So we managed to lower DAI price by implementing 101% LR on stablecoins and increasing debt ceilings to meet DAI demand. We knew that by implementing this, MakerDAO’s stablecoin exposure is going to shoot up and currently represents 45% of debt exposure. I think it doesn’t hurt if we already start discussing how we can reduce this exposure in the near to long term.
Assuming 4% SF on stablecoin vaults, we should have 3 months time before stability fees on some stablecoin vaults stop effectively accruing fees for the system. We can however lower SF and prolong the time this happens, but essentially it doesn’t change anything for the system as a whole because Maker can collect maximum 1% from 101% LR vaults. Also note that “losses” from potentially undercollateralized vaults due to SF accrual should be offset by surplus that fees on same vaults generated.
The main question is how we can generate enough DAI supply from other assets so these stablecoin vaults unwind by themselves or through manual liquidations when DAI price is low enough.
Community voted in favour of speeding the process of RWA onboarding, but it is less probable that the system generates few hundred million DAI from those assets in the near term. There are also initiatives to speed up onboarding of crypto collateral to generate more supply and put more focus on assets that are able to produce a lot of DAI.
We know that currently the assets with most DAI minting potential are farm related ones. Somehow the most sustainable ones seem to be LPs from Uniswap or Balancer, yVaults and secondary lending tokenized deposits such as c-tokens. In addition to having high potential to generate DAI supply, they also carry high yield which means Maker could set SF proportionally to those yields and receive good compensation for increased risks. Adding these assets would imply that Maker is indirectly swapping one stablecoin exposure for another (instead of higher USDC we may have higher cUSDC exposure), but we can be sure that Maker will definitely be able to collect much more than 1% as in current case.
I am curious about community desires to onboard assets such as:
- UNI LPs
- BAL LPs
- Aave (when liquidity mining starts)
SF management with these kinds of assets will need to be a bit more flexible and frequent, assuming the goal is to maximize them based on farm yields generated, which we know can be very volatile. Also keep in mind that adding something like yyCRV in the past was risky due to low DAI liquidity in Curve pool and related issues to withdrawing DAI and unwinding those vaults (case with yETH). But since we were able to fix the peg and improve liquidity, this is less of an issue now.
Note that by swapping USDC exposure to cUSDC or yUSDC we aren’t exactly unwinding stablecoin exposure, so the title for this discussion might be inappropriate. But I see this only as the first step before onboarding RWA and other assets, where we switch stablecoin exposure to farm related stablecoin exposure and achieve better risk compensation. It enables MakerDAO to indirectly participate in yield farming.
Also keep in mind the other regular measures to stimulate more DAI supply from other sources apart from RWA onboarding is regularly adding vanilla tokens such as BAL, YFI, LEND, PAXG (planned in October cycle) and potentially introducing lower LR ETH Vault types.