SCCP-210: Improve Pricing of Atomic Swaps

Simple Summary

This SCCP proposes to implement the following:

• Update the fee tier of the wETH/wUSDC pool from the 30 bp pool to the 5 bp pool. This is done by calling the setPoolForRoute, taking in arguments of the wETH and USDC addresses as well as the address of the 5 bp pool.
• Lower the atomicTwapWindow from 1800 seconds to 240 seconds. This is done by calling the setAtomicTwapWindow with 240 argument.
• Lower the atomicMaxVolumePerBlock to sUSD 5 million from sUSD 15 million.

Abstract

Below is description of the parameters involved:

• The setPoolForRoute overrides the default route taken when trades take place for specific tokens. Currently the default route is the 30 bp pool, hoping through ETH pairs when no direct route from the sourceCurrency to the destinationCurrency exists.
• The atomicTwapWindow is the twap window used when fetching the uniswap price.
• The atomicMaxVolumePerBlock is the maximum volume per block that can be executed atomically.

Motivation

The main motivation of the first two actions is to improve the execution pricing and improve volume for the protocol. This is achieved with the following:

• Shortening the twap window aligns the atomic price with the spot price. 4 minute Twap protection is still considered to be safe and conservative since bad actors that want to take advantage would need to move the price on a pool and defend it for a prolonged period of time, since a lot of trading takes place on these concentrated liquidity pools. And the best improvement to the fill would be up to the chainlink price. Hence, the uniswap pool manipulation attack vector is improbable and can be defused if chainlink pushes a price during the attack.
• Switching the from the 30 bp pool to the 5 bp pool leads to utilizing the price available on a pool that is more reactive to changes in cex prices and therefore offers traders better execution.

The main motivation behind lowering the atomicMaxVolumePerBlock to sUSD 5 million per block is due to the fact that more than 95% exchanges did not exceed a couple million sUSD per block. This number can be revisted in case we see that the maximum is being hit frequently.

Copyright

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