Update 003_depth_bump.md

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Will Ruddick 2020-05-15 06:18:47 +00:00
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## Rationale
The reserve on the Bancor contracts will never grow far beyond the Target Reserve Ratio point as holders will sell off the CICs and remove the reserves beyond it.
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.
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.
(note that a depth shrink could also be created )
## Before
We have no ability to increase liquidity depth (reserve and supply outside of the bonding curve).
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.
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 will shoot up and CIC sell offs will cause the reserve to fall back again.
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.
## After
We would need to be able to mint tokens and the reserve outside of the bonding curve in a controled way.
The idea would be to keep the CIC price 1:1 with reserve and increase both reserve and supply equally (in multiple) (off the curve)
Excess tokens created in this process (beyond those minted along the bonding curve) should be given to a specific address designated in the Converter constructor.
The idea would be to keep the CIC price 1:1 with reserve and increase both reserve and supply equally (with the same multiple) (off the curve)
To avoid gaming: Excess tokens created in this process (beyond those minted along the bonding curve) should be given to a specific address designated in the Converter constructor.
A donor in this case can choose to always get back as many CICs as they add to reserve - with no speculative advantage.
## Implementation