ETH and WBTC Vaults Liquidations 2.0 Parameters

Hey all,

Based on the current feedback regarding the 40 min expected auction duration for Liquidations 2.0 proposed parameters, we are proposing a similar set of parameters for ETH and WBTC vaults at MakerDAO.

One of the primary reasons to have the majority of the auction parameters unified between different vault types in this stage is that we may not want to create a potential disorder between keepers when setting up their software. If we observe auctions running smoothly with high participation, we will propose adjusting some of the parameters below (one idea was to shorten expected auction duration for ETH-B where market risk can lead to losses for Maker faster).

The only parameter where we propose a different value from the start is ilk.hole, which is the amount of pending liquidations for a particular vault type. Input for selecting this value is based on the latest on-chain slippage curves for assets backing Maker’s loan portfolio, which can be found here.

Based on the on-chain slippage curves, we believe that about $35m ETH and $15m WBTC could be liquidated in one auction life-time with an average expected duration of 40 minutes. $35m of ETH sold represents about 4.0% on-chain slippage and $15m WBTC sold represents 3.7% on-chain slippage currently. Assuming arbitrage between off-chain and on-chain liquidity works well, slippage figures will be likely much lower. Note however that in the downside case we could have about 36 auction cycles per day (24h / 40m expected duration), which would affect slippage severely if larger amounts would be liquidated.

Since Maker offers 3 types of ETH vault and we might want to liquidate ETH-B faster than ETH-C, we believe a larger share of the maximum $35m pending ETH liquidations should be attributed to ETH-B than to ETH-C, even though the current debt exposure on ETH-B is lower.

ETH-A, ETH-B, ETH-C and WBTC-A Auction Parameters:

cut = 0.99

step = 90 seconds

buf = 1.30

cusp = 0.4

tail = 140 minutes

chip = 0.1%

tip = 0

ilk.chop = 13%

tolerance = 0.5

Global Auction Parameter:

hole = 100m DAI

ilk.hole parameters:

ETH-A ilk.hole = 22m DAI

ETH-B ilk.hole = 8m DAI

ETH-C ilk.hole = 5m DAI

WBTC-A ilk.hole = 15m DAI


Awesome can’t wait to get these added! Out of curiosity, could you explain some of the rational for ETH-C having the lowest ilk.hole? I had just assumed ETH-C would have the largest one due to having such a high liquidation ratio and ETH-B would have the lowest. Typing it out, I can see that it might be dangerous to have too low of a value for ETH-B as not clearing through those liquidations could be quite costly in a continued decline, so I think my logic is faulty there.