Supply regulation for gigaAssets

Enjoyoors achieves protocol stability and solvency through gigaAsset supply regulation. Supply regulation is an automated portfolio LTV management where the algorithm evaluates key LTV parameters across available assets and makes decisions regarding gigaAsset mints, transfers, and burns accordingly. Enjoyoors tracks the following LTV parameters:

Parameter	Defined by	Description
MarketLTV	Calculation	‘Per collateral’ LTV of the specific virtual market defined as $D$C
PortfolioLTV	Calculation	Current LTV across the entire portfolio. Calculated as i$Di$CI
TargetLTV	Governance	Target LTV level for the entire portfolio. This parameter is evaluated statistically on a rolling average basis across protocol epochs.
DeltaLTV	Governance	Deviation bands around the TargetLTV. This parameter is evaluated statistically on a rolling average basis across protocol epochs.
upperLTVBound	Calculation	TargetLTV + DeltaLTV
lowerLTVBound	Calculation	TargetLTV - DeltaLTV

Here is a high-level overview of how the algorithm functions in principle:

1. We keep PortfolioLTV in a [lowerLTVBound; upperLTVBound] band around TargetLTV:

   1. if PortfolioLTV > upperLTVBound: decrease gigaAsset supply so PortfolioLTV = TargetLTV. May involve TWAP wind down.

   2. if PortfolioLTV < lowerLTVBound: increase gigaAsset supply so PortfolioLTV = TargetLTV. May involve TWAP issuance.

2. We keep MarketLTV below an upperLTVBound:

   1. if MarketLTV > upperLTVBound: decrease CDP debt by re-assigning gigaAsset debt to other markets whose current LTV < average LTV. markets should be doubly sorted first in order of increasing LTV, then in order of decreasing collateral value (e.g. given same LTV levels we prefer to reassign debt to a larger market first). May involve TWAP wind down.

   2. if MarketLTV < lowerLTVBound: increase synth debt so MarketLTV = TargetLTV. May involve TWAP issuance.

If the above algorithm fails to find enough liquidity to wind down, the protocol temporarily reassigns an excess synthetic debt to the external liquidity for a fee:

1. Insurance Pool. Enjoyoors sets aside a fraction of the earned yield to accumulate in the insurance pool, which acts as liquidity of last resort. The pool's permissionless nature allows for further liquidity provision for a fee/rev share.

2. Protocol token staked in Governance. Under the anticipated tokenomics mechanics, users stake protocol tokens or Token/[ETH] DEX LP tokens to receive veTokens. The protocol may assign synthetic debt to this staked liquidity during adverse market conditions. veToken holders benefit by earning additional tokens through inflation and/or receiving boosted revenue shares (external yield from gigaAssets) when synthetic debt is allocated to them.

As a final line of defense, the protocol may decide to wind down liquidity in gigaAsset AMM pools. Backtesting and simulations in accordance with our risk framework showed that the initial TargetLTV parameter the Enjoyoors protocol will work with is 0.6 with 0.2 DeltaLTV, effectively clipping the LTV levels in the protocol in [0.4 … 0.8] range. The target and the delta will be re-evaluated once per epoch (see the table above).