As I checked the code in Contract “EthUniswapPCVController”, I found that the reweight action will use “reweightWithdrawBPs” parameter which can only be set by Governor role, currently reweightWithdrawBPs is 9900 which means every time reweight happens, the PCV controller will use 99% of total PCV to restore the PEG. I think we can simply control this parameter “reweightWithdrawBPs” to achieve smooth PEG recovery rather than PEG directly to $1 and front run by bots, it’s like an auction process starting from current FEI price to $1.
For example lets say current FEI price is 0.8, we can set this “reweightWithdrawBPs” parameter to 2500 which is 25%, then resume the protocol reweight, and after a reweight we can pause the protocol reweight again. The price of FEI won’t rise to $1, but roughly rise to $0.85, then we can wait for a period of time (One day e.g.), then the price may slowly drop to somewhere between 0.8 and 0.85. we then can repeat the whole thing again.
By doing so, we need not to change any current contract code, and it’s easy to implement and we can vote on it
Interesting idea, how do you think this would play out long term? It’s been speculated that timed reweights will allow for bots to swoop in and front run for huge profits.
I like the idea. Imo, the best way to handle this is to support increasing prices during a certain period of time until the peg is restored in a smooth way. It is important to make it progressive to allow short-term/low-confident capital to go away while improving the collateralization ratio. Maybe what you propose is the way to do that.
playing around with the algo and parameters is a bad idea at this stage. There is a sense of urgency here to get this resolved and things like this need to be adequately tested/audited.
Am strongly against any code changes of this nature before a redeem option is offered. It’s not tinker time here, it’s damage control time.
By adjust the ratio of reweight it can increase by 1 cent of FEI price at a time , which won’t leave too much room for bot frontrun, to completely avoid frontrun we need to add a minimum price as pre condition to run reweight, just like the slippage protection in uniswap. And set this slippage to zero will make no room for bots at all, but in exchange the reweight transaction could fail more likely.
Please read the detail, NO CODE CHANGES needed, and it can be tested bit by bit, start with 1 cent price rise back to PEG, if anything wrong we can stop