Andre said the below in the CIP#10 - Update y pool A from 2000 to 1000:
So higher A is better when coins are at peg. Meaning with high A the pool assumes all the assets are as close to 1 as possible. Low A is the opposite.
If the yETH vault, with its large newly minted supply of Dai, is putting downward pressure on the Dai price and bringing it closer to parity with the 1:1 USD soft peg, then why do we need to then adjust the A variable? I am not against the idea of adjusting A, though I do want to understand why the above sequence is necessary.
There’s now less liquidity in the y pool, putting the yETH vault in a tough spot should there be another liquidity crunch. If Dai is then more in line with its soft peg because of the new minted supply of the yETH vault, then decreasing A in this scenario would then put upward pressure on Dai inevitable pushing it to trade at the 1.01 ~ 1.02 range in the y pool, the same range it’s been trading at since the March collapse?
Would this create a situation where Dai is trading closer to its dollar soft peg everywhere but the Curve y pool? Or is the adjustment of this A value more an attempt to address the premium Dai trades at because it’s 150% collateralization ratio, and the related fact that in the MCD protocol there’s no closed arbitrage loop, and as such, no risk-free downward arbitrage opportunities?