Stake Auction AMO
Last updated
Last updated
The Stake Auction AMO optimizes the use of ADA within the system by selling the staking rights of the ADA reserves to the highest bidders throughout the epoch in a Continuous Dutch Auction.
During the epoch while orders are being placed, ADA reserves are deployed elsewhere in other strategies. Then, at the end of the epoch, ADA reserves are pulled from those strategies and deployed into the Stake Auction to have the staking rights matched to the highest bidders' stake keys. This mechanism maximizes capital efficiency of the OADA system and yield for sOADA holders.
A user guide for the Stake Auction dApp can be found .
The Stake Auction operates continuously throughout the epoch until it is time to undeploy the ADA reserves from other strategies. By utilizing a Continuous Dutch Auction, the system minimizes the ability for bidders to strategically place orders at the last minute, thereby ensuring the highest profitability given the demand for stake.
To determine the current price of stake, the Stake Auction Controller employs a pricing curve based on the time elapsed in the epoch and the remaining reserves to be sold. The auction uses a minimum match size of 250,000 ADA stake and processes bids on a first-come, first-served basis, sorted in descending order by the Annual Percentage Yield (APY) offered.
When sufficient bids are accumulated to meet the minimum match size, the system reprices the clearing rate to be at least equal to the rate just received. This means that the price of the next matched bids will be set to ensure the system receives at least as much as it did in the previous transaction. The system will then match these orders and lock the stake with the chosen stake key until the epoch concludes. The use of a Continuous Dutch Auction allows the system to dynamically adjust pricing based on real-time demand, optimizing yield for the system and maintaining flexibility in stake allocation.
The System’s Market Clearing Interest Rate is defined as the following function:
Where
BR = 2.7% = Base Rate (What is the bid floor, set close to the staking rate on ADA)
PR = 2% = Projected Rate (What the system expects the opportunity cost of not matching bids
to be)
SR = System Reserves (in ADA, total)
SRIL = System Reserves In Locks (already offloaded stake)
T = Time in epoch, a number from 0 to 100 uniformly dividing the entire cardano epoch
Before the epoch ends, a recall event takes place that pulls all reserves out out strategies and into the Stake Auction AMO. During this time, the ADA is paired with stake keys to fulfill the stake bids that were placed and filled throughout the epoch.
These funds remain in the Stake Auction AMO until the end of the epoch. At this point, the system synchronizes profits from the auction and prepares to redeploy the funds across the rest of the system's strategies. The actual settlement of the auction occurs within one hour before the epoch ends, ensuring that all transactions are completed and profits are accurately accounted for.
The system allows Voltaire vote power to be acquired, as it is derived from one’s stake key weight. Given the governance process of Voltaire, participants are informed one epoch in advance about any important votes scheduled for the next epoch. This ensures transparency and prevents any last-minute surprises in the ratification of proposals.
The governance process in Voltaire operates such that proposals must pass through at least two epoch boundaries before ratification. The first boundary allows for the voting process, giving stakeholders sufficient time to consider and cast their votes. The second boundary is used to determine whether the proposal has been ratified or rejected. This structured timeline ensures that all proposals undergo thorough scrutiny and that stakeholders have ample time to participate in the decision-making process.
If a Catalyst vote power snapshot is scheduled near an epoch boundary, the system must decide whether to auction off the stake power or retain it for the Optim ODAO. The current policy is to only accept bids offering an Annual Percentage Yield of 100% or higher for that epoch boundary. If the snapshot is not near a boundary, the system will capture all the vote power for the ODAO.
When the ODAO captures vote power, the ADA rewards for voting, including stake rewards if on an epoch boundary, are funneled back into the OADA system through the Donation Strategy. This integration ensures that the voting rewards contribute to the overall yield and stability of the system.
It is important to note that, due to the centralized nature of the Catalyst snapshot process (especially when no exact snapshot slot is provided), the Controller cannot guarantee that this operation will always be carried out as described. Despite this, the system aims to maximize the benefits from vote power while adhering to the current policy guidelines.
