The latest snapshot voted for a sunset of the protocol. Vesta worked to build an action plan that will make sure the protocol is getting sunset without putting too much risk or pressure to the current vault owners.
Protocol Side Update
VST
VST will no longer be able to be minted via Borrowing
[NEW] Enable exchange between USDC/USDC.E and VST at 1:1 rate, no fee.
Saving Module
Removal of the lock system
Interest Rate
Removal of the System
Liquidation
No changes, it stays active
Redemption
We are adding back Redemption to assure that the protocol closes. We are proposing the following structure
Six months from now (April 10th, 2024) → Activate Redemption + Penalty fee jumps to 2%
Vault closed by Redemption will lose 2% of their collateral to the executioner.
Nine months from now (July 10th, 2024) → Penalty fee jumps to 5%
Vault closedby Redemption will lose 5% of their collateral to the executioner.
Eleven months from now (September 10th, 2024) → Penalty fee jumps to 10%
Vault closedby Redemption will lose 10% of their collateral to the executioner.
//Example of Penalty System at 2%
Trove: 25.3 ETH at $1500 | Debt: 30k
//Full Redemption
Redeem ETH: 30k / 1500 = 20 ETH
Trove`s Coll = 25.3 - 20 = 5.3 ETH
Penalty = 5.3 * 2% = 0.106 ETH
Executioner receives 20.106 ETH
Vault`s owner receives 5.194 ETH
//Partial Redemption
penalty is not applied
Website Update
The website will stay up for twelve months from now. We will push one more “feature” update where you will see a tab for the USDC <> VST exchange and one for redemption.
VST-FRAX pool
The process needs to go through frax’s governance system. Feel free to join the discussion so they can follow up with a snapshot vote.
Conclusion
Before we push this update, we want to have your feedback. While sharing your opinions, please keep in mind that the snapshot has voted for a sunset and not decentralization, meaning the protocol needs to be emptied at the end of the twelve months period.
So if I have an open vault position, I can exchange USDC for VST repay my loan and get my collateral back, no need to buy VST from frax/VST pool. Is my understanding correct? Also, I guess the redemption will work on the most risky vaults first.
So if the interest rate system stays active does this means that the interest rate during this period will depend on the peg of VST? that can’t be right, don’t we expect the frax/vst pool to drain?
Personally, I would give more time to vault owners to repay their loans eg, 6 month without redemption, 7 month 0% fee, 7-9month 2%, 9-11 moth 5%, 11-12 month 10%. I guess I don’t really get the 0% fee period, what is the rationale for it?
So if I have an open vault position, I can exchange USDC for VST repay my loan and get my collateral back, no need to buy VST from frax/VST pool. Is my understanding correct?
This is correct.
Also, I guess the redemption will work on the most risky vaults first.
Yes.
So if the interest rate system stays active does this means that the interest rate during this period will depend on the peg of VST? that can’t be right, don’t we expect the frax/vst pool to drain?
Good point, given the interest rate is really not that aggressive, and that we will have redemption + USDC <> VST, it wouldn’t make much sense to keep interest rate.
Personally, I would give more time to vault owners to repay their loans eg, 6 month without redemption, 7 month 0% fee, 7-9month 2%, 9-11 moth 5%, 11-12 month 10%. I guess I don’t really get the 0% fee period, what is the rationale for it?
We shared this action plan mainly for the redemption structure, so thank you for sharing your thoughts on this matter.
I personally think a good structure would be
6 months → Activate + 2% fee
9 months → 5% fee
11 months → 10% fee
We can give more time to vault owners with something more aggressive as
9 months → Activate + 5% fee
11 months → 10% fee
The 0% fee is mainly if someone wants to exchange their VST for a specific collateral (via redemption) and doesn’t care much about the later fee.
I would also prefer this structure to the one proposed initially. It seems to me that the 0% fee period is too good for the VST holders, ie 0% fee swaps of their VST for any collateral (when they also have the option of swapping for USDC).