Prioritize rETH withdrawal buffer (RPIP-65)

RPIP-65 directs ETH from new rETH mints to withdrawal liquidity first

Outcome If Positive

Aimed at the Saturn 1 release:

• ETH from new rETH mints will be directed to the rETH contract (available as withdrawal liquidity for rETH burners) Note: ETH from the rETH contract currently overflows to the deposit pool after a buffer; no change is planned there

Outcome If Negative

No change:

• ETH from new rETH mints will continue to be directed to the deposit pool (available for node operator matching)

Rationale

The rETH contract has a buffer for withdrawal liquidity (currently sized at 1% of rETH TVL), but it's not being fully effective. In particular, if (as has been the case recently) we have a need for a withdrawal liquidity and demand for protocol ETH to pair with Node Operators, we are not fully prioritizing either choice (exits and rewards currently go to liquidity, while mints go to pairing with NOs). This proposal suggests prioritizing liquidity, which will bring supply and demand closer together in this situation.

Context

RPIP-65: Prioritize rETH withdrawal buffer Discussion