"Wen auction. " Part 2.
11 Jan 2024, 18:41
“Wen auction?” Part 2 ⏳
The topic of auction timing on Reserve has been covered in a prior thread, but an update is due with the introduction of Dutch auctions.
Reminder: Revenue auctions are employed to lock in and realize yield for RToken stakers & holders.
Let’s go 🧵👇
Same news in other sources
811 Jan 2024, 18:41
If you’re keen to learn more about this process, or even just curious to learn the nuts and bolts of the Reserve Protocol, join us on Discord! 👉
You can also dig deeper into our documentation here 👉
If you're keen to learn more about this process, or even just curious to learn the nuts and bolts of the Reserve Protocol, join
If you’re keen to learn more about this process, or even just curious to learn the nuts and bolts of the Reserve Protocol, join us on Discord! 👉 https://t.co/vGfgiXZhPr
You can also dig deeper into our documentation here 👉 https://t.co/nTOL9XiWS5
11 Jan 2024, 18:41
Additionally, gas will eat into profits. Consider tx costs for recent revenue auctions:
Starting the auction
Settling the auction
Participation in #DeFi has real consequences; this guide is meant for sophisticated users only
Additionally, gas will eat into profits. Consider tx costs for recent revenue auctions:. Starting the auction.
Additionally, gas will eat into profits. Consider tx costs for recent revenue auctions:
Starting the auction https://t.co/Fz2979CHQj
Settling the auction
https://t.co/kWPQnvkWz8
Participation in #DeFi has real consequences; this guide is meant for sophisticated users only
11 Jan 2024, 18:41
⚠️ Caveats to consider before attempting this:
→ Dutch auctions must be completed with the entire lot, so make sure the size is manageable
→ Consider the slippage at the time of the trade, as liquidity conditions change
→ Auctions end after 30 min
Caveats to consider before attempting this:.
⚠️ Caveats to consider before attempting this:
→ Dutch auctions must be completed with the entire lot, so make sure the size is manageable
→ Consider the slippage at the time of the trade, as liquidity conditions change https://t.co/d8XGUASA0k
→ Auctions end after 30 min
11 Jan 2024, 18:41
Now let’s walk through a hypothetical auction execution for $20K eUSD (← more comfortable margins)
1️⃣ Start eUSD → RSR Dutch auction
2️⃣ Buy $20K RSR on DEX (incurring ~1% slippage)
3️⃣ Wait until auction drops to acceptable/min price, and submit bid
Now let's walk through a hypothetical auction execution for $20K eUSD (← more comfortable margins).
Now let’s walk through a hypothetical auction execution for $20K eUSD (← more comfortable margins)
1️⃣ Start eUSD → RSR Dutch auction https://t.co/5t1Vo2KiWz
2️⃣ Buy $20K RSR on DEX (incurring ~1% slippage)
3️⃣ Wait until auction drops to acceptable/min price, and submit bid
11 Jan 2024, 18:41
Too easy to profit from, though, right? Indeed: there’s still a catch 🕵️
Third parties are unlikely to have RSR inventory and must buy from DEXes to participate. From @DefiLlama we see that buying ≥$55K RSR renders this trade unprofitable due to slippage
Too easy to profit from, though, right. Indeed: there's still a catch.
Too easy to profit from, though, right? Indeed: there’s still a catch 🕵️
Third parties are unlikely to have RSR inventory and must buy from DEXes to participate. From @DefiLlama we see that buying ≥$55K RSR renders this trade unprofitable due to slippage
11 Jan 2024, 18:41
Oracles are relied on by the Reserve Protocol for pricing revenue auctions and ultimately to determine acceptable minimums
The eUSD oracle inherits the deviation from its underlyings, which is 0.25% — so the total possible profit is 1+2+0.25=3.25% (assuming CL price = DEX price)
Oracles are relied on by the Reserve Protocol for pricing revenue auctions and ultimately to determine acceptable minimums.
Oracles are relied on by the Reserve Protocol for pricing revenue auctions and ultimately to determine acceptable minimums
The eUSD oracle inherits the deviation from its underlyings, which is 0.25% — so the total possible profit is 1+2+0.25=3.25% (assuming CL price = DEX price)
11 Jan 2024, 18:41
2️⃣ Oracle error 🔮
Another profit vector results from uncertainty in oracle pricing
It’s infeasible for @chainlink operators to update onchain oracles for every CEX/DEX trade, so a “deviation threshold” dictates the percentage change that triggers an update. For RSR this is 2%
Oracle error. Another profit vector results from uncertainty in oracle pricing.
2️⃣ Oracle error 🔮
Another profit vector results from uncertainty in oracle pricing
It’s infeasible for @chainlink operators to update onchain oracles for every CEX/DEX trade, so a “deviation threshold” dictates the percentage change that triggers an update. For RSR this is 2%
11 Jan 2024, 18:41
1️⃣ Trade slippage ⚖️
RTokens have a property called maxTradeSlippage, which, like slippage on a DEX, dictates the minimum amount of tokens the RToken is willing to receive
At 1% for eUSD, a third party can give $990 worth of RSR in exchange for $1000 eUSD, and pocket $10 profit
Trade slippage.
1️⃣ Trade slippage ⚖️
RTokens have a property called maxTradeSlippage, which, like slippage on a DEX, dictates the minimum amount of tokens the RToken is willing to receive
At 1% for eUSD, a third party can give $990 worth of RSR in exchange for $1000 eUSD, and pocket $10 profit