NOTE!!!!

Exact numbers will vary due to the model being revised, but the principle remains the same.

Illustrative examples:

Using the BTC pool, the synth liability is ~75% as per https://dashboards.ninerealms.com/

Again, the equation being used is: LP exit fee = (Synth asset depth at time of freeze/total asset depth at time of freeze) * (1 - TCBOND Value)^1/2 * (1 - (Protocol Revenue/1 000 000 000))^1/2

Synth liability at time of freeze (this value will not change) = 75% Current TCBOND value is 0, as it has not yet been implemented. Therefore (1-TCBOND)^1/2 = 1 Current protocol revenue total is ~ 20 000 000. Therefore (1 - (20 000 000/1 000 000 000)^1/2 = 0.9899494937

Total fee that LP pays to exit = 75% * 1 * 0.9899494937 = 74.25%%

In effect, the LP would only be able to claim 25.75% of their position, which is what they would be able to extract if the synth units were claimed by the protocol. The fee is paid into the pool, so the protocol keeps the liquidity. Outcome to the protocol is the same as if they kept the synth LP units.

This also creates a game theory with DLPs, as those that are still in the pool have the fee paid added to their LP positions. This incentivises LPs to remain in the pool. Remember that even though the remaining LPs have their positions increased, they still cannot withdraw without paying the fees.

Over time, should the protocol improve, the outcome would look like this:

Synth liability at time of freeze (this value will not change) = 75% Potential TCBOND value of $0.2 (meaning Thorchain has covered 20% of its debt obligation). Therefore (1-TCBOND)^1/2 = 0.894427191 Possible total protocol revenue of 50m. Therefore (1 - (50 000 000/1 000 000 000)^1/2 = 0.9746794345

Total fee that LP pays to exit = 75% * 0.894427191 * 0.9746794345 = 65.38%

After Thorchain has paid back 20% of its debt, LPs will still only be able to redeem 34.62% of their position.

If the protocol does succeed in paying off its debts, an example may appear as follows:

Synth liability at time of freeze (this value will not change) = 75% Potential TCBOND value of $0.98 (meaning Thorchain has covered 98% of its debt obligation). Therefore (1-TCBOND)^1/2 = 0.1414213562 Possible total protocol revenue of 800m. Therefore (1 - (800 000 000/1 000 000 000)^1/2 = 0.4472135955

Total fee that LP pays to exit = 75% * 0.1414213562 * 0.4472135955 = 4.74%

At this point, when the the debts have almost been paid off, and the protocol revenues have 8x from current, the LPs are now able to withdraw most of their position, realising 95.26% of their position.

For the protocol to reach this point, it will be stable and be generating revenue such that removing this position is negligible to the protocol.

Additional scenarios can be modelled, and if necessary the scaling on the equations can be adjusted. However, the above demonstrates how LPs can hold a claim to their positions without creating a debt to the protocol, or jeopardising stability.

Fully disagree with exit fees on DLP. They haven't run the bank to this point, and creating that barrier could increase distrust and lack of confidence for new LPs.

1. the fee is only imposed on old LPs. It would not scare away new LPs, as if any old LPs leave, they would benefit.
2. the net immediate effect on old LPs is 0.

• If an old LP exits now, their position will be eroded based on the current synth leverage.
• My proposal increases old LP positions dramatically, they just cannot withdraw this new "extra" liquidity until the protocol recovers.
• This gives a net 0 change to old LPs now, but potential upside if they remain in the pool.

why are you not considering the payback by all (or at least as many as possible) borrowers, and with that a pool of a few million $ to start with that can earn fees?