Potential SIP: Scaling Zero redemption fee


Scale redemption fees for Zero (ZUSD), depending on collateral ratio.


To discourage redemption against well collateralized credit lines, and provide some compensation to those affected with redemption.


Redemption fee should be additionally multiplied by collateral rate of a credit line being redeemed against. For example, when origination fee is 0,5% and credit line being redeemed against is 200% collateralized, redemption fee will be 0,5x2=1%. The difference between origination and redemption fees should be added to credit line collateral, to compensate for the cost of renewing credit line.


This is an interesting automated way to scale the redemption fee, and I think it makes sense to increase the fee as the redemption eats up “safer” collateral. Right now it is possible to manually increase the redemption fee, either proactively in response to economic indicators, or reactively in response to significant increases in redemptions. We could try manual interventions first, and if they are successful then look at investing the resources to automate this, perhaps using a mechanism like the one you suggest.


I do agree that we need a fee mechanism that is dynamic and ideally automated, Since we are dealing with volatile collateral it only makes sense that the these sort of mechanisms are closely observed and adusted.
It is also worthy to note that the situation we are currently in is not the rule, but an exception. It is an anomally due to the maturity levels of the Zero protocol. So we must not make a rule out of an exception and impede organic function it