[Governance] Temporarily Increase Tobin Tax from 0.25% to 0.35%

Summary of the issue

Fix plan

  • B-Harvest is working on fix of the algorithmic flaw, and PR will be ready earlier next week(until 2020-06-09)
  • Terra team will include the fix in the terrad version for columbus-4 network

The first strategy to prevent arbitrage attack

  • B-Harvest and Terra team come up with idea to vote abstain for all luna/terra oracle except for luna/krw
  • However, because luna/sdr rate is crucial for business flow of Terra, we need to immediately resume the abstain votes to normal operation

Plan B : Preventing further attack

  • We submit a governance proposal to temporarily increase Tobin Tax from 0.25% to 0.35% for all terra-vs-terra swaps except mnt, to prevent most arbitrage attack risk caused by the short term volatility of terra-vs-terra swap rates
  • Additional proposal for restoration of Tobin Tax to 0.25% except mnt will be submitted after columbus-4 launch, which will include the algorithm fix

Risk exposure until Tobin Tax governance pass

  • The plan B still opens the risk exposure of arbitrage attack until the governance proposal passes
  • Do from Terra, and Hyung from B-Harvest discussed that the risk exposure is relatively small compared to breakdown of business flow of Terra

Other possible plans

  • We can softfork the network with Tobin Tax 0.35% right away if the community agrees
  • However, the disadvantage of this emergency approach is that the process is skipping proper on-chain governance process
  • We can assume that successful launch of the softfork network implies indirect agreement on Tobin Tax temporary increase

The Parameter Proposal

  • Tobin Tax from 0.25% to 0.35% except mnt.
    (Tobin Tax change for mnt denom will be automatically excluded)
  • Additional proposal for restoration of Tobin Tax to 0.25% except mnt will be submitted after columbus-4 launch, which will include the algorithm fix

The json file to be used for param-change proposal

{
“title”: “Temporarily Increase Tobin Tax from 0.25% to 0.35%”,
“description”: “”, #TBA: including short description and ipfs document link
“changes”: [
{
“subspace”: “market”,
“key”: “TobinTax”,
“value”: 0.0035
}
],
“deposit”: [
{
“denom”: “stake”,
“amount”: “2000”
}
]
}

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Note that the MNT tobin tax is an exception as it is currently in excess of 0.35%. Proposal is applicable to pairs involving krt, sdt and ust.

mnt exclusion updated!

Updating default tobin tax params will update all pairs tobin tax except MNT swap.

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Thanks for writing all of this up and acting so fast to propose a solution. Is there a thread/discussion somewhere that describes the issue in more detail?

edit: Nevermind, found it in the medium post.

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