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Update 003_depth_bump.md

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Will Ruddick 2020-05-24 10:21:07 +00:00
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@ -6,13 +6,19 @@ Version: 0.0.3
## Rationale
The reserve on the Bancor contracts will never grow far beyond the Target Reserve Ratio (TRR) point as holders will sell off the CICs and remove the reserves beyond it.
The reserve on the our bonding curve contracts will never grow far beyond the Target Reserve Ratio (TRR) point as holders will sell off the CICs and remove the reserves beyond it.
Giving people the option to multiply the reserve and supply tokens with the same multiple (without a price change) would be a way to increase the overall liquidity.
But because that would give an advantage to liquidity providers when the CIC price is above 1:1 we need to ensure that excess tokens are given to the community.
But because that would give an advantage to liquidity providers when the CIC price is above 1:1 we need to ensure that excess tokens are given to the community - in the form of a Basic Income pool.
### Note on depth_shrink
While a depth_bump gives people the ability to grow the liquidity ppol while taking a loss and as a result incresing the Basic Income
- a depth shrink (spec comming) can have the same effect by reducing the liquidity depth.
- The result of a depth bump and depth shrink means that a market can determine the appropriate liquidity depth.
## Before
We have no ability to increase liquidity depth (reserve and supply outside of the bonding curve) in the case where a system wants to grow.
We have no ability to increase liquidity depth (reserve and supply outside of the bonding curve) in the case where a system wants to grow without effecting the price.
Example if a donor decides to add 40,000 in reserve to a CIC (which is already at the designated TRR)
the price of the token may shoot up and CIC sell offs will cause the reserve to fall back again
- i.e. the Donor didn't really increase the over depth of the liquidity pool they just added a temorary price bump.