ICEBADGER
commented
1 year ago Redemption Mechanics:
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Users can redeem eBTC for ETH for a fee - ( eBTC price for redemption based on ETH/BTC oracle data)
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Collateral debt positions are ranked in order of risk
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Highest risk collateral debt positions will be liquidated first
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Redeemed CDPs have their debt paid down and eBTC is burned (eBTC supply reduction)
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Redemptions are disabled when TCR = MCR
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[x] #17
Redemption Fee and Mechanism:
After further analysis, research and discussions it was decided that:
- Redemptions will have a fixed low fee of 0.5% (To be adjusted based on Sim)
- Redemptions will not be capped
Reasoning:
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A fixed fee allows for the redemption mechanism to be properly be used to restore peg
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Having the redemption fee low is important since it will determined the true price floor of the system as per the economic nature of arbitrage operations
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There is no need to cap redemptions since they are only economical appealing for arbitraging when the coin is under peg.
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In the off scenario in which a malicious actor acquires a large sum of eBTC cheap or fee (exploits an AMM or money market), using these coins to redeem would improve the overall system health. Having a large amount of users being redeemed against (even safe CDPs) in these unique scenarios is not as bad as having a poorly chosen redemption cap that ends up impeding redemptions for everyday arbitraging and peg restoration.
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@GalloDaSballo confirmed the above with regards the system's security
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[x] #18
Requirements:
Define and build a redemption system that allows users to redeem eBTC for ETH. This redemption system will help maintain a hard price floor. Redemptions should be set algorithmically in proportion to redemptions usage in a way that they disincentive any redemption that does not help support peg.
Parameters:
Miro Link: https://miro.com/app/board/uXjVPEY0mBw=/?share_link_id=439657364322
Liquity Docs Redemptions: https://docs.liquity.org/faq/lusd-redemptions