Blackswan $SWAN Rebalance Explainer
Cryptocurrency markets are heavily correlated and full of downside tail risk. While there are many tokens competing to achieve the highest positive growth during these periods, virtually none of the projects plan for the opposite, extreme contraction during market cycles.
Blackswan maintains stability not only during market growth cycles but unleashes growth during contractionary market periods with the aim to move as an anti-fragile asset or uncertainty index.
Rebalance occurs every 24 hours in the Blackswan ecosystem and is an essential function that allows Blackswan to maintain it’s value growth for Blackswan Lake stakers and most importantly, anti-fragility.
Before we get into the article, we are excited to announce a community meme competition in the Blackswan telegram group with $200 in prizes going to 3 community members. In order to participate, you must post an original Blackswan related meme or design with the hashtag #SWANRMY in the group and winners will be announced throughout the week! (Rebalance memes would be appreciated) 😎.
Introduction
A countdown can be found predominately on the Blackswan dapp homepage indicating when the next rebalance will occur. It is important to realize that this function can be and is meant to be activated by the community each time the timer hits 0 within a 15 minute window.
The contract can be found here.
When rebalance is activated, it is determined whether the dollar value of liquidity is above or below equilibrium. The description of the two cases can be found below.
Equilibrium is seen as the average dollar value of liquidity over the past 30 days (although this value will be adjusted over time).
Above Equilibrium
When liquidity is above equilibrium, this means that on average, this is a high liquidity day and indicates either price growth or deposit growth in the Blackswan Lake.
During this period, 10% (this value will be adjusted over time) of the amount above equilibrium will be distributed to Blackswan Lake stakers in the form of $SWAN tokens.
For example,
Equilibrium: $200,000
Current Liquidity: $250,000
$SWAN rewards: $5,000
In addition, USDC will be sent to the Blackswan Fund by converting $SWAN tokens to USDC which will incur minimal price impact due to the high liquidity. This allows the Blackswan Fund to accumulate stablecoin in preparation for periods of uncertainty.
Below Equilibrium
There are two possible states when below equilibrium. This is due to a 25% (this value will be adjusted over time) buffer zone that indicates uncertainty.
For example,
Equilibrium: $200,000
Current Liquidity: $190,000
During this period, while liquidity is below the $200,000 equilibrium, because it is not below the 25% buffer zone, Blackswan Fund rewards will not get triggered, nor will any other rewards. This is classified as a period of stability or sideways market that does not warrant growth or contraction of the ecosystem.
If however,
Equilibrium: $200,000
Current Liquidity: $145,000
This would be classified as a period of market uncertainty. During this time, Blackswan Fund rewards would get distributed aggressively in the form of additional LP tokens going to Blackswan Lake stakers. Daily yield would be extremely high, attracting additional users to the Blackswan Lake, and increasing demand for the $SWAN token.
*(this value will be adjusted over time)
Certain parameters within the Blackswan ecosystem will be adjusted over time in order to ensure that they meet their desired outcome. While we are confident in our logic, it is extremely difficult to predict an optimal timeframe for the equilibrium calculation, or buffer zone that indicates a period of uncertainty. We believe that this flexibility will be beneficial.
