Governance Process: Minimum Deposit Policy

Background

The solvency of Super Token Streams currently relies on a buffer based system which is described in more detail here.

• Each super token can have its own minimum deposit configured by governance.
• The cost of liquidation is affected by the gas price, the super app complexity (of which there is a gas limit 3M per callback) and the gas cost of agreement operations.
• The main stakeholders of the minimum deposit are the TOGA PIC and the sentinel operators.
• TOGA PICs are encouraged to propose a new minimum under the /Minimum Deposit Guideline/.
• The governance body will review related proposals. If it deems a proposal follows the minimum deposit guideline, then it should pass the proposal within 2 weeks. If not, a justification must be communicated transparently to the "proposer".

Minimum Deposit Guideline

The goal of the minimum deposit is to ensure that liquidation transactions pay for themselves under most circumstances. There's no way to predict the cost of future liquidation transactions, but we can make a probabilistic prediction by looking at the status quo.

Default rule

Absent a more elaborate model, this is the proposed way to determine an appropriate minimum deposit amount:

• determine the average price of a liquidation transaction over the past 30 days, denominated in the chain's native token (e.g. ETH)
• determine the average token price over the past 30 days, denominated in the chain's native token
• divide the first number by the second
• add a margin of 100%

Example calculation for determining the appropriate minimum deposit of DAIx on Polygon according to this rule:

• average gas price of 220 gwei over the past 30 days, multiplied with the gas amount of 330k = 0.0726 MATIC
• average token price over the past 30 days of DAI: 0.9 MATIC
• 0.0726 / 0.9 = 0.08 MATIC (rounded)
• +100% = 0.16 MATIC

Note that since the determined amount is just a best guess about the future, there's no need to be very precise. E.g. The amount of gas here is based on a typical liquidation transaction for that token and may vary a bit. Also, the average token price is a ballbark estimation, looking at a chart. Community contributions for a tool automating this calculation are welcome!

Custom rule

Governance proposals for a minimum deposit may also suggest an amount derived another way. In this case, an explanation/justification for the proposed value shall be included in the comment section of the proposal.

Update frequency

The governance body will have a monthly review of minimum deposit values. That is, new proposals will be reviewed and applied periodically on a monthly basis. For tokens which already have a minimum deposit set, the set value will on such occasions be updated to reflect the underlying rule if the set value is deemed to have diverged too far from the value appropriate according to the rule.

References

• Discussion thread: https://github.com/superfluid-finance/protocol-monorepo/discussions/categories/governance-minimum-deposit