Dynamic Redemption Fees

Mechanism & Settlement Path.

For 0x → A redemptions, UCE charges a dynamic fee that is computed in 0x units and remitted to the treasury in underlying. The fee is evaluated at a snapshot rate taken just before execution so that preview = execution.

Execution flow:

• Compute feeRate = current (decayed) baseRedemptionRate.

• feeZeroX = zeroXIn * feeRate; convert to underlying via decimals normalization; transfer fee to treasury.

• Deliver netA = grossA − feeA to the user from reserves/pockets (no oracle, no underlying mint).

• After settlement, update pressure via _onRedemptionExecuted(zeroXIn).

This mechanism is oracle-free on the redemption leg and does not scale allocator debt; it purely throttles redemption intensity and compensates the treasury during stress.

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Rate Dynamics & Stress Behavior. The fee evolves with two opposing forces:

1. Decay (relief over time): Between events, the base rate decays multiplicatively per hour using a fixed factor (≈ 0.995 per hour, i.e., ~0.5% hourly decay of the rate itself), bounded to at most 24 hourly steps in a single read. Formally: $rate_t = rate_{t−Δ} × (0.995)^ (hoursElapsed)$

   This pulls the fee back toward 0% after pressure subsides, without governance action.

2. Bump (pressure from redemptions): After each redemption, the system computes the redeemed fraction of total 0X supply:

   redeemedFrac = zeroXRedeemed / totalSupply
   newRate = min( MAX_REDEMPTION_RATE(=5%),  decayedRate + redeemedFrac )

   Larger, sudden redemptions produce larger upward bumps. Frequent smaller redemptions keep the rate elevated until decay has time to dominate.

Intuition under scenarios.

• Calm markets: few redemptions → small bumps; decay quickly returns the rate ~0%.

• Redemption surge: big or clustered redemptions → rate jumps toward the 5% cap, raising the marginal cost to exit and preserving pocket/reserve depth.

• Recovery: as redemptions slow, the multiplicative decay rapidly lowers the fee back toward zero, restoring near-par exits.