Proposal #77
Tech. Comm. #0x915b

Follow Up to Proposal #75 - threshold reduction

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I'm am against this proposal, at least until the new formula for capacity-based rewards has passed AND bridge capacity or iBTC liquidity is an issue.

Please let me explain why:

If you take a snapshot of Interlay 1 sec before and 1 sec after this proposal would pass, the APR of any vault would be the exact same, but bridge capacity is increased.
=> Contrarily to what is explained, this proposal will have no impact on APR for vaults, rather just increase the vaults (i.e. bridge) capacity. This effect is not useful currently as it is explained that most minted iBTC basically do nothing.

Instead, this will initiate a 0 value-add race to self-minting for vaults to try to increase their share of BTC in custody and increase their APR, to the detriment of vaults that will not be willing to play this race.

The only scenario where APR somehow increases is if vaults mostly remove the newly freed collateral, which I believe is not going to happen as the whole point of this it to have it used as collateral to insure BTC