# Update Redemption Rate to 50%

Author: filipv

## Motivation

Redemptions keep the DAO accountable to JBX holders by providing an option to exit the community with some ETH.

Since the DAO launched its v3 project, redemptions have been disabled because:

1. The DAO had voted to move ETH from its v1/v2 projects into its v3 project, but
2. The v3 project did not yet account for v1/v2 JBX token balances.

Because of this, JBX redemptions from the v3 project would yield significantly more ETH than redemptions from the v1/v2 projects. Since then, the DAO went through a [v3 migration](https://docs.juicebox.money/dev/extensions/juice-v3-migration/) in which v1/v2 JBX balances were accounted for.

## Specification

Update the redemption rate to 50% on [JuiceboxDAO's v3 project](https://juicebox.money/@juicebox).

## Rationale

If the redemption rate is too low, it will not provide a meaningful option to JBX holders (who would instead opt to sell their JBX on exchanges). If the redemption rate is too high, the treasury will be arbitraged against those exchanges. As of 2023-07-01:

- Total JBX supply: ~2,088,773,433.18 JBX
- Uniswap[^1] JBX -> ETH Exchange Rate: ~4,534,427.55 JBX / ETH
- Project overflow: ~1,414.75 ETH

The initial redemptive values of 366,655.06 JBX (Uniswap's rate for JBX -> 0.1 ETH) and 281,490.59 JBX (Uniswap's rate for 0.1 ETH -> JBX) at a variety of redemption rates are as follows:

| Redemption Rate | ETH Returned at Sell Rate | ETH Returned at Buy Rate |
| --------------- | ------------------------- | ------------------------ |
| 10%             | ~0.0249                   | ~0.0191                  |
| 20%             | ~0.0497                   | ~0.0381                  |
| 30%             | ~0.0745                   | ~0.0572                  |
| 40%             | ~0.0994                   | ~0.0763                  |
| 50%             | ~0.1242                   | ~0.0953                  |
| 60%             | ~0.149                    | ~0.1144                  |
| 70%             | ~0.1739                   | ~0.1334                  |
| 80%             | ~0.1987                   | ~0.1525                  |
| 90%             | ~0.2235                   | ~0.1715                  |
| 100%            | ~0.2483                   | ~0.1906                  |

As indicated by this data, there isn't a significant and immediate arbitrage risk to the treasury at any redemption rate, especially when accounting for the price impact a larger JBX purchase would entail – however, this could change quickly due to high ETH<>JBX volatility or sufficient redemption volume (these rates only apply immediately – as JBX is redeemed, more ETH will be returned per JBX).

A 50% redemption rate provides a meaningful option to JBX holders (as redemptions would yield more ETH than selling on Uniswap) without putting the DAO at immediate arbitrage risk, and leaves room for movement in either direction.

[^1]: Uniswap's JBX<>ETH exchange rates fluctuate widely due to shallow liquidity.
[^2]: See [the docs](https://docs.juicebox.money/dev/learn/glossary/redemption-rate/) for the formulas used when calculating redemptions.