📈Market Dynamics

There are several feedback mechanisms within the system. These are self-reinforcing behaviors; action 1 increases the rate of action 2 which increases the rate of action 1. Circular mechanics like this are the drivers of exponential expansion and boom and bust cycles. Loose policy states enable these dynamics while tight policy states suppress them.

Player Goals

Stakers care primarily about their MAIA balance. While price is important in valuing their MAIA and determining the rate at which it grows, it is not the main goal. A smart staker cares only about the long term growth prospects of the network. That growth translates into wealth via price and balance growth.

Minters care primarily about MAIA price. When they mint MAIA purchasing a bond, these users lock in a fixed reward in MAIA. Therefore the price remaining higher then minting cost on that 5 day period is the best case scenario since minters have their MAIA gains locked in.

The ideal scenario for a minter is for price to go up; in this case, the minter benefits from their discount on MAIA and the increase in price.

Minters are still happy if price remains flat; their profit is the discount from the bond. Like stakers, minters profit from inactivity at or around their buy in via an increasing balance.

Minters only lose when price goes down beyond the discount on the bond. At this point, the minters will choose between the MAIA or the LP Token (coming soon), depending on which one is worth more. Minters always get to choose the better of the two assets, effectively combining the best pieces of both assets' risk to reward profiles.

Market Dynamics

The default state of the network is at intrinsic value. After some long period of inactivity, price will always return to this level.

Contractions are conceivably only triggered by short-term liquidity crises. Since MAIA holders have a guarantee that price will come back above intrinsic value eventually, the only sellers below should be those who need a short term exit and are willing to take the extra loss.

Expansions can be triggered by an increase in staking or minting.

An increase in staking will generally be preceded by purchases from the market. That increases price, which allows the protocol to open bonds at a higher price and increase yields for stakers. That should serve to bring in more stakers and continue the cycle while emissions aren't capped.

Meanwhile, the rising price increases the bond discount and creates capacity for new bonds.

This positive price-liquidity feedback loop should serve to create sustainable cycles composed by contraction and expansion phases. However, they work both ways. Falling demand decreases staking rewards and mint capacity, causing demand to fall further. This is an unavoidable fact of system's like this; even the best (i.e. Bitcoin) are no stranger to significant declines after periods of expansion.

Take into consideration that this rebase system is only a feature during the emissions phase. Further rewards will be denominated in the assets farmed with the treasury.