We appreciate WOOF!'s detailed specification for the Sandbox. This brief review identifies potential areas for improvement and includes comments and questions on topics such as the discount model, collateral addition rules, market closure assumptions, and correctness of calculations.
[SCP] Buy fees with discount in exchange for COMP tokens
- The protocol’s fixed 5% discount model guarantees a loss when selling accrued fees, which raise the question: why would the protocol systematically accept such a loss? Given the gradual accumulation of fees over time, selling accrued fees is unlikely to cause much slippage. A more efficient approach would be to dynamically compare the slippage cost of selling tokens through a DEX aggregator (e.g., 1inch) or intent-based DEX (CoW) against the fixed 5% discount. If the slippage is below 5%, the protocol should execute the trade directly; if not, it could revert to the discounted sale. This avoids unnecessary losses and caps the unexpected high slippage.
- The original proposal’s statement “Selling these tokens on third-party DEXs could expose the protocol to risks like impermanent loss” is inaccurate because impermanent loss impacts liquidity providers (LPs), not the sell of tokens.
- The wording of the section’s title is confusing. Based on the description, it could mean “Users buy the protocol’s accrued fees with COMP tokens at a discount.”
[SCP] Add new collateral asset using governance proposal
- Could you clarify whether the “Sandbox Token” is a new governance token that forked from COMP, and if so, what is the technical or functional relationship between the two?
- The specification states that adding new collateral tokens require a governance proposal (“The proposer drafts the proposal to add a new token”), yet the [SCP] Create New Market section implies that creators can freely select collateral assets from a pre-approved list.
- Does “add new collateral tokens” via the governance proposal simply mean adding the token to a pre-approved list of supported collateral assets? Or does it also entail adding the collateral token directly to a specific market and configuring its parameters (e.g., collateral factor) within that market?
- Can a creator add new collateral tokens to a market after it’s created, or are they limited to the initial selection?
[SCP] Close Market by Creator when totalBorrow is zero (without SCP)
- The assumption that “all Borrowers have returned the borrowed base asset” is unrealistic, as evidenced by legacy markets in Compound v2, where deprecated markets retain non-zero borrow balances even years after deprecation. To address this, the protocol should implement a borrow threshold (e.g., total borrow < $10,000) as a criteria for market closure. If outstanding debts persist, mechanisms such as debt auctions (similar to MakerDAO’s Emergency Shutdown) or debt redistribution (like Liquity’s Redistribution) could be used to settle obligations without requiring full repayment.
[SCP] Liquidation
- Does Sandbox intend to use the exact same liquidation mechanism as Compound III, or will it use the Compound v2 model? The specification mentions the absorb function but doesn’t mention the Store Front Price Factor, a key component of Compound III’s liquidation process.
- Incorrect Effective Supply and Liquidation Threshold calculation
- Collateral and liquidation factors are asset-specific and should not be averaged.
- Error in Original Spec:
- Cumulative Supply = 10 AERO * $1.2 + 10 LINK * $15.51 = $167.1
- Effective Supply = $167.1 * (0.6+0.65) / 2 = $104.43
- Correct Calculation:
- Effective Supply = 10 AERO * $1.2 * 0.6 + 10 LINK * $15.51 * 0.65 = $108.015
[SCP] Borrowing asset
- LINK prices typo
- $23.51 in the assumption and $32.51 in the formula
- Borrow limit calculation typo
- Correct: Borrow Limit = Collateral Value * Collateral Factor
- Error: Borrow Limit = (10 * 1.48 / 0.6) + …