PIP-18: Updating Warlord weights

Paladin Improvement Protocol (PIP) PIP - Approved
1

Summary: update weight in order to rebalance Warlord

Context:
When Warlord was released, weights were chosen for CVX & AURA to mint WAR, based on the value of each token and their yield at the time.
After some time, prices and yield have shifted, and the current weights do not reflect the correct values anymore, making it less than interesting to mint WAR using CVX today.

Rationale:
To solve this issue, we propose to change the current weights for both assets, calculated to reflect the price of each, in a fashion so the total of CVX & AURA held still match the total WAR Supply.
And we propose to start a program where the weights in Warlord could be changed every month, if needed, following the same calculation logic.

The new weights are calculated with the aim of having a ratio between the CVX weight and the AURA weight matching as closely as possible the ratio between CVX price & AURA price.

tW => total WAR supply
tCVX => total CVX in Locker contract
qCVX => amount of CVX in the redeem queue
tAURA => total AURA in Locker contract
qAURA => amount of AURA in the redeem queue

wCVX => CVX weight
wAURA => AURA weight

tW = ((tCVX - qCVX) * wCVX) + ((tAURA - qAURA) * wAURA)

The goal of this calculation is to find the best combo of wCVX & wAURA that fits the desired goal (ratio between wCVX & wAURA matching the ratio between price of both assets), and the weights applied does not create a situation where part of supply of the WAR is not backed by any token (if the weights applied to current amounts of CVX & AURA in the protocol gives a smaller calculated WAR supply than the real WAR supply)

For the 1st change of weights, based on the current state of Warlord & the prices, we recommend the following weights :
CVX weight : 1.5475
AURA weight : 0.4588389
(If the prices or state of Warlord changes while discussing & voting this proposal, a new set of updated weights will be posted here to be considered)

Means:
None

Voting options:
For / Against / Abstain

  • For
  • Rework
  • Abstain
0 voters
5 Likes
2

I speak in my name and as Tholgar’s.

This seems like an very good and needed update to Warlord so we totally support this proposal and are eager to see this go live.

3 Likes
3

Thanks for the proposal, I will support this change for Warlord as it fits with the current state of the product.

For the weight updates we could define a range where we do nothing and as soon as it is outside we do the update based on this formula.

3 Likes
4

Personally, I think it makes totally sense for an index as warlord to gets its underlying ratios rebalanced.

Speaking from Tholgar’s point of view, it is also a useful proposal as it might attract more CVX holders.

3 Likes
5

Thanks for this proposal !

It make sense, I support updating the Warlord ratios for CVX & AURA.

1 Like
6

  • I am currently calculating a split of 18% CVX and 82% Aura, instead of the redeem weights of 11.62% CVX and 88.38% AURA shown on the front. I assume it’s because I didn’t consider what is already in the redeem queue?

  • Is it possible to see the queue anywhere? (number of tokens and how much time is left on that lock?)

Is that really the case though?
I understand that on a first look it it seems disadvantageous to deposit CVX because you overpay the theoretical value of WAR tokens by 37%, whereas with AURA you currently underpay by 8%. But the deposit/lock of CVX/AURA also changes the composition of the assets backing the WAR token so in terms of value, the impact is not as significant.

If I understand correctly (and from previous discussions), we are not targeting a specific allocation for each tokens. (such as a 50-50 split or 75-25 split), the objective is only to periodically readjust the weights so that you end up minting the same amount of WAR tokens, whether you deposit 1000$ worth of AURA or CVX.

Can you please elaborate on that? I don’t think that would ever be possible… I assume this is just badly worded?

7

In my opinion it is a really good idea to update those ratios !
thanks for this proposal

8

Hey, sorry for the delay

Not yet, it’s something we could add in the UI. The only way is to check directly from the contracts.

Because WAR is mainly backed by AURA rn, and because of the genesis ratios, for the same $value of deposit you get less WAR via CVX is what I meant, and coupled with the fact that your WAR potential redeem becomes mainly AURA, the feedback we got told us that for CVX holder it’s less interesting to deposit CVX to mint.

Yes, the goal is to have weights reflecting the value between each token as week as the composition of the WAR index at the time of calculation.

This is the tricky part when changing the weights, we want ratios so that the current total supply is WAR is still reflecting the assets held in Warlord, so that all WAR token is backed by the same amount of CVX & AURA, and that enough of both token are currently held in Warlord to cover all redeem of all the WAR tokens.
As we base our weight calculation on the ratio between the price of both assets, if one of the ratio is round up, it would mean some WAR tokens are actually not backed by enough CVX & AURA, so we prefer a case were a negligible small amount of CVX & AURA are not matched by WAR rather than the other case, with of course the best case were all assets match the total WAR supply to the exact wei.
So what I meant previously is we consider this safeguard while calculating so we avoid any case were the last redeemed WAR still give you the correct amount of CVX & AURA (although we’re not hoping for a case were all WAR is ever redeemed :smile:)

3 Likes
9

Thanks for the reply, and sorry my delay as well! :rofl:

It’s much clearer for me now thanks to your explanation and the very good documentation on the site. I was able to decipher the logic for getTokenWeights in the redeemer contract. I didn’t expect the calculation of the redeem weights to use the initial weights (0.5 for Aura & 1 for CVX) and applying them to the balance of locked CVX and AURA (reduced by the amounts already queued for withdrawal).

I think that changing the weights to be as close as possible to the current market prices makes sense for new minters of WAR. As mentioned before, CVX holders currently do not want to mint WAR if they will take an immediate 30% hit, so that needs to be addressed. Ideally you should mint the exact same number of WAR tokens for a given monetary value, regardless of whether the deposit was made in CVX or AURA.
I am just concerned that changing the weights might have a undesired impact on the redemption weights.

1 Like
10

Vote is now live: Snapshot

11

Quorum PIP-18: 891 594 votes

image