Development unWrapped with Ryan Medlin, CTO of unFederalReserve

November 17, 2021

The following update addresses a number of priorities related to ReserveLendingTM and the eRSDL ecosystem. We greatly appreciate you taking the time to read the following, and encourage you to respond by participating in the Forum located here: forum.unfederalreserve.com

It is our commitment to you, the community members, to actively demonstrate how we are living by our five principles: Safety, Courtesy, Inclusivity, Efficiency and Show.

With that in mind, here we go …

- Ryan Medlin and Howard Krieger

Current Illiquidity for Stablecoins

The overall current cryptocurrency and digital asset market conditions, economically flawed collateral factor assumptions for the listed token pairs at platform launch in May, and a high percentage of eRSDL suppliers taking stablecoin borrows in lieu of selling their positions have resulted in a long period of stablecoin illiquidity.

Stablecoin illiquidity prevents new users, especially savvy institutional players, from supplying new stablecoins and trusting the platform, since DeFi users require liquidity to remove supply.

We previously announced the following approach to reduce the amount of collateral that can be used for an eRSDL holder for any borrows:

https://unfederalreserve.medium.com/update-deprecating-unersdl-legacy-and-launching-the-new-unersdl-contract-9924d8bb20e7

There has been some confusion that there would be a new eRSDL token created but this is not accurate. The eRSDL token is supplied to the unTokens listed in the article above as collateral. Important takeaways:

  • The eRSDL token itself will not be deprecated.
  • We are not creating a new eRSDL token.

Goal of Moving Users to the New unERSDL Contract

We must reduce the supply of the deprecated uneRSDL token by 60–70% before moving forward our enormous marketing plan to bring on more users and greater stablecoin supply to the platform. The current TVL of the deprecated token is around 95 million eRSDL, so that means we must get this to below 20 million eRSDL mark.

Market Data to track goal progress:

lending.unfederalreserve.com/markets/legacy_eRSDL

To maintain a healthy platform in perpetuity after the marketing campaign, only 40% of eRSDL collateral can be allowed to prevent a similar situation from happening again. In reality, as an overall crypto bear market eventually becomes a reality, all collateral factors should be adjusted to reflect those market conditions. No one should ever borrow up to the limit because the simple software code has no way to prevent liquidations if the collateral factor is violated even momentarily. As you may or may not be aware, liquidations across all DeFi platforms are handled by bots monitoring all loans weight relative to the contracts’ collateral factors.

[CORRECTION:] ReserveLending Gas Fee Reimbursement Information

Since the original announcement above was made on Howard’s and Ryan’s town hall from Disney®, there has been an extremely low amount of eRSDL moved over to the new uneRSDL supply. There are a number of reasons for this, but the most obvious is that it costs gas to make the switch.

We will repay gas for migrating supply from the eRSDL Legacy pool to the new eRSDL pool on a good faith basis (provided evidence of the transfer is given) and it is determined that gamesmanship was not employed to exploit this generous offer.

A Forum post has been created for discussion on this topic: Gas Fee Discussion Forum

Right now, there are 3,000 suppliers of eRSDL and 900 borrowers of that collateral. This phase of the migration will mainly be relevant for those with no borrows, so gas fees will not include paying back borrows. We will then look at TVL movement into the new token after the migration and propose a next phase, if needed.

Reference Analytics:

https://dune.xyz/ethpanda/unFederalReserve

https://dune.xyz/queries/137995/272513

How it Works

It is a very simple process, and low risk, to query the ethereum network on-chain data to determine if a user removed their funds and then resupplied them to the new platform, and what the gas fee cost was.

A report will be run of folks who created redemption transactions on the old deprecated uneRSDL token during the reimbursement period, and gas fee costs will be recorded in Ethereum.

Then, a report looking for those same wallets will be run against the new uneRSDL token looking for the mint token. If there is a match, that wallet and the gas fees for both tokens will come up in the final report.

Using the final report, we will issue an eRSDL airdrop to reimburse for gas fees. We discuss how much eRSDL will be provided below.

Example Transactions

This is Ryan’s DEV account which removed his supply and re-added it to the new unERSDL token supply:

Remove: eRSDL supply from the deprecated ueRSDL token: (Redeem)

Approve: new uneRSDL token

Supply: eRSDL to new uneRSDL token: (Mint)

[CORRECTION:] Additional Information

Reimbursement will be made in eRSDL at the value of the gas fee based on a method to be determined at a later date. This reimbursement amount might be calculated as:

  • The value of eRSDL/ETH at the time of the migration;
  • A pegged value of eRSDL/ETH calculated using a volume-weighted average or other metric;
  • The value of eRSDL/ETH at the time of the reimbursement itself; or
  • Some other method based on community feedback.

(in any event, we work on a ‘best-efforts’ basis to make sure the reimbursement is fairly calculated for the migrating party.)

  • Maximum reimbursement for the migration project will be $250k in eRSDL for total gas fees based on the method used to calculate the reimbursement above.
  • The gas fee per token maximum payout will be $300. So, $300 total to make the two-step move should be your budget.
  • Paying off borrows, multiple redeems and mints will not be reimbursed. It is expected that all funds the user wants to move will be moved in the one redeem/mint transaction set.
  • You must redeem and then mint on the same day.
  • The amounts must match (no decimals are ok) from the redeem to the mint.

Gas Fee Estimates

During low gas periods, typically on the weekends, the gas fee to remove and add supply is around $100 to $150.

Signaling and Timing of Reimbursement

The reimbursement period starts Wednesday, November 24th, 2021. The reimbursement period will last for two weeks from the start date, ending Wednesday, December 8th, 2021.

Closing Statement

We are grateful for all the feedback given by the community so far around this movement. The feedback has been creative, thoughtful and courteous — we could not ask for more than that.

We know taking the time to understand this process, trust the team to use on-chain data and reimburse the community accordingly after the fact and make this move is a sizable ask for our community.

We are super excited about the marketing plan and the next phase of ReserveLendingTM so that we can continue moving forward to use this product as an important “showcase” to our traditional finance partners.

We know as a community we can move through these challenges and get into the next phase of the project!

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