In light of recent VST de-peg, Vesta core contributors recommend changing of some of the parameters of redemption.

Current Setup

Some assets are not available to be redeemed upon. ETH is not available to be redeemed upon due how it’s the most optimal collateral to back VST and so we want to minimize impact to ETH depositors. GLP and GMX are not available to be redeemed upon as GLP is a desirable asset to have due to its redeemable nature, and GMX has little traction as a vault.

Redemption fee is set at 0.5% across the board. Due to how different collaterals have different liquidity profiles, some assets are being redeemed more frequently than the others. Therefore 0.5% across the board is rather not optimized.

Recommendation

1. Redemption is enabled for all assets except for ETH, allowing any VST holders to redeem VST for collaterals. This minimizes impact to ETH within the system, which increases the quality of VST backing, and still allows arbitrageurs to come in and bid VST back to peg.
2. Set minimum redemption fee for all assets to 2%. The higher redemption fee will decrease the arbitrage profit from redemption, dis-incentivizing arbitrageurs.

Implementation

Upon passing of this proposal, the recommended course of action would be implemented immediately.

To learn more, please visit our discussion in the link attached.