Introducing the Rebalancing Dashboard
Participate in Set rebalances — some of the largest on-chain liquidity events on Ethereum!
Today, we’re excited to release the first version of the new public Set Protocol Rebalancing Dashboard. Using the dashboard interface, anyone can participate in Set rebalances which are some of the largest on-chain liquidity events on Ethereum.
If you have any questions, please feel free to join the official Set Protocol telegram channel here.
Set Rebalancing Overview
When the state of a Set transitions into the “Rebalance” phase, Set Protocol’s smart contracts kick off a modified dutch auction. In this open auction, components from the previous allocation are exchanged for the components in the new allocation (e.g. ETH is auctioned off for USDC).
The auction is similar to a traditional dutch auction in that price (or the ratio between inflow tokens and outflow tokens) follows a predefined price curve which starts off high and goes down every block (currently every ~13 seconds). At a certain point the auction will pass fair value and there is a spread between the cost of acquiring the injected components and the received components.
The auction differs from traditional dutch auctions in that bids settle immediately or atomically, meaning that bidders receive the outflows tokens (e.g. USDC) in the same transaction as the injection of the inflows (e.g. ETH). Funds are never locked in the contract. This mechanism eliminates front running and bidders simply compete on time and gas.
In addition, the auction is not capped, and runs until outflows are swapped with the inflow tokens.
Auctions are facilitated entirely through smart contracts via the Rebalance Auction Module.
For more technical information on how rebalances work, please check the “Rebalancing” section of the Set Protocol white paper linked here.
Auction Parameters
Each auction has different parameters depending on how active the strategy is. I.e. Indexes have more conservative auction parameters compared to moving averages.
The auction parameters in the current Sets are:
- Auction start price: this is the price ratio at which the auction starts as determined by MakerDAO’s price feeds. For more active Sets such as the ETH20SMACO, the auction starts at 12% below fair value.
- Price step: The price ratio updates slightly every block. For more active Sets such as the ETH20SMACO this averages to 1% every 10 minutes. This means that the auction is expected to hit fair value after 120 minutes (1% price step starting at 12% below fair value)
- Minimum bid size: The minimum amount of units of outflows that can be bid at one time (this is fractions of a cent).
Participating in the Auction
To participate in a rebalancing auction, visit the rebalance interface here and follow the guidance below:
- Navigate to the Set that is currently Rebalancing
2. Approve any USDC or WETH for trading. Note: this version of the bidder uses Wrapped Ether. Wrap your Ether on Eth2Dai or Radar Relay.
3. Monitor the auction until it reaches a value you believe is a good price and submit your transaction.
Trend Trading Set Auction Specifics
Below are parameters to look at for Trend Trading Set auctions specifically:
- Auctions start at a price ratio of 12% below fair value, which is calculated at the exact moment the start auction functions are called. This will be the ratio of USDC / ETH depending on the rebalance. The 12% value was selected to be conservative and capture sharp ETH price movements right after the start auction functions are called.
- The price improves 1% on average every 10 minutes for the bidder. This means the fair value will be after 2 hours or 120 minutes assuming ETH price does not change.
- The state will shift to “Rebalance” when the auction kicks off. This is the same for all Sets during rebalances.
The Current Gain/Loss value displayed on the auction dashboard is calculated using Cryptocompare prices. If users want to use their own source for the ETH/USD spot price, users can reconcile the Current Auction Price value with whichever exchange price feed.
For example, displayed below is the auction interface for the ETH26SMACO Set once it has reached its fair value stage.
If you have any questions, please feel free to join the official Set Protocol Telegram channel here.
If you are an entity that is interested in deeper integration, please get in contact with us at markets@setprotcol.com and we’d be more than happy to help.
