# \[FIP -256\] Optimizing FIP-77’s TWAMM Parameters **URL:** \ **Category:** FIPs\ **Created:** [June 20, 2023, 2:09am UTC](https://gov.frax.finance/t/fip-256-optimizing-fip-77-s-twamm-parameters/2408 "2023-06-20T02:09:41Z")\ **Posts on this page:** 4\ **Page:** 1
**Author:** ![OuroborosCapital](https://avatars.discourse-cdn.com/v4/letter/o/5f9b8f/32.png) [@OuroborosCapital](https://gov.frax.finance/u/OuroborosCapital)\ **Post date:** [June 20, 2023, 2:09am UTC](https://gov.frax.finance/t/fip-256-optimizing-fip-77-s-twamm-parameters/2408/1 "2023-06-20T02:09:41Z")
This is to finalize the details of [Optimizing FIP-77’s TWAMM Parameters](https://gov.frax.finance/t/optimizing-fip-77s-twamm-parameters/2397) for it to be push through for a vote. **Proposal Summary** This FIP proposes for the protocol to initiate 1. a $1mn TWAMM over 30 days when price is below $5 and stopped (even when the TWAMM is midway) when price is above $5 and 2. a $1mn TWAMM over 30 days when price is below $4 and stopped (even when the TWAMM is midway) when price is above $4. If and when the $2mn budgeted for this proposal is exhausted, we will re-evaluate its effectiveness to make a decision on whether to recalibrate (increase and decrease) a new TWAMM. The objective of this proposal is to optimize [FIP-77](https://gov.frax.finance/t/fip-77-20m-fxs-buyback-program-using-twamm/1523) for better efficiency in achieving POL value accretion. Details below. **Introduction** This is Ouroboros Capital. We are a liquid crypto fund that prides ourselves as vocal hands-on investors of our bags (FXS included). The protocol has recently resumed its TWAMM FXS Buyback program again, kicking it off with a $2mn buyback over 6 months. I’m writing this proposal for us to consider parameters to which we can optimize for to design a much better buyback program. **Objective of Buyback** To start, we have to first understand what the buybacks are attempting to achieve. To put it simply, the buyback program’s objective is for the protocol to accumulate $FXS at prices which it deems $FXS to be undervalued. This delivers a spectrum of benefits including but not limited to 1) POL value accretion, 2) signaling a valuation floor to the market which consequently helps the protocol with more economic use of $FXS as incentives, 3) warehousing $FXS at cheap prices to be used in the future as it grows it value, etc. **Optimize for Acquiring $FXS at Low Prices** Now that we’ve established that the objective of the buybacks are to buy $FXS cheap and signal a psychological price floor to market, I would like to propose parameters which would help optimize for that. **I am proposing for a more aggressive TWAMM that increases in magnitude at lower levels but also stop buying $FXS at a higher levels.** **What is The Right Size and Price?** Historically the TWAMM buyback have been the most effective at establishing a price floor between the $4-5 level. A level that we should also agree is only more of a value floor as time passes given the growth of the protocol Frax v1 to Frax v2 AMO, Fraxlend, FraxFerry, FrxETH, etc. As such I recommend the program to target these price levels given the historical context. ![Picture1](https://canada1.discourse-cdn.com/flex031/uploads/frax1/original/2X/9/921553651feb8908ede819505e900ea294152f07.png) However, it is evident that these price levels are not visited for long. Since the introduction of the TWAMM buyback program last year, the price range of $4-5 has only been visited for 74 days. A mere ~20% of the days in the year. We will not be able to efficiently capture the value that presents itself if the TWAMM is spread across a period such as 6 months. Instead, I propose a $1mn TWAMM that spans over 1-month (30 days), buying only when price is below $5 and an additional $1mn 1-month TWAMM on top of it that starts buying only when price is below $4. We are proposing a 30-day period given it covers the lengths of time that has previously dipped the $5 level. See image and appendix below. The upper price limits circumvents the protocol chasing FXS higher and stops once the original objective of establishing a price floor has been achieved. This more aggressive buyback would 1) create a stronger signaling to the market and 2) allow the protocol to more promptly capture these rare value windows. **Digesting Existing Sell Flow** It is worth highlighting too that the Uniswap and FraxSwap pools have seen an increase in ~74K $FXS since 5 days ago when price dipped below $5. Assuming $5 FXS, this is ~$370K of FXS sold in 5 days (~$2.2mn in 30 days) which the above proposed $2mn TWAMM should be able digest. I welcome any suggestions and hope as a community we can work towards designing a better buyback program. **Appendix** Prior Dates since FIP-77 when $FXS is below $5: - 7-9 Jun '22 (2 days) - 13-20 Jun '22 (7 days) - 28 Jun - 5 Jul '22 (7 days) - 12-14 Jul '22 (2 days) - 20 Sep - 8 Oct '22 (18 days) - 12 Nov - 5 Dec '22 (23 days) - 22 Dec '22 - 6 Jan '23 (15 days) ---
**Author:** ![nader.frax](https://yyz1.discourse-cdn.com/flex031/user_avatar/gov.frax.finance/nader.frax/32/1849_2.png) [@nader.frax](https://gov.frax.finance/u/nader.frax)\ **Post date:** [June 24, 2023, 9:45pm UTC](https://gov.frax.finance/t/fip-256-optimizing-fip-77-s-twamm-parameters/2408/2 "2023-06-24T21:45:06Z")
This proposal is up for voting here: [Snapshot](https://snapshot.org/#/frax.eth/proposal/0xb0318154a2cd9a89fe4aa4dee58246581002abfa5c4d8855ac6344bc04873bd5) ---
**Author:** ![C2tP-C2tP](https://yyz1.discourse-cdn.com/flex031/user_avatar/gov.frax.finance/c2tp-c2tp/32/378_2.png) [@C2tP-C2tP](https://gov.frax.finance/u/C2tP-C2tP)\ **Post date:** [June 26, 2023, 11:41pm UTC](https://gov.frax.finance/t/fip-256-optimizing-fip-77-s-twamm-parameters/2408/3 "2023-06-26T23:41:29Z")
> [@OuroborosCapital](#): > > 1. signaling a valuation floor to the market > [@OuroborosCapital](#): > > 1. create a stronger signaling to the market well I absolutely disagree with some of the reasoning and wording. the execution though is fine I believe. I hope future proposals refrain from this sort of wording though ---
**Author:** ![Geronimo](https://avatars.discourse-cdn.com/v4/letter/g/ea666f/32.png) [@Geronimo](https://gov.frax.finance/u/Geronimo)\ **Post date:** [July 6, 2023, 11:54am UTC](https://gov.frax.finance/t/fip-256-optimizing-fip-77-s-twamm-parameters/2408/4 "2023-07-06T11:54:57Z")
> [@C2tP-C2tP](#): > > well I absolutely disagree with some of the reasoning and wording. Is increasing governance power of FXS holders and transferring value from FXS seller to long term holders better?