Are we there yet, SIRs?
The Solvency Incentive Ratio (SIR), which aims to maintain the solvency and attractiveness of the Tranche protocol, is now live on the Kovan testnet and open for community feedback.
Introducing SIRs
Perpetual tranches require perpetual rewards. That’s why we’ve been heads-down perpetually developing for the past few weeks. The Solvency Incentive Ratio smart contracts proved to be a challenge due to the epoch-less nature of the contracts. This is due to the many variables to be handled within the contracts to provide a well oiled system that is responsive to changes within the protocol.
In a nutshell, SIRs distribute rewards to one or both of the Tranches. Distributions are done to incentivize deposits in such a way that maximizes protocol solvency. Rewards are measured in a SLICE APY.
SIRs are now live on the Tranche Testnet on Kovan.
SIR Contract Variables
These are the parameters that drive SIR calculations and SLICE distributions:
Market TVL: Total SIR rewards are distributed proportionally across markets.
Example, if DAI deposits across Tranche A and Tranche B make up 40% of TVL on the Tranche Protocol. 40% of SIR rewards will be distributed to the DAI market.
Tranche Returns: SLICE rewards are distributed to Tranche A, Tranche B or both depending on the Solvency Incentive Ratio as described here. This incentivizes deposits into the respective tranche in order to maintain solvency, avoid negative returns and boost APYs.
Example: If Tranche A is receiving an external APY from Compound at 3%, while the Tranche A holders are promised 4%, deposits will be incentivized to Tranche B, to cover the difference in the Tranche A APY, until it goes back to a healthy level
Balance Factor: Can be considered as the velocity of solvency. Depending on speed (transaction frequency), size and health of the Market. The Balance Factor can be increased or decreased to ensure each Tranche maintains solvency with minimal collateral. The amount that is distributed to each Tranche if both Tranches receive an infinite amount of deposits, the default for now is 50%.
Before we go to Mainnet, we’d like to invite the community to try our SIRS on Testnet, so we can collect feedback and observe how well the Tranche system works with higher levels of user activity and testing. If you’re not on our Discord yet, we also invite you to join the conversation and chime in with comments, suggestions, and questions!
Instructions for testing SIRs
To participate in SIRs, all you need to do is deposit into any of the Tranches, and your rewards will start accumulating in your wallet. You are able to withdraw your rewards at anytime, or keep them until you’re ready to withdraw your Tranche deposits.
If you haven’t deposited into Tranche, please refer to the instructions listed in this article. If you already know how to deposit, here are a few pieces of useful information:
1. Always make sure that you’re on the Kovan testnet.
2. You can get Kovan ETH from faucets and use Uniswap to get DAI or USDT- alternatively, you can ask someone from the Discord to send you some test tokens.
3. We’ve introduced the SLICE APY, which refers to the annualized return on your deposit, measured in SLICE.
4. You can claim your SLICE rewards at any point from the top right modal.
Please note that the APYs do not reflect the expected rewards from the implementation on Mainnet. These will be determined by the community through a vote in the coming few weeks. We’re looking forward to hearing your feedback!
Thank you for your continued support! Start staking and become part of the community!
Follow and discuss the Tranche Protocol on Discord, or just jump in to let us know if you have any questions!
