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myco-bonding-curve/docs/06-reserve-tranching.md

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06: Reserve Tranching

Source

  • Protocol: Gyroscope GYD
  • Files: ReserveManager.sol, VaultRegistry.sol, ReserveSafetyManager.sol, DataTypes.sol
  • Repo: gyrostable/gyd-core

Rationale for MYCO

A multi-asset bonding curve needs risk separation. Not all reserve assets carry the same risk — stablecoins differ from ETH, which differs from governance tokens. Tranching provides:

  1. Risk isolation: If one vault's assets crash, other tranches are unaffected
  2. Governance control: Target weights can be adjusted to shift risk profile
  3. Dynamic rebalancing: Weights drift with asset performance (price-weighted)
  4. Safety invariants: Operations that worsen imbalance are blocked
  5. Flow limits: Short-term capital movement between tranches is bounded

For MYCO specifically: commitment-based minting (labor, subscriptions, staking) creates "non-financial tranches" — the tranching system provides a unified framework for managing both financial and commitment-backed reserves.

Architecture

Each tranche is a vault holding one type of collateral (or a pool of correlated collateral). The reserve system tracks:

  • Target weights: Governance-set, time-interpolated between old and new values
  • Current weights: Actual USD value / total USD value
  • Price drift: Target weights adjust for asset performance since calibration
  • Safety checks: Every mint/redeem must either keep weights within epsilon of targets, or move weights closer to targets

Key Formulas

Target weight with time interpolation:

scheduled_weight = prev_weight + (current_weight - prev_weight) * min(elapsed / duration, 1)

Price-adjusted target:

weighted_return[i] = (current_price[i] / calibration_price[i]) * scheduled_weight[i]
target_weight[i] = weighted_return[i] / sum(weighted_returns)

Safety check:

For each vault outside epsilon band:
    new_deviation = |new_weight - target|
    old_deviation = |old_weight - target|
    REQUIRE: new_deviation <= old_deviation  (must be rebalancing)

Parameters

Parameter Effect
target_weight Fraction of total reserve value
max_deviation How far current weight can deviate before blocking
transition_duration How long to interpolate between old/new target
short_flow_memory Decay rate for flow tracking per vault
short_flow_threshold Max flow as fraction of vault value

Implementation

See src/primitives/reserve_tranching.py