How does a dutch auction find price in real time? It requires a user inputted parameter than can only be changed manually. Please donāt shut up, I just donāt understand in what manner fixed cost is more expensive.
Edit: Iād like to point out that this is an open ended problem with a hundred solutions. Dutch auction is not āwrongā and fixed cost is not ārightā, they are simply different ways of looking at the same problem. My basic argument for fixed cost is not that it is cheaper, but only that it is simpler from the perspective of the shareholder to assess the cost associated with providing liquidity. (not to mention easier to code)
My bid on CNY is 0.47%/day, so I canāt argue that Iām offering high rates sometimes. Let me try to analyze what I think youāre saying. Youāre saying that the price mechanism tends toward an increase of pool rates in a neutral market (i.e. one where the liquidity providers are not shareholders). In order for that to be true, the liquidity providers would need to collude to reduce the amount they are providing in unison to increase the rate, because Nu will only provide a certain NBT/day to that pool no matter what. This collusion actually sweetens the deal for a third party to the deal to come in and start providing (the collusion has made it easier and easier for new LPs to dominate the pool), thereby again working down rates even with collusion.
Colluding LPs
Now the colluding LPs attempt a strategy whereby they have high rates when alone and drop the rates sharply when another LP joins. The thing is, this is actually a T2 strategy, and highly desired by Nu. The actual NBT/day that those colluding LPs are being paid is the same whether they have promoted a lot of T2 to T1 or not. This gives those LPs the opportunity to properly assess risk and reward of placing funds from T2 to T1, always realizing that if they keep nothing in T1 they lose money.
This collusion is summarized by an announcement, or a defaulting, of the fillfactor parameter.
