Debt Ceiling Mechanics

At the present the collateral debt ceiling is absolute. Example: ETH has a USD100m debt ceiling, irrespective of the USD value.

My question is: Would it not be better to have a relative debt ceiling expressed as a percentage and linked to the marketcap?

Example: ETH has a marketcap of USD 20 billion. Instead of a absolute debt ceiling of USD100 million, we could give it a floating debt ceiling of 0.5% of market cap?

The debt ceiling would be the same using both systems but the relative debt ceiling would be much more flexible. If ETH doubles in value, the debt ceiling measured i USD doubles automatically. Same if the price of ETH drops. In this way the debt ceiling for Vault collateral would be adjusted to market circumstances without increasing the Maker governance workload.

Are there any strictly technical reasons this would not work? Possibly too high reliance on oracles?

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First thing that comes to mind, you would need to replace the word ‘ceiling’ with something else.

Anyhow:
You cannot lower the ceiling below the current debt.

You would not need to lower the debt ceiling under total amount of current debt. Example: the ETH debt ceiling is USD100m and total debt for this asset is USD100m - it is in other words maxed out. During an event the price drops significantly (let’s say 20%), resulting in multiple Vaults being bitten. This will lower the total debt for this asset class. If debt ceiling mechanics (which may lag the price by a week or two) kicks in the debt ceiling is adjusted to lets say USD80m after a week or so unless the price has recovered in the meantime.

The above system will reduce the governance burden associated with having tens or even hundreds of assets types and manually having to adjust the debt ceiling for each of them as the assets grow or fall in value.

I don’t think it makes sense for the debt ceiling to fluctuate with market caps of the collateral since the borrowing collateral value is only relevant against the debt value (which is intended NOT to fluctuate via the PEG).

This unnecessarily complicates the contract for exactly what benefit?

Can you really assume this step?

It is an assumption. It should however be fully possible to simulate it.

Very naive question here[Apologies if addressed in previous thread]:
Is it possible to denominate the ceiling in absolute nominal units of ETH [or in units of each type of collateral]?

Main thought was to eliminate rates of exchange and global supply of money.