Automatic debt rebalance

1: Design ideas

Regardless of whether it is a spot or futures market maker, they will pay attention to their own net positions in the process of managing their inventory. When the long position is unbalanced, the market maker needs to open some short positions to provide liquidity. Under normal circumstances, the market maker will hedge this part in external markets.

Based on this idea, changes in global debt are mainly caused by changes in net positions.

1: The reasons are as follows

First, let's sort out the calculation method of the global debt.

Under normal circumstances, the new global debt = net income of the moASSET position

When the net income of the moASSET position is positive: among the moASSET position holders, the profitable users earn less, the loss-making users lose more, and the moUSD holders also lose money.

When the net income of the moASSET position is negative: among the moASSET position holders, the profitable users earn more, and the loss-making users lose less. Users who hold moUSD will also generate profits.

Net income of moASSET position = current position-open position (considering that the open position may be opened at different prices, the open price should be based on the average open price of each open position)

Current position = current price * open interest

Open position = average open price * open interest

Because the overlapping parts of the positive and negative positions in the current position can be opponents and offset each other. Therefore, the position that can generate net income is only the net position part.

2: New global debt algorithm

Suppose: set the open position as "x", the average open price as "y", the open position amount as "z", and the current price as "v"

x=y*z

Long position is "a", the short position is "b"

net position=|a-b|

Average opening price * net position-current price * net position = global new debt = (y-v)*|a-b|

Global new debt = (y-v)*|a-b|

3: Conclusion

It can be seen from this formula that to reduce the overall new debt, the difference between the average open price and the current price must be made smaller. The method of doing this is transaction mining, which uses transaction incentives to promote users' enthusiasm for transactions, making the total transaction position and the update frequency of the opening price more and more.

However, it is difficult to control the factors that affect the opening price and the current price. Therefore, the key to the problem lies in affecting the net position.

If the net position can be infinitely close to 0, and the global new debt will be infinitely less than 0.

The general approach is a dynamic holding fee rate, but the purpose of this method is "deterrence." Deterring positions compels users to close their positions before charging a holding fee, the closing itself will affect the price, thereby prompting the price of the perpetual contract to approach the spot price.

This essentially changes the "demand" and thus affects the price.

To have no slippage and high liquidity, our price mechanism adopts oracle quotations.

Pricing power is not within the platform, so the holding fee rate mechanism is unreasonable.

2: The Automatic debt balancing algorithm (ADB)

1: moASSET issuance fee subsidy

We will use the ADB algorithm to price the issuance and redemption fees of moASSET.

The ADB algorithm is used to influence the issuance and redemption fees of long positions and short positions in moASSET assets to affect trading sentiment.

Induces trading users in the market to buy short positions and creates arbitrage space for arbitrageurs.

The specific algorithm formula of issuance fee is as follows.

Suppose: the long position is "a", the short position is "b", the moUSD position is "c", and the long position is the positive asset.

The basic handling fee is "N"=0.3%, and the handling fee offset upper limit "M"=1%

Then net position = |a-b|

Total position (total global debt) = a+b+c

Proportion of net position=|a-b|/(a+b+c) is set to "K"

Long position asset handling fee x = N + M * K;

However, because the new position will have more impact on the current net position, and the size of the position will have different effects.

Therefore, we will add weight to the "K" value of the long-position handling fee according to the difference of the newly-added position h.

Originally k=|a-b|/(a+b+c)

When h is added to the equation

K1=(|a-b|+h)/(a+b+c+h)

K1-K=The impact of new positions on net positions

The actual long position handling fee x = (N + M * K) * (1+K1-K)

The opening of short positions has a fixed 0.3% handling fee.

In addition, for every 1,000 blocks, Mobius will aggregate the additional handling fees for long positions and distribute them to the holders of the short positions according to the current holdings of the short positions.

2: moASSET redemption fee subsidy

The reverse is true for redemption: the redemption of short positions requires payment of the redemption fee according to the formula for entering a long position previously discussed. The accumulated fee in addition to the basic handling fee will be used to incentivize the redeem process.

3: MOT transaction mining

In addition, Mobius's $MOT transaction mining calculation method is also very conducive towards opening short positions.

For example, 100 MOTs per block are used to reward users for issuing moASSET, and issuers with short positions have a 5x earnings weight.

The above behavior is essentially using the service fee provided by the long-position user to subsidize the debt wear and tear that the short-position user needs to bear.

So we call this algorithm the ADB (algorithm-net position debt compensation algorithm).

3: Arbitrage opportunities

Arbitrageurs on the Mobius platform will obtain stable arbitrage opportunities under the following circumstances.

Arbitrageurs can purchase short-position assets on the Mobius platform, and buy forward assets in the external market with a lower commission.

Two types of benefits can be obtained.

The first is the difference between the long-position handling fee subsidy and the arbitrageur's own handling fee expense.

The second is higher for the MOT mining revenue.

As long as these two types of income can cover the debt toll caused by arbitrageurs holding short positions on the platform, stable profits can be made in a period of time.

The ADB algorithm is designed to prompt arbitrageurs to hold a short position over time.