Introduce a selective retirement function with a lower fee structure than selective redemption, allowing users more reasonable access to retiring specific projects from Toucan pools.
Motivation & Context
The current selective redemption fee structure is intended to mitigate the impact of arbitrage between different carbon pools. However, the steepness of these fees is disproportionate for users seeking to retire specific projects from a pool, rather than extract the unretired TCO2 via redemption.
In order to improve the user experience of retiring specific credits from Toucan pools, there should be a separate fee tier for selective retirements: guaranteed to both redeem and retire TCO2 from a Toucan pool in a single transaction. This maintains the pool arbitrage protection of the selective redemption fee, but renders selecting a specific project to use for retirement more affordable.
Given that Toucan’s goal is to drive the adoption of tokenized carbon credits, and selecting a specific project to support is the norm when retiring in the traditional VCM, this new fee tier will make on-chain pools more attractive for retirement purposes.
The code for such a selective retirement function could be modeled after the corresponding open-source KlimaDAO retirement aggregator function here. The only additional code would be a variable and getter/setter to configure the new fee tier.
In terms of an appropriate level to set for the new selective retirement fee, I propose somewhere in the range of 2-3% to be competitive with C3’s fee of 2.25% for selective redemption - but defer to the Toucan team on that decision.
Implement a selective retirement function with a new fee tier that maintains pool arbitrage protection but provides more reasonable access to retiring non-default TCO2s from a Toucan pool.
Rather than adding a new function to the pools that combines redemption and retirement, instead add an allowed list of known contracts which receive a lower selective redemption fee. Contracts that are known to both redeem and retire TCO2 from a Toucan pool in a single transaction would be able to apply for a lower fee tier for selective redemptions originating from such a contract.
Suggested courses of action
Develop a selective retirement function with a lower fee tier and its own fee setting. If this is technically prohibitive, pursue the alternative which should be simpler to implement (though more toilsome to maintain).
Timeline of execution
This is an important feature that will unlock more value from the existing Toucan pools. It should be implemented within 6 weeks, and the simpler alternative pursued as a stopgap solution if that timeline is not feasible.