This proposal is to ramp up the amplification coefficient (A parameter) on the stETH pool from 50 to 200.
Motivation:
The stETH pool has been one of the largest and most balanced pools on Curve since its inception. Increasing the amplification coefficient will help reduce volatility in this pool during one-off events [1] that are not indicative of the stability of the underlying assets, and will allow them to trade closer to the 1:1 redemption ratio that will be available once post-merge withdrawals are enabled.
Information regarding the Amplification Parameter can be found on the Curve white paper: https://curve.fi/files/stableswap-paper.pdf
Specification:
Ramp up the amplification coefficient on the stETH pool to 200.
For:
The A parameter on the stETH pool should be increased to 200.
Against:
The A parameter on the stETH pool should not be increased to 200.
Hey, Vasiliy from Lido here. I don’t think it’s a good idea neither for Lido nor for Curve.
The natural dynamics for stETH:ETH pool is going slightly off peg when there is a stETH sell pressure, so that people with longer time preference can buy stETH at discount. That allows a healthy amount of time-based arbitrage trading in the pool, a natural way of pool imbalance recovery and a market-derived stETH price. Amping the A coefficient to 200 at this point in time will reduce trading volumes on Curve rather than increase it.
Once the eth2 merge happens, I suspect this pool will play an important role by market matching people who want to stake with people who want to withdraw their validators, effectively reducing the validator queue churn and bypassing wait times.
When the merge happens, does your opinion on the amplification coefficient of the pool change? Or would you like to see it stay at 50?
TL;DR: My sense is that we’ll need to see more of how the stETH peg acts before making any changes. Current price action would support a higher A, but it’s not clear this level of stability will be maintained.
Two major points:
Sims using recent price action (last 2 months) do indeed suggest A could be raised to 128-181 while maintaining 60/40% balance or better (corresponds to .8 on the balance metric for pools with 2 coins)
But, I don’t know how confident we can be that this regime continues. stETH went as low as .98 ETH in September. With current pool size and A=100, this would produce a ~25%/75% imbalance, which is probably unacceptable.
