[IP] hyUSD Backing Buffer Change to 0.15%

Summary

Change the backing buffer from 0.1% to 0.15%.

Current backing buffer:

0.1%

Proposed backing buffer:

0.15%

Abstract

Currently the backing buffer is set to 0.1%. If enacted this proposal would change the backing buffer from 0.1% to 0.15%.

The backing buffer is a percentage value that describes how much extra collateral to hold in the BackingManager. This can be important for preventing RSR seizure during normal rebalancing as a result of trading slippage.

Problem Statement

If the backing buffer is too low, this can result in RSR seizure during normal rebalancing. It’s possible to get into a situation where RSR stakers begin individually unstaking before rebalancing proposals in order to avoid being slashed. The backing buffer should be high enough to prevent this outcome for expected rebalances.

If the backing buffer is too high it can cause RToken and staker yields to become too sensitive to supply changes; new issuance creates a hole that must be filled in before revenue handout can resume, while new redemptions cause the excess capital to be immediately realized as revenue.

It is not important to consider the backing buffer for default scenarios, only governance-led rebalances.

Rationale

The goal is to align the backing buffer with the recommended value in the documentation.

Risks

The risk of keeping the backing buffer too high is that RToken and RSR staker yield can be volatile.

The risk of keeping the backing buffer too low is that this can result in RSR seizure during normal rebalancing.

  • Yes, I am for this proposal
  • No, I am against this proposal
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This proposal has been moved onchain. The Request for Comments period has ended and the poll is closed.

Link to onchain proposal: Reserve app | DTFs