Resupply Redemption Fee and Interest Rate Adjustment

Proposals
1

Resupply Redemption Fee and Interest Rate Adjustment

Summary

This proposal introduces further optimization to Resupply’s redemption fee structure and dynamic interest rate model to enhance borrower incentives while maintaining protocol sustainability. The changes aim to improve user experience, strengthen reUSD peg stability, and support continued protocol growth.

Key changes:

  • Increase borrower share of redemption fees from 0.8% to 0.95%
  • Reduce protocol share of redemption fees from 0.2% to 0.05%
  • Update peg-based dynamic interest rate calculation methodology

Motivation

Building on the success of previous fee optimizations, this proposal continues Resupply’s commitment to:

  • Enhanced borrower incentives: Increasing the borrower’s share of redemption fees further reduces the economic impact of redemptions, making borrowing positions more attractive and sustainable
  • Improved user experience: Lower protocol fees reduce friction in the redemption process while maintaining the mechanism’s effectiveness
  • Peg stability reinforcement: The updated dynamic interest rate model provides more nuanced responses to market conditions, supporting sreUSD yield generation during periods of peg stress
  • Protocol competitiveness: These adjustments position Resupply favorably within the broader DeFi lending landscape

Specification

1. Updated Redemption Fee Structure

The total redemption fee remains at 1%, but the allocation will be adjusted as follows:

Recipient Current Proposed
Borrower 0.8% 0.95%
Protocol 0.2% 0.05%

Note: If crvUSD or frxUSD depeg upward, the redemption fee increases proportionally by the depeg amount, as per existing mechanics.

2. Enhanced Peg-Based Dynamic Interest Rates

A new interest rate calculator will be deployed across all reUSD pairs with the following updated methodology:

Interest Rate Calculation:
The borrow rate will be calculated as the maximum of:

  • 2% (minimum floor)
  • 50-60% of sfrxUSD rate (adjusted by priceWeight based on peg)
  • 62.5-75% of collateral lending interest rate (adjusted by priceWeight based on peg)

priceWeight Multiplier:

  • When reUSD is on-peg (≥$1.00): Uses lower bound (50% for sfrxUSD, 62.5% for collateral rates)
  • When reUSD is off-peg (<$1.00): Scales up to upper bound (60% for sfrxUSD, 75% for collateral rates)
  • The adjustment is bounded by configurable min/max thresholds

This mechanism ensures that:

  • Interest rates respond more dynamically to both risk-free rates and collateral-specific yields
  • Additional revenue generated during off-peg periods flows to sreUSD
  • The protocol maintains sustainable base interest rates during stable periods

3. Revenue Distribution

The existing revenue split structure remains unchanged:

Target Weight
Staked RSUP 70%
sreUSD 15%
Insurance Pool 10%
Treasury 5%

Off-peg fees are processed first and sent entirely to sreUSD. The remaining revenue is then distributed according to the weights above (with sreUSD receiving both off-peg fees AND its 15% baseline share).

Rationale

1. Maximized Borrower Protection

Increasing the borrower’s redemption fee share to 0.95% provides near-complete offset of redemption impacts, significantly improving the borrower value proposition and reducing involuntary position closures.

2. Sustainable Protocol Revenue

While protocol fees from redemptions decrease, the enhanced dynamic interest rate model ensures sustainable revenue generation through:

  • More responsive rate adjustments during market volatility
  • Better capture of collateral-specific yield opportunities
  • Maintained minimum rate floor of 2%

3. Enhanced sreUSD Attractiveness

The updated interest rate model generates more off-peg fees during periods of peg stress, creating stronger yields for sreUSD holders and improving the product’s competitiveness.

4. Market-Responsive Design

By incorporating both sfrxUSD rates and collateral-specific lending rates with different multiplier ranges, the protocol can better respond to varying market conditions and optimize revenue across different collateral types.

Expected Outcomes

For Borrowers:

  • Minimal economic impact from redemptions (95% offset vs. 80% previously)
  • Improved position sustainability during market volatility
  • Enhanced long-term borrowing incentives

For sreUSD Holders:

  • Increased yield potential during off-peg periods
  • More dynamic revenue generation from enhanced interest rate model
  • Stronger value proposition for long-term reUSD holders

For the Protocol:

  • Maintained revenue sustainability through optimized interest rate calculation
  • Improved peg stability through stronger borrower retention
  • Enhanced competitive positioning in the DeFi lending market
  • Continued support for Insurance Pool and Treasury operations

Next Steps

  1. Community discussion and feedback period
  2. Smart contract deployment and review
  3. Formal on-chain governance vote to implement the new contracts
  4. Monitoring and optimization based on real-world performance

We encourage community discussion and feedback on these proposed changes before proceeding to a formal governance vote.

2

I closed my leverage because redemptions were causing me to bleed to much. This might bring me back. Ill watch how other’s positions do with redemptions first though.