Spike-and-Decay Pricing
Several core mechanisms in Polaris use spike-and-decay pricing, including bonding curve swaps, pAsset minting and redemptions, and pETH-to-POLAR conversions.
The first two follow the same underlying design with different parameters, whereas pETH-to-POLAR conversions rely on a Dutch auction mechanism.
| Mechanism | Pricing model |
|---|---|
| Bonding curve swaps | Spike-and-decay |
| pAsset minting & redemptions | Spike-and-decay (peg parameters) |
| pETH-to-POLAR conversions | Dutch auction |
Each of these mechanisms responds to a different type of market activity, but they all adjust their pricing according to the same market forces.
The result is that higher demand for a particular action also increases its cost. As demand fades, that cost gradually decays until the action becomes attractive again.
Thus, prices can continuously adapt as market conditions evolve, capturing more value during periods of higher demand before naturally encouraging activity again as costs decline.
Once configured, these mechanisms respond automatically to market activity. Demand causes the price or fee to spike, while inactivity causes it to decay.
Some parameters are stewarded within immutable bounds. For example, pETH-to-POLAR conversion spike-and-decay parameters can be adjusted through stewardship within their allowed ranges, while the mechanism itself continues operating according to protocol rules.