Liquidity Rebalancing Scenarios
Terminology
Floor Bin: absolute lowest price per token (in ETH) guaranteed by the protocol
Anchor Bin(s): ETH denominated bins
Active Bin: currently traded bin
Token Bin(s): $JIMBO denominated bins sold by the protocol
Trigger Bin: liquidity bin that triggers a rebalance after it is completely bought out
Scenario 1: Rebalance ETH Liquidity when Active Bin > Trigger Bin
In the intial pool state, the Active Bin trades ~5 bins below the Trigger Bin.
Buying $JIMBO from the pool will naturally move the Active Bin past the current Trigger Bin.
When this happens, Jimbo rebalances the ETH liquidity by taking the protocol-owned ETH in the pool and distributing it across a Floor Bin and Anchor Bins.
The Floor Bin price is determined by 90% of the total ETH in the pool divided by the circulating supply of $JIMBO, ensuring an absolute lowest price where all $JIMBO can be repurchased by the protocol.
In the case where there are not enough bins to add 5 anchor bins, we will add the liquidity to a single bin under the active bin. The Anchor Bins are a set of 5 bins next to the Active Bin containing 3%, 2.5%, 2%, 1.5%, and 1% of the total ETH in the pool, respectively. The Anchor Bins provide immediate liquidity to $JIMBO at the most recently traded price to stabilize the market.
Scenario 2: Rebalance $JIMBO Liquidity when Active Bin < Anchor Bin
In the intial pool state, the Anchor Bins are supporting market activity at the current price premium with concentrated liquidity.
Selling $JIMBO in the pool will naturally move the Active Bin below all the liquidity provided in the Anchor Bins.
When this happens, Jimbo rebalances the $JIMBO liquidity by taking the protocol-owned $JIMBO in the pool and distributing it across a new set of Token Bins. Additionally, the Redemption Bin and Anchor Bins are combined into a single bin, recalculated to a new risk-free price based on 100% of the total ETH in the pool. In essence, the protocol "resets".
The Token Bins are a set of 51 bins with the first 50 bins containing 1% of $JIMBO owned in the pool, and the last (51st bin) containing the remaining 50% of $JIMBO in the pool. This allows for enough upside price discovery of $JIMBO while keeping the bins condensed enough for the protocol to keep gas usage manageable when conducting liquidity operations.
Scenario 3: Recycling Floor Bin Tokens when Active Bin = Floor Bin
When the Floor Bin is the Active Bin, any sales of $JIMBO are exchanged for ETH at the floor price of the token. Without any actions from the protocol, any $JIMBO sold in this bin will need to be re-bought before the price can move again, and all $JIMBO purchased in this bin will effectively be bought at the risk-free value.
To ensure that price can rise again, Jimbo re-hypothecates $JIMBO in the floor bin periodically, moving them to the final token bin to be re-sold at a higher price, ensuring continued growth of the protocol.
Although the recycled $JIMBO are moved to the final Token Bin, they will eventually get redistributed when the Token Bins are reset upon the collapse of an Anchor Bin, thickening $JIMBO liquidity of the protocol and creating more potential upside price movement.