Actually based on SCD actions during the last drop I can say for sure the following two things.
- Most people who actively manage their vaults don’t want to be liquidated
- Due to (1) what will happen is either a) more collateral will be deposited b) Debt will be paid down.
2b would be a case where one might want to lower the DC
2a would be a case where one WOULD NOT want to lower the DC
Personally I have advocated elsewhere a kind of floating rate based on the Debt utilization and the community voting for a SF target based on a 50% Debt utilization. My proposal suggested the Debt Utilization curve for the SF should be ~.5*SFtarget if the utilization is < 20% or 2xSFtarget if the utilization is > 80%. This would allow for a kind of floating rate that would manage utilization and the rates bounded by the debt utilization curves. It would also allow the rate to move towards the existing market via users.
Having a fixed rate for whatever amount of debt utilization leads to the need to unecessary management of the DC by the community. Same thing applies to the DSR. I would rather something like a fixed percentage of the incoming interest (say 50% for example) be set aside for the DSR again giving a kind of utilization curve payout to depositors since it guarantees MKR holders get a return, and DSR holders will self manage to match best available market rates for the risk exposure.
If one sets up a system to manage itself via proper feedback mechanisms - it will. Right now every parameter in the Maker system is fixed and is requiring constant community votes to adjust. I think in time this will lead to voter and community exhaustion for very little reward. It also leads to Maker rates being inflexible to market conditions and being used to arbitrage rates against other platforms.
The added bonus is that having utilization curve based rates will allow enough data to be collected regarding what the market thinks the risk exposure is for Maker compared to other platforms both on the borrow and supply side of the rate equations and will always allow for liquidity to be available (at some price) and to have utilization actively managed by users.
There are other issues here in relation to how quickly and accurately Maker can adapt their business model to the now fast changing DeFI space.