Parameter Tuning in the Lien Protocol

Parameter Tuning in the Lien Protocol (White paper): https://lien.finance/pdf/LienParameterTuringWP_v1.pdf

Hello everyone!

In our first white paper, we discussed the Lien protocol (iDOL). The second white paper focused on Lien FairSwap, a platform that allows for trading option tokens (e.g. LBT) in a fair manner.

This time, we published our third (and last) white paper which examines the parameter tuning mechanism implemented in the Lien protocol.

The topics covered include:

• The rationale behind choosing Chainlink as the main oracle within the protocol and how it behaves in case ChainLink returns invalid price feeds.
• How the buffer parameter (β) is determined in the Lien protocol.
• How the protocol calculates the historical volatility of the ETH price using the Chainlink price feeds, as well as how this method compares to the one that utilizes the price feeds provided by a centralized data provider, using Binance as an example.
• How and when an “emergency auction” is triggered.
• The criterion for accepting SBT deposits within the iDOL contract.
• A numerical simulation for how the value of iDOL, λ (iDOL/USD), might change
• How the commission rate is configured within the Lien FairSwap platform.
• The discussion on the Lien token.

Those parameters aren’t chosen in an arbitrary manner; rather, they have been configured given the results of our extensive simulations.

The above graph illustrates the result of a simulation we conducted on the value of λ(iDOL/USD). As you can see, the “inflation rate” of iDOL is expected to be capped at around 3% over the period of 2 years even if the Ethereum market presents a highly volatile condition.

The above chart shows the result of a back testing we’ve conducted to examine the relationship between the ETH price and the trigger condition for an emergency auction over the period between the beginning of April, 2020 and the beginning of June, 2020.

Please see the white paper for more details on how those simulations have been implemented and how all these parameters are actually determined.

These mechanisms should allow the Lien protocol to continue operating autonomously and indefinitely, without having to change the relevant parameters through a “governance mechanism” or via an admin privilege.

The protocol is expected to be launched within the next 5–6 weeks. Stay tuned!

Lien(iDOL) White paper: http://lien.finance/pdf/iDOLWP_v1.pdf

Website: http://lien.finance/

Twitter (Follow and get update): https://twitter.com/lienfinance

Telegram Group: https://t.me/lien_finance