Rethinking frozen iSynths

[synthetixio]

Rethinking frozen iSynths

[kaiynne]

The other issue for option 1 is it is essentially a free option in the case where the iSynth has hit its lower bound. For example if the lower bound of iETH is $45 and it is $44 I can buy in and know that I will only lose the exchange fee and could have significant profit if the price moves back in my favour. That alone should exclude it from consideration.
I still think a direct fee to flag a frozen Synth is the most efficient and given it is not exploitable in that it can only be called once for each synth doesn't feel very gameable to me.

So I strongly favour option 3.

[jjgonecrypto]

Even with option 1, the price will never go outside the bands; recall I mentioned that regardless of the flag we can ensure that the ExchangeRates contract always shows a fixed price whenever the current price is above or below a limit. So you can never buy for $44 as per your example. You could still buy it at 45, but why would you? You hope that it will again over 45 but for every dollar it goes under 45 it’s further and further away from coming back.

[kaiynne]

Sorry my example was wrong, you would have to buy at $45, but the logic remains. If you can buy something with no downside and +ve upside it is a huge free option and the cost is only the exchange fee.

[jjgonecrypto]

Ah yeah that makes sense, so scrap option 1. A combined option 2 & 3 could be the safest option though. We can embed the freeze action in an exchange/transfer as well as allowing anyone to call it. Additionally I suggest the reward be in sETH that way we can pay back relative to the gas paid (with an upper limit of gwei to prevent any kind of free ETH/sETH conversion from it)

[kaiynne]

Where does the sETH come from though? We have no easy way to ensure sufficient sETH reserves to pay for this over time vs paying in SNX from a pool diverted from inflation.

[jjgonecrypto]

From the debt pool - we could issue it like we do with fee reclamation rebates.

[kaiynne]

I really don't love the idea of just creating debt out of thin air for protocol incentives.