I had posted the following as a response to “YIP: Add RageQuit Functionality” which was originally posted at the beginning of the month. No one had posted a response. If anyone has some clarity to share about any of the following concern, please reply. Here is that post:
I have a grave concern about RageQuit. I was originally pro Ragequit, because it sounds nice and fair, but I’ve been thinking more about how this could be a mechanism for abuse, or use by arb bots/humans.
As I understand it:
If the value of total Yams (as backed by the Treasury) is less than the Treasury, then I can burn my Yams (as a percentage of total yams) for the same percentage of the Treasury, and receive that relative sum.
The market mood is poor, most of crypto is facing selling pressure. I am able to buy some Yam at a significant discount to book value, let’s say 10%, which accounts for 10% of total Yams. Then, I RageQuit, burning 10% of total Yams.
So 10% of the Treasury is gone, leaving the community and now in my hands. I made a profit at the expense of the community.
The market mood hasn’t immediately changed after this transaction. Now there is a smaller treasury (price floor), and everyone left has a greater % of the treasury. Price/Yam should be greater now. However, if the treasury is the price floor, then there should naturally be selling pressure by 10%. If the price falls below the price floor, then another Ragequit occurs, eventually resulting in more selling pressure. If I am right in my assertion, RageQuit could be very very bad.
I’m just thinking about the cascading effects of the RageQuit mechanism.
I think it could happen. And it doesn’t have to be from a bad actor in the example; the first person utilizing RageQuit could just use it as intended.
If I am off base and my worries aren’t warranted, because I’m not understanding how RageQuit works, please explain to me why.