⚖️Token Monetary Policy

TWAMM enables DAOs to execute large sustained market orders on-chain to stabilize the price of one asset by acquiring or selling specific collateral over a prolonged period.

The biggest protocols in DeFi have built complex mechanisms with this exact feature:

• MakerDAO - Protocol Stability Module (PSM)

• Fei Protocol - Protocol Controlled Value (PCV)

• Frax Stablecoin - Algorithmic Market Operations (AMO)

• OlympusDAO - Range Bound Stability (RBS)

Stablecoins are one of the true early product-market-fit stories of DeFi. Truly DeFi native stablecoins leverage user collateral

How can TWAMMs help?

DeFi protocols need to innovate and iterate fast. A big hindrance to that goal is developing supporting non-core competence infrastructures to achieve a bigger goal. The next generation of algorithmic stablecoin and lending projects will leverage TWAMMs instead of trying to substitute inefficient systems.

Olympus DAO's next generation Range Bound Stability the system leverages TWAMMs to constrain the price of OHM tokens within the desired bounds. Today, they have to use inefficient (gas, monetary) and MEV-handicapped infrastructure to achieve the same goal.

Source: OlympusDAO

A big advantage of TWAMMs is the programmability and flexibility of long-term orders in addition to gas efficiencies. This allows the OHM team to issue and cancel long-term orders as needed and based on off-chain simulations.

EXAMPLE RBS TWAMM OPERATIONS
If the price of the token increases beyond the range:
- Create large TWAMM sell orders for tokens -> stables
  - Buy pressure increases the price of assets on local AMM
  - Arbs will source liquidity from other venues
  - Treasury order sizes far exceed market participants
  - External AMM prices reflect the desired price due to arbs
  - TWAMM increases sell pressure to push the token price down

If the price of the token decreases beyond the range:
- Create large buy orders for stables -> tokens
  - Buy pressure increases the price of assets on local AMM
  - Arbs will source liquidity from other venues
  - Treasury order sizes far exceed market participants
  - External AMM prices reflect the desired price due to arbs
  - TWAMM increases buy pressure to pull the token price up

OHM DAO is the first customer pioneering TWAMMs for monetary policy. The questions that are yet to be answered:

Are layered TWAMM orders more cost-effective and efficient than walls and cushions?

How can the protocol leverage Maximum Extractable Value (MEV) to conduct Treasury operations more efficiently?

Olympus RBS DashboardDuneAnalytics

A dashboard of RBS operations pre-TWAMM

Next Generation Stablecoin

Curve released its stablecoin and the underpinning infrastructure is a continuous liquidation or deliquidation AMM. Curve is a well-established protocol that can invest time and resources into developing a specialized TWAMM.

The future is on-chain FX