Simple Summary

Raise c-ratio target on Layer 2 to 1000% to keep L2 synth supply and debt risks more manageable in early stages of L2 exchanges.

Motivation

With SIP 117 and SIP 121, we will be starting Phase 1 of L2 rollout, which includes exchanges. Currently, stakers on L2 are not exposed to any debt changes, and hence they will always have sUSD equal to their debt. After exchanges start, debt and sUSD holdings may be different.

However, in the current state, L2 sUSD is not available for purchase or for migration, which is problematic. We have various workarounds to this on the way, but in the meantime it is desirable to 1) make it less likely that anyone gets liquidated or runs so low on sUSD that they are no longer able to claim and 2) lower the total synth supply on L2 such that subsidizing losses if necessary is easier.

The c-ratio is intended to be walked down if debt increases to allow people to continue claiming in the intervening time period. Once this stage is over, we should also plan on renormalizing c-ratio.

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