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update backing buffer description
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tbrent committed Jul 24, 2024
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10 changes: 8 additions & 2 deletions docs/deployment-variables.md
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Expand Up @@ -102,10 +102,16 @@ Reasonable range: 100 to 3600

Dimension: `{1}`

The backing buffer is a percentage value that describes how much overcollateralization to hold in the form of RToken. This buffer allows collateral tokens to be converted into RToken, which is a more efficient form of revenue production than trading each individual collateral for the desired RToken, and also adds a small buffer that can prevent RSR from being seized when there are small losses due to slippage during rebalancing.
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.

However, too large a backing buffer (as a function of the blended collateral yield) can cause RToken and RSR 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.

If the backing buffer is set too low, 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.

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

Default value: `1e15` = 0.1%
Reasonable range: 1e12 to 1e18
Reasonable range: 1e13 to 1e17

### `maxTradeSlippage`

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