Skip to content

Commit

Permalink
nit: backing buffer
Browse files Browse the repository at this point in the history
  • Loading branch information
tbrent committed Sep 6, 2024
1 parent 5acdeda commit d72ccf9
Showing 1 changed file with 2 additions and 2 deletions.
4 changes: 2 additions & 2 deletions docs/deployment-variables.md
Original file line number Diff line number Diff line change
Expand Up @@ -104,9 +104,9 @@ Dimension: `{1}`

The backing buffer is a percentage value that describes how much extra collateral to hold as backing in the BackingManager. It is important for preventing RSR seizure during normal rebalancing.

As a result, too low a backing buffer can result in RSR seizure during normal rebalancing. While unpleasant, the stronger reason to avoid this is to prevent situations where RSR stakers are incentivized to unstake before rebalancing proposals in order to avoid paying their fair share. The backing buffer should be set high enough to prevent this outcome.
Too low a backing buffer can result in RSR seizure during normal rebalancing. While unpleasant, the stronger reason to avoid this is to prevent situations where RSR stakers are incentivized to unstake before rebalancing proposals in order to avoid paying their fair share. The backing buffer should be set high enough to prevent this outcome.

On the other hand, too high a backing buffer (as a function of the blended collateral yield) can cause RToken and RSR staker yields to drop during large supply increases as new issuance creates an additional debt burden that must be filled in with new appreciation. In general the amount of time this takes is short, but when an RToken grows fast enough it can outpace and result in no revenue being recognized for a while.
On the other hand, too high a backing buffer can cause RToken and RSR staker yields to drop during large supply increases as new issuance creates additional debt burdens that must be filled in with new appreciation. In general the amount of time this takes is short, but when an RToken grows fast enough it can outpace and result in no revenue being recognized for a while.

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

Expand Down

0 comments on commit d72ccf9

Please sign in to comment.