- Ethereum is introducing a BASEFEE parameter in EIP 1559
- BASEFEE is unpredictable, users cannot plan ahead
- A token pegged to BASEFEE can be used as a hedge
- Beyond that, use cases like metatransactions are better denominated in terms of BASEFEE and can use the token as the means of exchange
- Users lock X ETH in a contract and mint Y BaseFeeTokens where
X / Y >= C * BASEFEE, C is the collateralization ratio - Owner can add/remove from the stash at any time as long as the above condition is satisfied
- The stash can be liquidated at any time by the owner by paying back Y BaseFeeTokens and receiving X ETH in exchange
- If
X / Yis ever lower thanC * BASEFEE, the stash is undercollateralized and can be liquidated by anybody- Exact method (e.g. FCFS, auctions, etc) yet to be determined
- No oracles needed anywhere,
BASEFEEis available in the EVM directly BASEFEEcan theoretically double/halve in 6 blocks, C needs to be large enough to cover a reasonable liquidation window of N blocks
- BaseFeeTokens can trade against ETH for users who want to use it but do not want to manage stashes themselves
- Order matching exchanges work fine
- Uniswap pools are painful since miners can easily manipulate the BASEFEE up/down and drain liquidity every time
- The price discovery aspect of uniswap (essentially what we get in return by allowing liquidity draining on price movements) is wholly unnecessary in the long term, its simply available as the
BASEFEEparam in the EVM - It is still useful in the short term to absorb liquidity shocks
- The price discovery aspect of uniswap (essentially what we get in return by allowing liquidity draining on price movements) is wholly unnecessary in the long term, its simply available as the
- Smarter oracle-less AMM pools are needed which allow uniswap like movements, but also ground the price in the
BASEFEEparameter somehow to minimize the liquidity draining- Need to figure out exact mechanisms