The Dynamic Issuance is an Aragon App that implements a Dynamic Supply Policy that can burn and issue tokens automatically. The tokens are usually held on the organization Common Pool (an address controled by the DAO, most likely an Aragon Vault or Agent app)
The Dynamic Supply Policy would work similarly to the previous Issuance Policy in that there will be a public function that anyone can call which would adjust the total supply of the configured token.
However, instead of just issuing the configured token at a fixed rate it will adjust the total supply in order to target a certain percentage of the total supply by either issuing new tokens, or burning tokens.
The mechanism makes adjustments to the supply using a proportional control function where the further from the target the system is the greater the magnitude of adjustment are.
error = (1 - current_ratio / target_ratio) / seconds_per_yearThis error term tells us how much we should be adjusting the supply to get back to the target ratio. The seconds_per_year constant smooths the adjustments so that even though we can adjust on a per block basis, it would take approximately a year (all else equal) for the system to get back to the target ratio.
To ensure that we can provide a simple and easy to understand upper bound on how quickly the total supply can change over time, we can limit the magnitude of any adjustment by a throttle parameter.
error = (1 - current_ratio / target_ratio) / seconds_per_year
if error < 0:
adjustment = max(error, -throttle) * supply
else:
adjustment = min(error, throttle) * supply In practice the throttle is an artificial limit on the ability for the mechanism to adjust supply, if the throttle kicks in it will take longer for the system to reach the target ratio and may reach an equilibrium that is higher or lower than desired.
From a governance perspective this is useful because we can make it significantly more difficult (or impossible) to adjust the throttle and reserve ratio parameters, while allowing more strategic discretion over the outflow rate from the Common Pool (for example using Conviction Voting).
When installing the app you need to determine which values will be initially used for the target_ratio, and throttle.
target_ratio is the ideal fraction of the total supply that should be in the Common Pool. For example, a value of 0.3 means that 30% of the total supply should ideally be in the Common Pool.
throttle is the maximum issuance that can happen in a year. For example, a value of 0.1 means there can never be more than 10% new issuance per year.
To help inform your decisions, we highly encourage anyone interested in the topic to read carefully through this forum post and get their hands on the model we created to come to help us come to our own decisions.
It’s important to note that all models are imperfect representations of reality but can help to create a better and more robust shared understanding of how we expect the system to behave and make the assumptions we are basing our decisions on more explicit. Play around with it, if you have question or aren’t familiar with the tooling, you can ask for guidance on our discord.