Expand the monetary base

As we start the MCD launch process, we should also consider and review the “core mandate”…

  • Stabilize DAI to the USD with a 1:1 soft peg with as many zeros after as possible
  • Methodically and scientifically reduce the risk of collateral portfolio while maintaining the above
  • Expand the DAI ecosystem getting DAI used a synthetic US Dollar to cement the existing network effects

We have addressed the first two and that remains a never-ending vigilant process.

For the third, I not only reference it to bring attention to the business development aspect (raw implementation) but also how it influences the aspects for the first two (eg it’s impact on monetary policy).

For example, in SCD and presumably in MCD, ETH will be used as collateral with a 150% CR and a TBD risk premium.

Point being to assist in the mass release of DAI, we should consider a massively de risked collateral package (for each approved collateral) where the objective is the mass monetization of collateral but where the risk of default is laughably low… So a CR of 1000% or more such that the RP is 50bps (or even less).

Today there is no “discount” for providing exceptionally more collateral than needed… and to that end, no motivation…

By splitting between the possible leverage use case and just partial monetizing of an asset, we can lock up additional collateral, mint more DAI, integrate in more use cases, compete with a better cost of capital, get more people paying the DSR and thereby more people receiving the DSR… In summary, expand the monetary base without expanding the risk profile.

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A discount for extra collateral makes sense, and offering multiple CR/RP tradeoffs has been positively discussed many times in the past. We should keep in mind that this minimizes price/liquidity risk. For smart contract risk, very high prices don’t reduce the odds of going instantly to 0.

Very much for it.

We can all easily over complicate it with assembling a risk reward curve trade off… long-term that is fine… however, in the short-run, I believe the easiest way to get started is to have a two-tier structure… “Normal” (which would allow leverage)… and then “De-risked” … There will be a large number of RPs to evaluate, so before we make it complicated, let’s remember to keep it simple…

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I agree this would be cool, but I’m more worried about the demand side than the supply side. We can only expand the monetary base if there is demand for Dai.

It definitely seems like a product MCD should support though, and if I understand the risk model process correctly, there shouldn’t be a huge amount of additional overhead for adding this sort of package alongside the ‘Normal’ ones.