didn’t like the argument of using it as a peg management lever. Note that A is an amplification coefficient, it’ll also means, that it’ll be more aggressive at buying sUSD too. It’s dual sided, it also means that the curve pool will try to be more aggressive at propping up the sUSD peg too.

Well you know, I don’t like playing around with things this fragile, but the state of the peg was crazy, because we have a bunch of farmers drowning the pool with USDC&USDT causing an imbalance and sUSD to go off-peg… In the end, the demand for sUSD is kind of related to the exchange volume… So if we raise the A-factor, I don’t anticipate any impact on the supply of sUSD in the pool (since it is exchange volume driven) rather it’ll just allow traders to buy sUSD at reasonable prices…

@jiecut

One thing to note is that LPs will have a bit more risk if sUSD depegs downwards.

Yeah if we were at a discount, probably then it’s a different matter all together…And probably would lobby for higher SNX rewards shot at the pool, higher c-ratio, more CRV shot at the pool, or lower A.

@jiecut

agree that the CRV gauge adjustment is a very powerful monetary policy tool. Maybe the Synthetix DAO needs to lock up some veCRV to have a bigger influence on decisions.

Well I did raise this on snx discord, but I don’t know who manages sDAO, probably if it was one guy that controlled a large amount of the supply, like Andre does with his pools, than we’d have much more levers. But as was seen recently, Founders of CRV can veto any decision… And I’m not sure they’d like to see lower rewards on the V2 pool, because they worry it’ll lower TVL…

@michwill
Ok from what you said, I understand that the first order derivative will be lower but then the second order derivative will be higher. Can you please clarify the scenario that would result in a break-out to occur? Like are you referring to massive draining sUSD liquidity from the pool will result in this breakout?

[michwill]

When A is higher, d_balance/d_price is higher, however the range where it is higher is smaller, and the current price will become out of that range if we raise A. IMO, A cannot manipulate SUSD price closer to the peg now.

A real solution could be to allow printing SUSD out of thin air for a smart contract which sells high and buys-low-and-burns. This operation would be profitable btw

[KALEB]

@michwill

When A is higher, d_balance/d_price is higher, however the range where it is higher is smaller, and the current price will become out of that range if we raise A. IMO, A cannot manipulate SUSD price closer to the peg now.

Ok that is pretty clear to me thank you.

@michwill

A real solution could be to allow printing SUSD out of thin air for a smart contract which sells high and buys-low-and-burns. This operation would be profitable btw

Well I don’t think we can ever arrive at consensus as an SNX community to issue sUSD that is not backed by some form of debt (synth minting) or not tied to some locked up liquefiable collateral (synth loans), even if it was profitable to do so… But there are things being worked on to alleviate the peg pressure from snx dev side:

1. Making minting/burning/claiming cheaper (even Pre-L2)
2. sUSD Loans backed by ETH
3. L2

But I can say the gauge plays an important role now in setting the sUSD peg. If yielded, it can set sUSD to whatever price, since it seems people automatically shift USDT/USDC to other pools depending on that factor.