Process Walkthrough

In this page we will provide a simplified walkthrough, end to end, of the process to which SonicSphere acquires cPoL, Utalizes said cPoL, Liquidates Yield from cPoL & distributes said yield back to the ecosystem.

Pretext for Context

In the examples below there are some arbitraty figures. Its best to clarify these for the sake of this example and clarity.

1. Prices for the assets within each Gauge Auction are arbitrary. We have used round integers for ease.

2. The price of SPHERE is $2 (arbitratry)

3. The price of oSPHERE is half that of SPHERE (arbitrary as oSPHERE will likely never be higher than SPHERE due to the arbitrage premium).

4. The Gauge auctions are puerly random and do not indicate final auctions once the project is live.

Gauge Auctions will initially be set by the team. Further gauges can be added via governance, however as each Gauge Auction is treated as a mini fund & needs team participation to establish the mini-fund and how it is managed, being hard coded into the smart contract, these will be added on an ad-hoc basis depending on demand from protocol particpants.

Gauge Auctions - Where it all begins

In the image below we see 3 example Gauge Auctions set.

1. Beets Gauge Auction - Seeking to acquire stS for the fund.

2. Shadow Gauge Auction - Seeking to acquire a SPHERE / S LP (on shadow) for the fund.

3. SwapX Gauge Auction - Seeking to acquire a oSPHERE / S LP (on SwapX) for the fund.

At the bottom of each auction (in red) You will see a "pay" tab. This indicates the ammount of the yield bearing asset the auction is starting with. In reverse dutch auction style, this amount will decrease over time, making it cheaper for someone to execute this auction. The starting price of each auction is arbitrary to start, however after the first auction is completed the next auction will start at 2X the value that the previous auction concluded at. In the screen shot below we see each mini fund seeking to acquire: 1. 100 stS (Valued at $100 in notional value) 2. 100 Shadow LP (Valued at $300 notional value) 3. 100 SwapX LP (Valued at $200 notional value)

Up the top we can see the minter contract dispersing the auction emissions to the "voter" contract. The voter contract then emmits oSPHERE emissions to each respective gauge auction based on gSPHERE governance votes.

The start of a Gauge Auction Epoch.

First Auction Executed - Process

In the image below we see the auction for the stS mini fund has been executed by a user. In this image, 2 hours has passed since the gauge emissions went live and with the stS gauge auction recieving the most amount of votes, its gauge filled with oSPHERE the quickest. Cocurrently, because it started with the least ammount of stS required to execute the auction, the decay of the ammount required to pay meant that the price discovery process found equilibrum the quickest out of all 3 auctions. This presents an arbitrage opportunity where the value of oSPHERE on offer is greater than the value of assets the fund is looking to acquire. Logically this means a bot or human has taken this arbitrage premium by executing the auction. In the process highlighted as #1 in the image below, the user has paid 80 stS and recieved 100 oSPHERE in return. An arbitrage value premium of $20.

From here, the mini fund automatically puts the stS that it recieved from the auction, to work, as seen in #2 below. It will now start to farm $S tokens, by the find automatically interacting with Beets. Further more on the far right of #2, we see a new stS auction starting. As mentioned above the new auction is set at a starting value of 2X the previous auctions execution value. With the previous auction being executed at 80 stS, the new auction starts, asking for a value of 160 stS, and will decy from there as a means of price value discovery. The gauge begins to fill with oSPHERE once again and the process is repeated.

Further more we see the other two auctions have also updated their metrics, where the value ask has decreased and the value on offer (oSPHERE) has increased based on their emission rates. As the hours pass, these auctions will come closer to equilibrium in the price discovery process, eventually offering a premium, which, if a human does not act on, a bot surly will.

First auction executed

Second Auction Executed / Reward Auction Starts- Process

In the picture below we are now 4 hours into the Gauge Auction Epoch Process.

There are now quite a few moving parts, so we will break these down by numbering them in the diagram below.

1. By now the second gauge auction for SwapX LP's has found equilibrium and presented a good enough value arbitrage for someone to execute. The Gauge got to $160 in oSPHERE emissions asking for $120 in notional value for the LP tokens. This presented a value arbitrage of $40 for the executing party.

2. Per standard process highlighted above, the user paid the LP tokens in return for oSPHERE, with the mini fund automatically putting the LP to use in SwapX farms.

3. Returning to the stS mini fund, its second auction has some updated value metrics and equlibirum is not far off. Our attention here however should focus on the "Plug in" area, where we can see that 2 hours after the auction is executed and the stS being put to work, the mini fund has now acquired 16 $S tokens from its automated fund management.

4. Looking to the blue box now, we can see someone has called the "Claim Reward" function on the stS mini fund plug in, which has now triggered a secondary "reward auction". This auction works the same as the Gauge Auctions (in logic), however rather than seeking assets for cPoL in return for oSPHERE, its seeking to liquidate farmed assets in return for SPHERE. A reverse model to the standard gauge auctions, if you will. This auction has started by seeking $160 woth of SPHERE tokens from any user willing to execute this auction, in return for the 16 $S tokens that has been farmed from the stS mini fund strategy. This "reward auction" will continue to converge in terms of value paid vs value received, until such a time that an arbitrage in value is presented, making it illogical for someone or a bot, to execute this auction because, who doesn't like free money?

As other mini funds start to accrue cPoL & said cPoL starts to produce yield, they too will start to fill this "reward auction" with added value, expediting the value discovery process and speeding up the liquidation process.

Multiple auctions now in play, including "Reward Auctions"

cPoL continues to increase / More Yield added to Reward Auction.

In the diagram below, 5 hours has now passed in our hypothetical example. As depicted in the diagram the stS Gauge Auction has been executed for a second time & the reward auction continues to grow in value offered.

1. The stS auction was executed for 112 stS in return for 150 oSPHERE. We can see the cPoL balance for this mini fund has now updated from 80 stS to 192 stS with the addition of assets acquired from the most recent auction.

Note* Mini fund assets (cPoL) are retained by the fund to continue to extract value in perpatuity. These assets are never sold, the only grow as the fund acquires more cPoL.

1. After 5 hours, with the addition of the new stS to the minifund, plus with the stS that was already put to work farming $S, the mini fund now has 24 $S tokens extracted as yield for the ecosystem. This Yield is automatically passed through to the ongoing "reward auction".

2. The reward auction continues to grow in value, not only from the increase in $S tokens from the two successful stS Gauge Auctions & subsequent stS mini fund, but also from the SwapX mini fund, which is now earning SWPX tokens. As more assets are acquired as cPoL & farmed for Yield, the pace to which any given reward auction accrues value will increase exponentially.

Reward Auction Executed, cPoL Yield Liquidated & Resulting SPHERE is Distributed to gSPHERE Holders

As depicted in the diagram below, 7 hours has now passed. All standard Gauge Auctions are running as they should, continuing to converge on their respected price discovery equilibriums. The reward auctions however, has now been executed, with the resulting value passed back to gSPHERE holders where; 1. The notional value of cPoL farmed assets reached $80.40 vs $60 SPHERE needed to be paid to win the auction. The user buys SPHERE from the open market (or collateralises their gSPHERE to borrow SPHERE and execute the auction). In return the user receives the Reward Auction assets at a premium rate.

Note* A user could collateralize their gSPHERE to borrow $S from the bonding curve. Using this $S to buy SPHERE and execute the auction. Once recieving the Yield from the reward auction, the user could then liquidate these assets, buy back $S and repay their loan to unlock their gSPHERE collateral again. The remaining $20.40 in value could be treated as profit from participating in the ecosystems liquidation process.

1. The reward auction is reset at 2X the rate the previous auction was settled for (60 {SPHERE} *2 = 120 SPHERE)

2. The buyer pays 60 SPHERE tokens and in return received 62.4 $S tokens (farmed from the stS mini fund) & 18 SWPX tokens (farmed from the SWPX mini fund).

3. The 60 SPHERE paid by the user who executed the auction is automatically distributed to gSPHERE holders who can then claim this as a reward for participating in the gauge governance process.

Reward auction executed, liquidated yield distributed to gSPHERE holders

Rinse and Repete

From here, the process is repeated over and over again throughout each Gauge Epoch (7days). As the protocols cPoL position continues to grow, so does its propensity to accrue yield thus exponentially increasing its ability to produce sustainable & perpetual yield for gSPHERE holders.

At the end of a Gauge Epoch, users gSPHERE is unlocked (for them to do with it as they will) or for them to re-lock and vote again for another week or rewards.

It could be considered a wise strategy for a user to continue locking their SPHERE rewards for gSPHPERE inorder to not get diluted out of their position. As the protocol matures in age & thus the NAV of its cPoL, the protocols propensity to produce yield week on week, increases exponentially rewarding those who continue to increase their gSPHERE position.

Overlooked strategies

Those who have enough size in gSPHERE, can easily participate in the gauge auction process without any additional capital required. If a user were to see an attractive auction reach equilibrium, but has no free capital liquid they could

1. Collatoralize their gSPHERE

2. Borrow $S from the bonding curve (liquidation and interest free)

3. Use said $S to buy SPHERE (if a reward auction) or the respective assets (if a gauge auction)

4. Execute the auction using the assets purchased (SPHERE or LP's) from the borrowed $S

5. Sell the rewards (realising the arbitrage)

6. Use the $S from the arbitrage opportunity to repay $S to the bonding curve

7. Unlock their gSPHERE again

8. Realize profit from the Gauge Auction process (Auction Proceeds - {Collateral Repayment + Fees} = Profit)

It is this unique function of liquidation & interest free borrowing of $S from the bonding curve that truly propells the fly wheel of ecosystems cPoL acquisition and liquidation process.