This SCCP proposes the following updates to Layer 2 Wrapprs:
burnFeeRateon LUSD wrappr to 1%
- Increase the
maxTokenAmounton the ETH Wrappr by 500 ETH to 3,700 ETH
The parameters being updated as are as follows
burnFeeRateis a parameter that determines the fee to be paid in order to release the underlying, when a synth is burned
maxTokenAmountdetermines the max amount of a synth that can be minted with a given wrappr
This SCCP aims at improving the sETH/ETH liquidity on L2 and negate arbitrage activities that reduce the supply of sETH. The arbitrage involves buying LUSD on optimism using the freshly minted sETH:
- Mint sETH with ETH (20 bp)
- Swap sETH to sUSD (25 bp)
- Burn sUSD to release LUSD (5 bp)
- Send LUSD back to ethereum
- Swap LUSD back to ETH (~80 bp profit)
The current debt pool composition on optimism is around 1,500 long ETH.
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