This SCCP proposes to set the initial parameters of the wrappr contract SIP-112 as follows:
maxETH: 5k ETH
mintFeeRate: 200 bp
burnFeeRate: 5 bp
The initial parameters proposed in this SCCP will be revisited once the contract cap is utilized and on-chain arbs take place in order to fix the peg.
In the long run,
burnFeeRate are expected to be around 5 bp as to encourage peg arbing with the least amount of friction possible and
maxETH is expected to be set significantly high enough in order to keep some capacity for increased demand for synths and offset the skew in the debt pool.
The initial parameters of the wrappr contract are proposed to be set as such for the following reasons:
maxETHparameter is set low enough as to minimize volatility on the peg and avoid situations where liquidity is drawn from Curve pools in expectations of large influx of synths. In addition, the cap is set as such, since the contract is still being battle tested against on-chain activities. The cap will be raised eventually over the next few weeks until the peg premium is resolved.
mintFeeRateis set as such in order for the fee pool to capture most of the arb-value. Currently curve provides around 250 bp premium for trades of sETH into ETH. Therefore, setting
mintFeeRateto 200 bp will ensure that most of the value is captured by the fee pool.
burnFeeRateis set initially at 5 bp, which is the long-run expected fee, as this function isn’t expected to be utilized initially due to the peg premium.
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