Auton Stabilization Mechanism (ASM)

Auton Stabilization Mechanism: elements, the functions they perform, and the lifecycle for Auton and Newton supply.

Overview

This section describes the Auton Stabilization Mechanism (ASM) and protocol. The Auton Stabilization Mechanism provides functions to compute the target value for the Auton (ATN), a Collateralized Debt Position (CDP)-based stabilization mechanism to borrow Auton for Newton (NTN) collateral at interest, and an auction mechanism to maintain CDP health by debt and interest auctions.

Auton price stability is maintained by targeting Auton market value to a Stabilization Target the Autonomous Currency Unit (ACU).

Auton borrowing and repayment via a CDP-based stabilization mechanism acts to mean-revert the Auton’s actual market price towards the target through the supply of Auton and Newton (NTN). CDP integrity is maintained by CDP owners managing their CDPs and an auction mechanism introducing market incentives by means of interest auctions for CDP loan interest and debt auctions for liquidatable CDP collateral.

Auton tokens are minted and burned exclusively as a result of changing Collateralized Debt Positions.

Users open CDPs by depositing collateral in the form of NTN to borrow Auton at interest. Autons are minted when borrowed and interest then begins to accrue against the loan debt.

Autons are burned when a CDP is repaid by depositing ATN to the ASM’s Stabilization smart contract. NTN is removed and returned to circulation by CDP owners as they deposit and withdraw NTN collateral to their CDP.

CDPs are created with defined collateralization and liquidation ratios which limit the risk that the debt cannot be adequately covered by the sale of the collateral.

Borrowers maintain their CDP throughout its lifecycle, depositing and withdrawing collateral, paying interest, and increasing or decreasing borrowing to maintain their CDP within the required collateral and liquidation ratios.

An Auction Mechanism is utilised to maintain CDP health and Auton and Newton supply by auction-based market incentives. CDP interest payments accumulate until a threshold amount is crossed, triggering an interest auction where bidders bid NTN for the paid ATN interest. If a CDP becomes liquidatable, then a debt auction is triggered where bidders bid ATN for CDP NTN collateral.

Changes in supply and demand for Auton are absorbed by dynamically adjusting CDP incentives to increase and decrease Auton borrowing costs when Auton price moves above or below its Stabilization Target the Autonomous Currency Unit (ACU).

ASM identifiers and accounts

The ASM functions with three identities for cryptographic security: the CDP owner, and the Stabilization and Auctioneer protocol contracts.

Stabilization Contract calls to mint and burn Auton as CDPs are interacted with to borrow and repay Auton are restricted to the Stabilization Contract, the ‘stabilizer’ address.

Stabilization Contract calls to liquidate CDPs are restricted to the Auctioneer Contract, the ‘auctioneer’ address.

CDP identifiers

The CDP owner’s account address is used as a unique identifier for the CDP itself as well as the CDP owner.

The identity is in the form of an Ethereum formatted account address and is used to:

  • unambiguously identify the CDP on-chain
  • by the CDP owner as the msg.sender address in all CDP interactions: to open, repay debt, and withdraw collateral from the CDP
  • by a Liquidator to identify the CDP being liquidated in a liquidation scenario.

Stabilization protocol

ASM roles, core concepts, and the lifecycle of a CDP from opening to closure.

Stabilization roles

There are four roles in the ASM:

  • Borrower (CDP owner): a user taking out a CDP to borrow Auton, deposing collateral in return. There is no limit on the number of open CDP’s a borrower can own at any one time. Borrower’s must have an account on the Autonity network.

  • Bidder (debt, interest auctions): a user or agent that bids in auctions for:

    • debt: bidding ATN for NTN. A debt auction liquidates and is triggered by a CDP that has become under collateralized, repaying the CDP’s outstanding ATN debt and receiving remaining NTN collateral token in return.
    • interest: bidding NTN for ATN. An interest auction is triggered when the accumulated amount of ATN the ASM has received from CDP interest repayments crosses a threshold.

    Bidders must have an account on the Autonity network.

  • Stabilizer (ASM Protocol): the stabilizer is the protocol account address used for Auton mint and burn operations by the Stabilization Contract

  • Auctioneer (ASM Protocol Liquidator (Keeper)): the auctioneer is the Auctioneer Protocol Contract used to initiate and manage debt and interest auctions. Interest auctions are managed purely by the Auctioneer Contract. In debt auctions the auctioneer address is used to call the Stabilization Contract liquidate() function and trigger CDP liquidation.

ASM elements

The ASM is composed of 4 system elements implemented as smart contract logic: ACU, Supply Control, Stabilization, Auctioneer. ASM contracts are deployed by the protocol at genesis.

ACU

The Autonomous Currency Unit (ACU) is a currency basket from which an index value is computed. This index value is then used as the stabilization target for Auton price, see Stabilization.

The ACU currency basket is composed of 7 free-floating currencies:

  • AUD - Australian Dollar
  • CAD - Canadian Dollar
  • EUR - Euro
  • GBP - British Pound Sterling
  • JPY - Japanese Yen
  • SEK - Swedish Krona
  • USD - United States Dollar

Each currency’s quantity in the basket is computed to provide a currency basket with minimal total variance with respect to its underlying currencies. The index value then has minimal volatility with respect to variance from individual currency fluctuations.

The index value of ACU can be computed at any time in terms of exchange rates. The index value is computed from price data for each of the basket currencies. Price data is sourced from off-chain by the validator oracle network and retrieved from the Oracle Contract on-chain.

The value is recomputed at the end of each oracle voting round after new price data for the basket currencies has been computed by the oracle network.

Public functions can be called to return the ACU value, scaling, the currency pair symbols in the basket, and the basket quantities. See ACU Contract Interface.

Modifying the currency basket is restricted to the governance account. See the Governance and Protocol Only Reference, modifyBasket().

A note on ACU basket quantities and ACU index value

The quantity of each currency in the basket is computed based on the end-of-day time for the most recent 11 calendar years of rate data for each currency. A 365 calendar day is used, end-of-day is 17:00 GMT.

\(\text{USD}\) is used as the numeraire over the data. The quantity of each currency in the basket is then computed based on a weighting that aims to minimize its variance with respect to the basket and using an initial target value of \(\text{1 USD}\) for the total value of the basket. Basket quantities fixed over time. The index value of ACU at any time can be computed in terms of exchange rates.

When the computed weights are determined to no longer be optimal, the basket quantities are recomputed. The “recompute time” is then the close of the most recent calendar day in the past and again based on the preceding 11 years of calendar data from that time point.

The new basket quantities are computed by:

  • Collecting end-of-day (17:00 GMT) data for each ACU constituent currency for the preceding 11 calendar years to today.
  • Compute minimization, weights, and basket quantities using the data.

Supply control

The Supply Control contract controls the supply of Auton in circulation on the network. The contract is called by the Stabilization contract to mint and burn Auton as CDP’s are opened and Auton borrowed and repaid. See the Governance and Protocol Only Reference, mint() and burn().

Public functions to return the total supply of Auton and the amount of Auton available for minting can be called, see Supply Control Contract Interface.

Stabilization

The Stabilization Contract maintains a record of CDPs and calls the Supply Control Contract to mint and burn Auton as collateral token is deposited or withdrawn and borrowing repaid. For each CDP, the Stabilization Contract records:

  • timestamp: the timestamp of the last borrow or repayment.
  • collateral: the collateral deposited with the Stabilization Contract.
  • principal: the principal debt outstanding as of timestamp.
  • interest: the interest debt that is due at the timestamp.

The stabilization mechanism operates by dynamically adjusting CDP incentives.

Users post Collateral Token to borrow ATN against collateral at the Borrow Rate. The Auton Borrow Rate goes up (down) depending on whether ATN/ACU is below (above) the target exchange rate for ATN/ACU to:

  • Increase ATN borrowing (more supply) when ATN/ACU is above target
  • Decrease ATN borrowing (less supply) when ATN/ACU is below target.

CDP collateral token is currently restricted to the Autonity staking token NTN but may be extended to other protocol assets.

Modifying the stabilization configuration for CDP collateral and debt thresholds is restricted to the governance account. See the Governance and Protocol Only Reference, setLiquidationRatio(), setMinCollateralizationRatio(), and setMinDebtRequirement().

Public functions can be called for:

  • CDP ownership - borrow and repay Auton, withdraw and deposit Collateral Token
  • CDP cost discovery - collateral price, borrow limit, minimum debt requirement, and interest due
  • CDP liquidation - if a CDP is liquidatable and to liquidate. Liquidation is invoked by ASM debt auctions. See ASM element Auctioneer and ASM protocol primitive auction.

See Stabilization Contract Interface.

Auctioneer

The Auctioneer Contract initiates and manages debt and interest auctions for illiquid CDPs and accumulated CDP interest payments respectively.

ASM’s auction mechanism is complementary to the Stabilization mechanism and contributes to lending market equilibrium. Auctions introduce market incentives that bring NTN and ATN in and out of open circulation by means of bidding NTN for CDP ATN loan interest in interest auctions and repaying ATN debt for NTN collateral in CDP debt auctions for liquidatable CDP collateral.

Auctions open with a start price which decreases over the auction’s duration to a floor price as a function of time.

For interest auctions the start price is set at a premium to the collateral price and floor at a discount to the collateral price. For debt auctions the start price is set at the liquidation price and floor at the bankruptcy price.

Participants with sufficient funds can place bids at or above the reserve price and the auction ends when the first bid \(>=\) the reserve price is received. If no bids are received within the auction duration, the auction remains at the floor price until a willing bidder is found. An auction will always end with a single, successful bid.

A debt auction is triggered by a bidder identifying a CDP that has become under collateralized and submitting a bid to repay the CDP’s outstanding ATN debt in return for the remaining CDP collateral. A successful debt bid then trigger CDP liquidation: ATN debt is repaid and burnt; NTN is released into open circulation.

A note on CDP liquidation

Debt bids trigger liquidation by the Auctioneer Contract invoking the Stabilization Contract liquidate() function.

An interest auction is triggered when the accumulated amount of ATN that the ASM has received from CDP interest repayments crosses a configured threshold amount. For each new interest auction triggered, the Auctioneer Contract emits a NewInterestAuction event logging:

  • auctionId: the unique identifier for the auction.
  • amount: the amount of ATN in the auction.
  • startRound: the timestamp when the auction will begin; this is the timestamp of the interest payment that triggered the interest auction.
A note on CDP interest repayments

See the Stabilization Contract repay() for how CDP loan interest repayments are processed and the order in which a repayment settles interest before reducing loan principal, with surplus from over repayment returned to the borrower.

The Auctioneer Contract records for an interest auction:

  • id: the unique identifier for the auction.
  • amount: the amount of ATN received from interest payments that triggered the auction.
  • startPrice: the reserve price for the auction. Start price is set at a fraction above market price that an interest auction starts at
  • startTimestamp: the timestamp at which the auction was triggered.

Bidders discover interest auctions by querying Auctioneer Contract state for open auctions (see Auctioneer Contract Interface, Auction View functions) and listening for NewInterestAuction events. Multiple interest auctions can be open concurrently. The actual duration of an individual interest auction is the delta between the auction startTimestamp and the first successful bid.

Successful interest auctions then result in ATN returning to open circulation and NTN transferring to the protocol interest auction proceeds address.

See Auctioneer Contract Interface.

ASM configuration

ASM parameter settings:

  • ACU:
    • quantities = [21_300, 18_700, 14_300, 10_400, 1_760_000, 18_000, 141_000], the basket quantity corresponding to each symbol.
    • scale = 5, the scale used to represent quantities and the ACU value as a fixed-point integer.
    • symbols = ["AUD-USD", "CAD-USD", "EUR-USD", "GBP-USD", "JPY-USD", "USD-USD", "SEK-USD"], the symbols comprising the currency basket.
  • Supply Control:
    • initial allocation = 2^256 - 1, the total supply of Auton available for minting.
  • Stabilization:
    • borrow interest rate = 50_000_000_000_000_000 (0.05e18), the annual continuously-compounded interest rate for borrowing.
    • announcement window = 3600 (1 hour), the length of time in seconds before an update to ASM Stabilization config will take effect.
    • liquidation ratio = 1_800_000_000_000_000_000 (1.8e18): the minimum ACU value of collateral required to maintain 1 ACU value of debt.
    • min collateralization ratio = 2_000_000_000_000_000_000 (2.0e18): the minimum ACU value of collateral required to borrow 1 ACU value of debt.
    • min debt requirement = 1_000_000 (megaton) : the minimum amount of debt required to maintain a CDP.
    • target price = 1_618_034_000_000_000_000 (1.6180340e18): the ACU value of 1 unit of debt.
    • default NTN ATN price = 666_619_300_000_000_000 (0.6666193), default NTN-ATN price for use at genesis.
    • default NTN USD price = 900_000_000_000_000_000 (0.9), default NTN-USD price for use at genesis.
    • default ACU USD Price 834_405_200_000_000_000 (0.8344052), optional default ACU-USD price for use at genesis.
A note on target price and ATN price

Target price is the ATN to ACU conversion rate, which is set to the Golden ratio \({\displaystyle {\frac {1+{\sqrt {5}}}{2}}}\) i.e. \(1.6180340\).

ATN value is targeting \(\text{ACU index value} \times \text{target price}\).

For example if at today’s exchange rates the \(\text{ACU index value}\) is \(079 \dots\) then it would give an ATN price of ca \(1.28 \dots\).

  • Auctioneer:
    • liquidation auction duration = 60 (blocks), the number of blocks for a liquidation auction to move from the liquidation rate to the bankruptcy rate.
    • interest auction duration = 60 (blocks), the number of blocks for an interest auction to move from the discount rate to the floor price.
    • interest auction discount = 0.1 (10%), the fraction above market price that an interest auction starts at.
    • interest auction threshold = 1 ATN, the minimum amount of ATN paid in interest to trigger an interest auction.
Auction price and rate terminology

For auction rate terminology see the notebox “Deep dive into auction price and rate terminology” in Protocol primitives, auction on this page.

ASM restrictions

ASM may be configured with temporary restrictions to facilitate genesis bootstrapping of an Autonity network.

There are two types of temporary restriction that can be set and lifted:

  • CDP Opening Restrictions. Restricts CDP opening to an atnSupplyoperator account set by network governance. The rationale is limiting the supply of ATN at genesis until there is sufficient market liquidity in ATN and NTN for ASM to work effectively.
  • CDP Opening Price Restrictions. Sets NTN and ATN protocol asset prices used by the ASM to default fixed price values. The rationale is ATN and NTN market prices are not available from public market sources at network genesis. Without these ‘opening prices’ ASM cannot compute a collateral price and enable CDP borrowing to bring ATN into circulation. Post genesis network bootstrapping can therefore use default prices until public NTN and ATN market price availability.

Restrictions are subject to network governance and can be set and removed by the governance operator account. For details see Autonity Contract Interface, Governance and Protocol Only Reference and useFixedGenesisPrices(), setAtnSupplyOperator(), and removeCDPRestrictions().

Protocol primitives

Essential primitives of ASM are: ACU, auction, CDP, collateral, and exchange rate price data..

ACU

Auton price has the Autonomous Currency Unit (ACU) as the Stabilization Target to which it mean-reverts. ACU is an index value computed from a basket of free-floating currencies. Use of a currency basket minimises exposure to an individual currency’s FX exchange risk. The index value is computed from the basket, weighted pro rata to each currency’s share i.e. quantity in the basket. Basket quantities are set at network genesis and may be modified by governance.

ASM then functions to maintain Auton-to-ACU value, ‘mean reverting’ to this value by the CDP stabilization mechanism.

ACU value is kept current by protocol recomputing the value at the end of each oracle voting round when price data for all the basket currencies is available. See the Protocol Only Reference functions modifyBasket() update() for more detail.

Auction

Auctions introduce market incentives that bring NTN and ATN in and out of open circulation on the network. There are two types of auction: debt and interest. In interest auctions NTN is bid for CDP ATN loan interest, bringing ATN out of the ASM into open circulation on the network and moving NTN into the ASM. In debt auctions ATN debt is repaid in return for NTN collateral in liquidatable CDPs. CDP liquidation results in moving ATN into the ASM and burning it as the ATN borrowing debt is repaid, and moving NTN out of the ASM and returning it into open circulation on the network.

Auctions have start, floor, and bid (‘hammer’) prices. The start price is the auction opening price and floor the lowest price accepted in an auction. Price evolves throughout the auction’s maximum duration from start to floor price. Start and floor prices are, therefore, a reserve or minimum bid price for the auction that adjusts automatically as a function of time after the auction starts.

Auction bidders place bids at or above the reserve price and the auction ends when the first bid \(>=\) the reserve price is received. If no bids are received within the auction duration, the auction remains at the floor price until a successful bid is made. An auction will always end with a single, successful bid.

Deep dive into auction price and rate terminology

  • Collateral Rate The market rate of NTN in ATN.

  • Liquidation Rate The rate of NTN in ATN which makes a CDP’s collateral value times the CDP’s liquidation ratio equal to its total debt value.

  • Bankruptcy Rate The rate of NTN in ATN which makes a CDP’s collateral value equal to its total debt value.

  • Discount Rate The discount to Collateral Rate applied to the Starting Price of an interest auction.

  • Lot The asset and amount being offered for sale (or offered as collateral) as a single unit, in which the asset is called the Lot Asset and the amount is called the Lot Amount.

  • Bid The asset and amount a bidder is willing to offer at any point in the auction, in which the asset is called the Bid Asset, the amount is called the Bid Amount and the bid amount times the collateral price is called the Bid Price.

  • Reserve Price The minimum bid price an auctioneer is willing to accept at any point in the auction.

  • Starting Price The reserve price when the auction starts, in which the starting price divided by the lot amount is called the Starting Rate.

  • Floor Price The minimum reserve price for the whole duration of the auction, in which the floor price divided by the lot amount is called the Floor Rate.

  • Bid Price The bid price at which the auctioneer closes the sale, in which the bid price divided by the lot amount is called the Bid Rate.

  • Price Evolution Function A function \(P(t)\) mapping the time since the auction started to the price of the lot. The price evolution function must start at the starting price at \(t = 0\) and end at the floor price at \(t = T\) (the auction duration).

  • Auction Duration The duration \(T\), in seconds, after which the auction will reach the Floor Price.

  • Auctioneer The individual or entity that conducts the auction.

  • Seller The individual or entity that offers the lot for auction.

  • Bidder The participant in the auction who places bids.

CDP

The CDP functions to manage Auton borrowing and stabilize Auton price by adjusting the CDP borrowing cost. CDP’s are operated within strict parameterization constraints:

  • CDP Ownership:
    • A borrower (CDP Owner) can have only 1 open CDP at a time.
    • A borrower opens a CDP by depositing collateral >= the minimum debt requirement for a CDP. A borrower can then within CDP constraints:
    • borrow ATN against collateral
    • repay ATN to partially or completely repay the CDP
    • withdraw collateral
  • Minimum debt requirement:
    • A CDP must be >= a minimum amount of debt. This ensures the position is economically viable, i.e. the transaction and interest costs of opening and servicing, or liquidating, a position is viable.
  • Borrow interest rate:
    • Interest on debt is charged at an annual continuously-compounded interest rate.
    • Adjusting the borrow rate is the primary economic lever by which the CDP-based stabilization mechanism incentivises increase or decrease in ATN borrowing and ‘mean-revert’ ATN to ACU value.
    • Repayments to a CDP are used to cover accrued interest before debt principal.
  • Borrow limit:
    • The amount of Auton that can be borrowed against collateral deposited to a CDP is determined by the ATN value of that deposited collateral, forming a borrow limit.
    • The CDP Owner can borrow Auton to an amount <= the borrow limit.
    • The amount of Auton borrowed in a CDP is the principal of the debt position. Principal cannot exceed the borrow limit.
  • Collateralization:
    • A CDP must maintain adequate collateral value at all times. A minimum collateralization ratio sets the minimum ACU value of collateral required to borrow 1 ACU value of debt. This ratio must be strictly greater than 1.0.
    • Collateral must be an ERC 20 token. The accepted collateral token is the protocol asset Newton.
  • Liquidation ratio:
    • A CDP must maintain adequate collateral value at all times. A liquidation ratio sets the minimum ACU value of collateral required to maintain 1 ACU value of debt.
    • The liquidation ratio must be strictly less than the minimum collateralization ratio.
  • Liquidation Condition:
    • A CDP is liquidatable when the CDP’s collateralisation ratio falls below the liquidation ratio:
    • If the liquidation condition is met, the only permitted operations on the CDP are:
      • For the Borrower, the CDP Owner, to pay back Auton until and repay the CDP or bring the position back within the liquidation ratio
      • For a Liquidator to liquidate the position.

Collateral

Auton borrowing is collateralized by depositing collateral token into a CDP. The amount and value of collateral backing a CDP is determined by collateralization and liquidation ratios set in the ASM configuration. Failure by a borrower to maintain these ratios results in a CDP becoming liquidatable. In a liquidation scenario a liquidator is able to assume the debt position, repay outstanding debt, and receive the position’s remaining collateral in return.

Autonity’s native protocol asset Newton (NTN) is used as the collateral token.

Exchange rate price data

ASM sources price data via Autonity’s oracle network, retrieving the data on-chain by contract interactions with the Oracle Contract.

Oracle price data is used for two purposes:

  • for the ACU currency basket symbols to compute the ACU value
  • for CDP borrowing to compute the value of Collateral Token (NTN) in ATN and determine the borrow limit.

Oracle price data is computed per the Oracle protocol, updated periodically in voting rounds.

CDP lifecycle

The sequence of lifecycle events for a CDP is:

  • CDP is opened.

    • Borrower determines their borrowing and collateral requirements. To do this, the borrower can call Stabilization Contract functions, see collateralPrice(), minimumCollateral().
    • Borrower opts to open a CDP, becoming a CDP Owner. The CDP Owner then approves the Stabilization Contract to spend Collateral Token (NTN) on their behalf for the amount of collateral to be deposited:
      • Calls the Collateral Token Contract (i.e. Autonity Protocol Contract) to approve() the Stabilization Contract address as a spender on their behalf and set the allowance() of collateral token that the Stabilization Contract can spend.
      • Calls the Stabilization Contract to deposit Collateral Token to a CDP, calling the contract’s deposit() to deposit collateral.
    • Stabilization Contract creates the CDP, using the ERC20 allowance mechanism to execute the collateral deposit. A CDP object is created, and the CDP attributes are populated.

  • CDP is maintained and serviced. The CDP Owner maintains the CDP, opting to increase or decrease borrowing and deposited collateral within CDP primitive constraints. The CDP Owner may:

    • Borrow: CDP Owner borrows Auton from CDP against collateral. Constraint checks are applied:

      • the amount borrowed must not exceed the borrow limit for the deposited collateral value

      • the principal debt must meet the minimum debt requirement

      • the borrowing does not decrease the CDP collateralization ratio below the minimum collateralization ratio.

        The Stabilization Contract calls the Supply Control Contract to mint the borrowed Auton amount to the CDP Owner.

    • Repay: CDP Owner pays back some or all borrowed Auton in a CDP to (a) service the debt, or (b) maintain the CDP within constraints and prevent a CDP becoming liquidatable. Constraint checks are applied:

      • Payment is only accepted if outstanding debt after the payment meets the minimum debt requirement

        The Stabilization Contract uses the payment to cover outstanding accrued interest before outstanding debt principal, transfering the interest proceeds to the contract’s Internal Balance Sheet. If a payment surplus remains after covering outstanding interest, then the contract reduces the CDP principal and calls the Supply Control Contract to burn the amount of Auton principal debt paid back.

    • Withdraw: CDP Owner withdraws collateral token from the CDP. Constraint checks are applied:

      • the withdrawal must not reduce collateral below the CDP’s liquidation ratio, making the CDP meet the liquidation condition and so become liquidatable

      • the withdrawal must not reduce the remaining collateral below the CDP’s minimum collateralization ratio.

        The Stabilization Contract transfers the withdrawn amount of collateral to the CDP Owner account address.

  • CDP debt auction (liquidation).

    • A bidder determines that a CDP has or will meet the liquidation condition and so become liquidatable. To do this, the liquidator can call Stabilization Contract CDP View functions to view CDP state.

    • Liquidator opts to liquidate a CDP by submitting a bid for CDP collateral. The liquidator calls the Auctioneer Contract bidDebt() function to submit an ATN bid for a specific amount <= the CDP’s remaining NTN collateral.

      As a reward, the liquidator will receive the collateral that is held in the CDP. Any payment surplus remaining after covering the CDP’s debt is refunded to the liquidator.

  • CDP interest auction.

    • Accrued CDP loan interest payments cross the interest auction threshold, triggering a new interest auction.
    • Bidder detects that a CDP interest auction has opened. To do this the bidder can listen for NewInterestAuction events or can call Auctioneer Contract Auction View functions to view auction state.
    • Bidder opts to submit a bid for the auctioned loan interest. The liquidator calls the Auctioneer Contract bidInterest() function to submit an NTN bid for the auctioned amount of ATN loan interest.

ASM economics

ASM economics are multi-dimensional:

  • For the protocol:
    • Protocol asset price stability: the stabilization mechanism mean-reverts Auton to the ACU stabilization target over time, smoothing Auton price movement.
    • Supply and demand elasticity: Auton supply increases and decreases according to demand, the CDP borrow rate providing the economic lever to adjust CDP incentives.
    • Protocol revenue from borrow interest earned on CDP’s.
  • For the borrower:
    • CDP’s give access to collateralized borrowing for Auton with flexibility to increase and decrease borrowing and collateral amounts within constraints. Borrowers can offset flexibility against opportunity costs of borrow interest, staking reward potential if deposited Newton collateral were earning staking rewards, and liquidation risk.
  • For auction bidders:
    • Liquidation returns from NTN collateral after bidding for CDP collateral in ASM debt (i.e. liquidation) auctions.
    • Interest returns from ATN interest after bidding for CDP interest payments in ASM interest auctions.