Protocol Added Value (PAV)
In response, the above ReOrders mechanism can be set as follows. After Alice completes the trade, the protocol will only reserve the corresponding amount of USDC funds. The remaining USDC raised from the TiTi-AMM can be defined the Protocol Added Value (herein after referred to as “PAV”).
Only 9.99 USDC are reserved, and the funds in the pool are 10009.99 TiUSD and 10009.99 USDC. ReOrders mechanism is now as follows: For the n round ReOrders, ΔPAVn is:
After the n round ReOrders, the amount of USDC in the TiTi-AMM is Xn':
The amount of TiUSD adjusted by the Protocol in the TiTi-AMM is ΔYn' as:
- If ΔYn', it means that in this round of ReOrders, the Protocol needs to mint TiUSD, and the mining amount is ΔYn';
- If ΔYn', it means that in this round of ReOrders, the Protocol keeps the status;
- If ΔYn', it means that in this round of ReOrders, the Protocol needs to burn TiUSD, and the burning amount is ΔYn';
Obviously, the protocol can accumulate value in TiTi Protocol's market-making process. It can be defined as Protocol Added Value. The reason for this design is that any adjustment of market circulation will impact the circulating TiUSD. Although TiUSD's inflation and deflation always reflect the real supply-demand relationship in the market and the PAV ensures that inflation and deflation will not affect the inherent value of TiUSD in circulation, any sell and buy will cause TiUSD's price to deviate from the anchor price temporarily.
To a certain extreme extent, it will cause unnecessary panic among TiUSD users. Therefore, we ensure that users who buy or sell TiUSD will compensate the holders of TiUSD in circulation through the slippage setting. Furthermore, slippage ensures that the protocol can resist giant whales because when the depth remains the same, the greater the transaction volume, the greater the transaction slippage. On the other hand, the emergence of a significant slippage is a good thing for other TiUSD holders. Because the PAV is enlarging, the transaction depth provided by the TiTi Protocol will be further deepened and subsequent users will have less transaction slippage if they choose to hold and wait.
Then cumulative added value PAV is:
How TiTi-AMM divides PAV and PRV in ReOrders process