Raising the Floor

The Goldilocks AMM incorporates an automated floor raising mechanism that increases the floor price of LOCKS by moving a portion of the PSL to the FSL whenever certain conditions are met.

Specifically, the AMM contains a `target ratio’ variable T such that when the ratio PSL/FSL hits T, the AMM transfers a portion of the PSL to the FSL, thereby increasing the floor price permanently. The portion of the PSL that is transferred to the FSL on floor raises increases as a function of the PSL/FSL ratio -- it is very small when market price is close to floor and increases as the market price goes further above the floor.

After the floor raises this way, the PSL/FSL ratio will decrease back below T and a new target threshold is set at 1.02*T. If the PSL/FSL ratio is stuck below T for a period of time, the protocol will gradually decrease T so that it becomes easier to reach it, thereby ensuring that the floor never stops rising. Specifically, the AMM decreases T by n% each day, where n is the number of days since the last time it hit T.