A primary challenge with launching TAI is distributing ownership to the community while also keeping the system stable for everyone.
TAI is designed like RAI, to adjust its redemption price when the market shows excessive imbalance. During normal operations, these imbalances happen when collateral prices are rising (people readily mint TAI to leverage their collateral) or falling(people want less leverage and need to close their safes).
However, during launch the returns from rewards can far outweigh market factors, causing the peg to track rewards' behaviors and not underlying minting and market conditions.
Rewards can lead to non-organic behaviors controlling the redemption price. This could lead to lack of adoption, as actual organic adopters fail to see the real organic value and behavior of TAI's floating price.
To avoid this:
TAI will start with the rate controller off, slowly incorporating it as the community rewards overall impact on TAI's market price decreases.
Tune LP and mint emissions ratios(x and y) to best achieve market stability. In other words, if there is a lasting market price divergence, adjust the individual reward ratios.
The general idea of rewards control:
Decrease x/y, allocating more rewards to minting TAI.
This should increase sell pressure, specifically through recursive minting.
Increase x/y, allocating less rewards to minting TAI.
This should decrease sell pressure.
There are other factors that can cause market price divergence, but we believe the rewards will be the main driver of market price in TAI's early stages.
Rate controller stays off
The system will launch with the rate controller off to avoid redemption price volatility and added complexity while tuning rewards. During this time, the redemption value of TAI/USD will be fixed to $1.00.
Starts: at launch
Rewards control switches from manual to using an autonomous rewards controller. The rate controller will remain off during this period and TAI/USD redemption value will stay fixed at $1.00.
Goal: Launch +6 months
TAI will use the same general controller as RAI, but will incorporate it slowly over time. At this point, the rate controller is turned on, and runs alongside the rewards controller to address system imbalances. The rate controller will initially react much slower than the rewards controller in order to avoid control conflicts.
The rewards controller will handle short-term market imbalances by adjusting the ratio of LP/Mint rewards.
The rate controller will handle long-term market imbalances by adjusting the rate of redemption price of TAI/USD.
At this point, TAI/USD will begin to float in order to balance supply and demand.
Goal: Launch +18 months
The system will eventually migrate to the rate controller as the primary way to enforce TAI/USD peg.
Exponential decay of RATE emissions(see schedule above) and decrease of rewards controller strength will slowly weaken the impact of rewards on the system.
Simultaneously, the rate control frequency will be increased. The rate controller will start responding more quickly.
Migration is complete when rewards impact becomes negligible, the rewards controller is disabled and the rate controller is at full strength.
Goal: Launch +2-4 years