Enabling USDC-A Vault liquidations

What is process for enabling USDC liquidations? Now that we are generating a lot of fee income from USDC vaults (and more coming), we need to enable liquidations to make sure the fee income is paid. Also the 13% liquidation penalty could be a large source of income for MKR. I would think this would be straightforward to do. What is holding us back?

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The fee income accrues on a block-by-block basis, it doesn’t need users to close out their vaults / be liquidated. This was true in SCD, but is no longer the case in MCD.

As far as I’m aware, what is holding us back is the inefficiencies in current auction process combined with the fact that liquidating USDC vaults actually makes the peg worse.

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I realize that the fee accrual is block-by-block- but if the vault is abandoned as fees go up and there is no way to liquidate it, we would eventually have the equivalent of unbacked Dai - the amount owed could exceed value of collateral- at this point the fee income doesn’t help anymore.

That is true. At 2% we’re like 6 months away from that happening even at 101% though.

right good point- we have time

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The plan is to wait until liquidations 2.0 where this won’t be an issue anymore due to the dutch auction style of clearing.

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