Janitorial Juice

bonding/index.adoc

@@ -20,7 +20,7 @@ forfeits their bond, and risks their work token stake.
 
 == Acceptable collateral
 
-Two tokens present themselves as obvious choices for signing bond collateral-
+Two tokens present themselves as obvious choices for signing bond collateral--
 TBTC and the underlying work token. During the bootstrap phase of the network,
 neither is an appropriate candidate due to low liquidity.
 
@@ -59,7 +59,7 @@ of ETH crosses a security threshold, open `Deposit` s will enter
 This threshold will be determined by the contract owner.
 
 If the value of BTC drops precipitously, signers won't make the return on their
-bonded capital that they'd hoped- as <<Custodial Fees>> are denominated in TBTC.
+bonded capital that they'd hoped-- as <<Custodial Fees>> are denominated in TBTC.
 This doesn't pose a problem for tBTC reserves, but is expensive to signers,
 lessening their value proposition.
 
@@ -74,7 +74,7 @@ This threshold will also be determined by the contract owner.
 == A resilient price feed
 
 Unlike popular synthetic stablecoin schemes, the tBTC system design makes no
-effort to stabilize the value of TBTC relative to BTC- TBTC will be priced by
+effort to stabilize the value of TBTC relative to BTC-- TBTC will be priced by
 the market. Instead, the goal is to ensure that the TBTC supply is strictly
 less than its backing BTC reserves.
 
@@ -144,4 +144,4 @@ ceiling of the TBTC surplus. If any TBTC is left over after, it's given to the
 `Deposit` owner.
 
 What the unresponsive signers do with the BTC outside the tBTC system design is
-for them to decide- it might be split up, stolen by a signing majority, or lost.
+for them to decide-- it might be split up, stolen by a signing majority, or lost.

custodial-fees/index.adoc

@@ -1,6 +1,60 @@
 [#custodial-fees]
-= Custodial Fees: Paying for security
+= Custodial Fees
 
-* Custodial fee rate
-* "Earnest money"
-* Deposit ownership
+Signers put their own <<Bonding,funds at risk>> to assure depositors there will
+be no foul play. The bonds they put down are capital that could otherwise be
+productive, and need to earn a return relative to the risk to remain competitve
+with other opportunities.
+
+== Paying for security
+
+There are a number of pricing models that could cover the opportunity cost of
+signers' bonds. An adjacent space offers a strongly aligned pricing model.
+
+Today's centralized cryptocurrency custodians charge 50 to 75 basis points
+(between 0.5-0.75%) on _assets under custody (AUC)_ per year. For each year
+that a centralized custodian protects a bitcoin deposit, that's as much as
+0.75% lost to the costs of custody.
+
+A decentralized model should eventually allow a lower effective fee on custody
+by introducing more competition to the space. There's a caveat, however-- a
+decentralized approach to custodianship makes legal recourse more difficult,
+requiring additional bonded collateral to ensure recompense in case of failure.
+
+Applying this pricing model to tBTC's bonding, it's clear that a signer would
+like to make a similar return on the total capital it's responsible for-- its
+portion of `Deposit` security. In the full threshold case, that's
+`1 / min(m, n)` in deposit security, or `1 / m` as `m` is less than `n`, with
+`m` signers are required to move funds. Those `m` signers would each require
+`1 / m * OverCollateralizationFactor` in  bonds, assuming for a moment a shared
+value currency.
+
+For a few conservative values,
+`n = 20, m = 15, OverCollateralizationFactor = 150%, LotSize = 1 BTC`, a single
+signer can make .0005 TBTC a year per deposit. For depositors, that costs 1.5% a
+year. Lowering single-signer returns from 0.75% to 0.25% across the security
+value they provide means total signing revenue is 0.5% of the market cap of TBTC
+each year, with a return a year of their locked up capital, denominated in TBTC.
+
+While these returns are reasonable relative to their risk in the cryptocurrency
+space, we can save both sides money through a more efficient use of capital. As
+the network matures, these costs can be lowered through the introduction of
+leveraged bonds.
+
+== Deposit ownership and maintenance
+
+A _minimum custodial deposit_ is set aside from the initially available TBTC of
+each `Deposit`. This withheld balance ensures signers will be paid for their
+work as time goes on.
+
+Over time, the _custodial deposit_ is earned by signers, who will be paid for
+their efforts when the `Deposit` is redeemed. A portion of the unwithdrawn
+_minimum custodial deposit_ must be maintained at all times for a `Deposit` to
+be in good standing.
+
+A _deposit owner_ can maintain their `Deposit` by returning TBTC, or by leaving
+a larger balance undrawn.
+
+`Deposit` s that fall out of good standing will be put up for auction,
+potentially forfeiting a _deposit owner's_ remaining _custodial deposit_. More
+details can be found in <<Handling Failure>>.

deposits/index.adoc

@@ -138,21 +138,13 @@ improving the resilience of the system to signing group failure.
 
 == TBTC Minting
 
-:collateral: 200%
-:custodial-fee: 20%
-:base-custodial-time: 2 months
+Once a deposit has been made and funded, the corresponding TBTC are minted. The
+_custodial fee rate_ coupled with the _minimum custodial lockup period_
+determines how much TBTC is immediately available for withdrawal by the
+_depositor_, who is now the owner of a funded `Deposit`.
 
-Once a deposit has been made and funded, the _depositor_ is authorized to mint
-an amount of TBTC that provides for {collateral} collateralization plus
-a custodial fee of {custodial-fee} of the deposit for maintaining the deposit up
-to {base-custodial-time}. The amount of mintable TBTC is expressed by this
-equation:
-
-`TBTC = {lot-size} / ({collateral} + {custodial-fee})`
-
-The depositor mints their allowed TBTC by sending a transaction to the tBTC
-system, which in turn credits their account with the full amount of TBTC they
-are due.
+A _custodial fee rate_ of 1% a year with a _minimum custodial lockup period_
+of 1 year would immediately enable 99% of the `Deposit` to be withdrawn as TBTC.
 
 Custodial fees are described in more detail in
-<<{root-prefix}custodial-fees/index#custodial-fees,their own section>>.
+<<../custodial-fees/index#,their own section>>.

index.adoc

@@ -223,20 +223,21 @@ all of which are implemented by the Keep network.
 
 The architecture is broken down into
 
-* Deposits
+* Deposits and signer selection
+* Bonding and price feeds
+* Custodial fees
 * Signing
-* Price feeds
-* Wallet and collateral failure
+* Wallet failure
 * Redemption
 
 include::deposits/index.adoc[leveloffset=+2]
 
+include::bonding/index.adoc[leveloffset=+2]
+
 include::custodial-fees/index.adoc[leveloffset=+2]
 
 include::signing/index.adoc[leveloffset=+2]
 
-include::bonding/index.adoc[leveloffset=+2]
-
 include::failure/index.adoc[leveloffset=+2]
 
 include::redemption/index.adoc[leveloffset=+2]