# 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.

{% embed url="<https://twitter.com/OlympusDAO/status/1584933286853640192>" %}

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.

<figure><img src="https://4121718674-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FJ7bY0xe83NKFmbUiEyBZ%2Fuploads%2FPeYDfwzqHKFVxMAsqCil%2Fimage.png?alt=media&#x26;token=2da20972-dc4e-47e2-978d-205ee7f1cb61" alt=""><figcaption><p>Source: OlympusDAO</p></figcaption></figure>

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.

```html
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?

{% embed url="<https://dune.com/spoysp/olympus-rbs-dashboard>" %}
A dashboard of RBS operations pre-TWAMM
{% endembed %}

### 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.

{% embed url="<https://twitter.com/DefiIgnas/status/1595066916090966016>" %}

{% embed url="<https://twitter.com/DefiIgnas/status/1595066928845856768>" %}

### The future is on-chain FX

{% embed url="<https://twitter.com/koeppelmann/status/1615968827145351168>" %}

{% embed url="<https://twitter.com/Uniswap/status/1616106328740470784>" %}

{% embed url="<https://twitter.com/0xdoug/status/1562840153936125958>" %}