The idea is to allow existing or new sponsors to mint synths in a 2 step scenario, similarly to how slow withdrawals work, giving them the ability to mint new tokens while being below the GCR.
When synth price steadily goes down over a period of time, EMPs tend to end up being over collateralized, which adds a huge barrier of entry to both new sponsors and existing sponsors that want to increase their exposure to the synth.
As of today, YD-BTC EMP GCR is 3.81481047. A new sponsor with 1 BTC($47k) available can mint up to ~12.3k YD, when a 2.5 CR (which most people would consider safe enough) would allow them to mint ~18.8k YD. In this scenario, using slow minting they would be able to mint 50% more tokens and still sit at a CR value they are probably comfortable with.
With the current implementation of the EMP, a sponsor in this situation would need ~1.53 BTC available to mint ~18.8k and then withdraw ~0.53.
A high GCR with no way to go around it when minting hurts the potential of UMA being used as an alternative to lending for unlocking capital.
How it would work:
A first transaction would indicate the amount of synths to be minted and, after a period of time long enough for liquidators to analyze the resulting health factor of the sponsor, a second transaction would withdraw the newly minted tokens.
1st tx: Lock collateral and declare the amount of synths you want to create. At this point in time, position CR = collateral / (synth price * synths to be created).
Wait for a liveness period where liquidators may liquidate the position if CR < minimum CR.
2nd tx: Mint and withdraw an amount of synths <= the initial amount declared (I don’t know if slow collateral withdrawals allow you to withdraw less than requested, but basically it should work in the same way than those).
1st tx: Declare the amount of synths you want to create. At this point in time, position CR = collateral / (synth price * synths to be created).
Rest is the same as new sponsor.
As Sean pointed out in Discord, this feature would require liquidators to be able to liquidate without having to repay any outstanding debt, they would only need to provide a bond and a liquidation price. This removes the capital restriction in place for liquidators, which is something that might require more thoughtful consideration.