Summary
This RFC aims to adjust the Based ETH (bsdETH) issuance throttle to the higher of either 500 ETH or 10% and the redemption throttle to the higher of either 625 ETH or 12.5%.
| Throttle | Current Cap | Proposed Cap |
|---|---|---|
| Issuance | 250,000 ETH or 5% | 500 ETH or 10% |
| Redemption | 500,000 ETH or 7.5% | 625 ETH or 12.5% |
Abstract
This RFC proposes adjusting the issuance and redemption throttles for bsdETH. The current issuance throttle is set at 250,000 ETH or 5%, and the redemption throttle is at 500,000 ETH or 7.5%. These high thresholds pose risks to RSR stakers and bsdETH holders, particularly in scenarios where arbitrage opportunities arise due to price differentials between minting and redemption price vs onchain liquidity price. To mitigate these risks, the proposal suggests lowering the issuance throttle to the higher of either 500 ETH or 10% and the redemption throttle to the higher of either 625 ETH or 12.5%.
Problem Statement
Issuance and redemption throttling are important mechanisms designed to safeguard RToken & $RSR stakers from being drained from malicious actors attempting to drain funds or inject large amounts of defaulting collateral into the protocol.
However, the current throttle settings are too high. bsdETH issuance is at 250,000 ETH and redemption is 500,000 ETH. This leaves potentials risks to RSR stakers and bsdETH holders in the event of an arbitrage opportunity if minting and redemption price differentiated from liquidity.
Rationale
In order to mitigate this risk, the issuance and throttle will be reduced to the same throttles as ETH+. This will allows whales and large investors to utilize the protocol easily while still adding a substantial reduction to protect the overall Based ETH community.
Risks
Liquidity Constraints
The proposed reduction in issuance and redemption throttles may limit the liquidity available for large investors, potentially leading to liquidity crunches during periods of high demand. This could result in slippage and make it more difficult for users to enter or exit positions efficiently.
Operational Risks
Adjusting the throttle mechanisms introduces a risk of misconfiguration or implementation errors, which could inadvertently disrupt the protocol’s normal operations.
- I am in favor of changing the issuance and redemption throttle
- I am not in favor of changing the issuance and redemption throttle