Hey mr.masa,
I suggest you post thoughts about the cap reduction in the AIP-09 thread where we are talking about that specific change, see link at bottom.
But for now, one thing I notice in your posts is that you keep discussing what happens if f(x) “goes to Stability Mode” over a long period of time. I think that scenario is very unlikely. Let me explain:
In stability mode, rebalance pool capital is immediately redeemed to push the protocol out of stability mode, by pushing CR up. If there is sufficient capital in the stability pool, then stability mode is exited almost immediately. If all the capital in the rebalance pool is not enough to keep the protocol out of stability mode, then this implies that the leverage of xETH is > 4 (and its unit price has probably just dropped a lot), and the risk of the protocol “destabilizing” event is >0.1%, perhaps much greater (here I use ‘destabilize’ to describe xETH->0, and fETH reverting to beta=1 to stETH. It’s more correct to call it a spot reversion or something like that…)
In this situation I see it being less likely we get stuck, and more likely that either xETH gets minted (due to super high leverage, plus add’l minting bonuses coming online soon) or, in a catastrophic market, the protocol goes to full-spot-reversion and we have to recapitalize with FXN.
If I’m wrong and somehow the protocol did get “stuck” in stability mode, I would guess that the dao would have plenty of time to enact structure changes on an as-needed basis at that time. I don’t think that the DAO would just sit by for a year with minting disabled, it would be addressed very quickly.
What do you think?
And as always we appreciate you and your thoughtful contributions!