This post is intended to offer a broader discussion on strategies MakerDAO members see fit for maintaining the ability for smaller vaults to exist. You may want to check out the conversation on the Bite Rebate Poll to inform the discussion here. The Signal Request to Increase the Dust Parameter is expected to be finalized by on-chain voting next week, raising the Dust Parameter (minimum DAI debt per vault) to 2,000 DAI.
The security of the protocol is paramount, which helps explain why the Dust Parameter was just 20 DAI in August of last year and will now (probably) be 2,000 DAI just five months later. If we do not put together a plan that allows for liquidations to be preformed more cheaply, our Community will be at the mercy of Gas prices and ETH appreciation, preventing many valuable operations from people not currently in our community.
I will use one last wall of text here to briefly explain why this issue is so near and dear to me. Put simply, I would not be here contributing to this vibrant and supportive community if I had found out about Maker even a couple weeks later than I did. For me, being able to test the vaults by borrowing the minimum (at the time) of 100 DAI was paramount for me being able to understand and trust the system with more of my assets. Less than a week after opening my testing vaults, the Dust Paramater was increased to 500 DAI, prompting me to join the community and start posting on the forum. I am constantly grateful that I found MakerDAO mere days before it might have slipped away from me, as I now consider this community a home and a welcome personal obsession.
Seeing as the dangers of a higher Dust Parameter include:
- inability for new users to “test” vaults at reasonable risk levels
- a barrier to entry in the DAO for contributors with less capital
- effectively pricing out users with a native currency weak to USD
- diverting market share to platforms (like Aave and Compound) without high minimums
- more concentrated positions from individual vault users
- making compatible “partner” solutions like B.Protocol more difficult to manage
And a variety of different vectors for solutions have been suggested like:
- rebating keepers that call bite on undercollateralized vaults
- incorporating a Layer 2 solution to cut down on expenses
- expanding partnerships with groups like B.Protocol that offer committed liquidators
- updating Liquidations2.0 to be more efficient for liquidating smaller vaults
- moving small undercollateralized vaults to an ETH reserve fund
- hiring someone to manually preform bite calls
I think it’s time we start aggregating and discussing what might be a reasonable path forward.
There are reasonable concerns about bandwidth and development cost, but I firmly believe the amount of vault users and contributors to MakerDAO we will gain in the long run by investing into a solution will cover those costs ten-fold.
Thanks for reading and please drop your thoughts below! If you like an idea you’ve already seen in the forum, I suggest giving a tag or a linkback to draw in some discussion!