Redemptions

Users can redeem their lcdETH into ETH through the protocol.

The backing ratio for lcdETH = Amount in Reserve Bucket / Total lcdETH Supply

Redemption price = lcdETH floor - redemption fee

The fee to redeem through the protocol is on a varying scale of anywhere between 3-5 basis points depending on the activity. The redemption rate serves as the market floor price for lcdETH.

The redeemer of n lcdETH would get slightly less than the pro rata share x < n * fairPrice

The difference is kept in the Reserve Bucket. The captured fee increases the fair price of lcdETH by the same amount.

An exponentially decaying fee schedule is used to efficiently throttle redemptions: the fee is dynamically increased upon every redemption in function of the redeemed amount, decaying over time to a minimum when no redemptions take place.