priceDeviationThresholdFactor in the
SystemSettings contract to 1.6x from 3x.
Given the imminent increase in the number stock synths, this sccp proposes to tighten
priceDeviationThresholdFactor to a value of 1.6x, in order to safeguard against the event of a significant increase in synth price following a reverse stock split.
As explained in SIP-65 the decentralized circuit breaker aims at preventing irrecoverable loss on minters by halting the exchange on a synth, if it’s price increases or decreased by the
priceDeviationThresholdFactor, with respect to the price at the previous exchange. The current factor, as currently configured, would trigger only if the price were to increase or decrease by 3x, which is too wide to cater fo a 2-for-1 stock split or 1-for-2 reverse stock split, in which the price respectively, halves or doubles. Therefore, updating the
priceDeviationThresholdFactor to 1.6x would tighten the band enough for the mechanism to trigger in this scenario and more extreme scenarios.
The table below shows the upper and lower bands that trigger the decentralized circuit breaker with
priceDeviationThresholdFactor set at 1.6x and 3x, for a synth having an initial price of 100.
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