Continuing on from this thread: Signal Request: Should we replace the weekly DSR Rate governance poll with a DSR Spread governance poll?
The poll end date is almost here and it seems we are mostly in alignment for a switch to a DSR Spread. It has become clear to me since running that last poll that even though most people agree on switching to a DSR Spread, we are not in complete alignment on the governance model in the first place.
I wanted to open this thread to start discussion on the specifics of what should be voted on, how we interpret those votes and how the results of those votes are encoded into system parameters.
See the Jan 2nd governance call for my presentation here: https://youtu.be/dRG1TThjv5c?t=1275
Slides here: https://docs.google.com/presentation/d/10x5Z0111Lt6tOMsqhiZop53QiLLSRxqaQKVvyPY6D-U/edit?usp=sharing
In particular, I want to propose this governance model for after migration:
Since the creation of this presentation, @cyrus has made a good point about allowing vault-type (ETH-A, BAT-A, ETH-B, etc) subsidies / taxes as well for low-volatility assets such as US Treasury Bonds. I think it’s a good idea to have the vault fees be a combination of Risk Premium + Subsidy / Tax.
For example: we want to encourage a subsidy for US Treasury Bonds by keeping the total fees paid by borrowers to always be at most 1% and the Risk Premium for the vault type is 0.1%. Let’s say general market conditions give us a 4% Global SF and we run the DSR Spread at 0% (DSR = Global SF). We can achieve this by setting the vault fee subsidy to be 3.1% so that the total fees paid are 1%. This allows a borrower to gain 2.9% interest via the DSR. In this example the fees are encoded as:
Global SF = 4%
DSR = 4%
US Treasury Bonds Vault Fee = 0.1% - 3.1% (RP - Subsidy Rate) = -3%
US Treasury Bonds Total Fee = 4% - 3% = 1%
A technical note: the dev team has said negative vault fees are currently not possible, but this could be changed in code.
I made this thread as a general idea dump, so we can hone in on the specifics. I definitely do not have all the answers, so please object with better ideas if you have them!