PowerIndex v2 Dynamic AMM is launched for ASSY
ASSY is now a Dynamic AMM pool with automatically adjusted weights
Some time ago we shared our vision of the PowerPool 2021 tech roadmap. It was mainly focused on the Dynamic AMM concept, which allows the launch of automatically rebalanced portfolios with different strategies on top of Balancer AMM. We named it Unlimited ETF since it is a flexible solution allowing our community to build complex rebalancing strategies for automatic weight changing. When weights change, arbitrageurs rebalance the portfolio.
Our vision is that Dynamic AMM is an elegant solution for solving issues inherent in ordinary Balancer AMM, such as not efficient rebalancing (known as “buying losers and selling winners” issue). In contrast, Dynamic AMM is built for maximization of capital growth by means of efficient rebalancing.
How DAMM works?
PowerPool Dynamic AMM has three key components:
- Balancer AMM pool with an implemented algorithm for smooth weights changing triggered by Controlling contract.
- Strategy contract that contains the logic of weights changing, which is used for calculation of new weights
- A Poker system for maintaining DAMM. It receives input data (prices, TVL, and any other data available on-chain), calling the Strategy contract for calculating new weights and after that the Controller contract for initiation of the weights changing process
ASSY transition to Dynamic AMM
ASSY weights significantly differ from weights that should be established by DAMM (based on M.Caps). It happened since initial weights were established a long time ago and market caps changed a lot, and now YFI weight is necessary to decrease, increasing AAVE SUSHI and SNX at the same time.
There were two options:
- Launch DAMM, transit weights from current ones to M.Caps-based smoothly, and let arbitrageurs do their rebalancing work.
- Launch DAMM starting from a state with M.Caps-based weights and proper token balances. For this purpose, balances in the pool should be initially prepared.
The first option looks like the most obvious one, but the hell is in the details: during the transition arbitrageurs will drain significant capital from the pool, >6% or $500k according to our tests.
We decided to save $500k of users’ capital using the second option
For this purpose, we calculated how many YFI the pool needs to swap to other assets (AAVE, SUSHI, and SNX) and developed a special smart contract for this purpose. Here is the tweet from our CTO regarding this operation:
Costs for initial weights changing were only $35k
When the pool will be prepared for transition and transition will be done, join/exit/swap functions will be available. New target weights for ASSY will be calculated once per day, and after that transition will be started and will proceed until the next point (next day).
The next Dynamic AMM launched on top of PowerPool will be YLA — Yearn Lazy APE. We plan to launch it soon.