Rebalancer Incentives

Off-chain rebalancers are participants who

  1. force closes positions with depleted premium deposits

  2. fills add/reduce orders

Force closing incentives

A rebalancer will force close a position when a premium deposit is depleted, which is triggered when the instantaneous premiums quoted > the premium deposit.

The protocol is designed such that all the remaining margin of the force closed position is the resulting profit for the closing rebalancer, where the remaining margin is simply the remaining proceeds after all debt has been repaid to the AMM.

Can a rebalancer profit from closing healthy positions?

No. A position can only be forcibly closed if the instantaneous premiums quoted > the premium deposit. However, the instantaneous premiums quoted are a function of time * rate. Even if the rate was made high within a block it would take at least dozens of blocks for it to become greater than the position's premium deposit.

Order filling incentives

A rebalancer will fill an order if the action is profitable given current prices and liquidity conditions. For example, an order that needs 1ETH in exchange for 2000USD will be filled by a filler as soon as the market price of ETH(including slippage + fees) is marginally less than 2000USD.

Last updated