Flopping to raise the surplus buffer

Governance
#1

MKR price has almost increased 300% in a short period of time. As well demand for Dai from ETH shows no signs of slowing down. We can take advantage of this by floping some MKR to rapidly build the buffer. If we set a starting bid of $1750, 2300 MKR can be issued to immediately expand the surplus buffer to 8MM, doubling our risk bandwidth for high-demand collateral types like ETH-A and ETH-B.

It might be a controversial position that we should use the Flop mechanism in good times rather than as a last-resort mechanism. However companies in growth mode issue equity all the time to fund expansion when the equity is at a high price. I think it makes sense to capitalize on the recent price rise by raising some funds now that we have burned several thousand MKR at an average price around $600.

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#2

have been thinking about this idea last night too :wink:

however

  • you cannot flop if you don’t have more than 50k DAI in debt to heal that you cannot cover with surplus
  • even if you could, the added surplus buffer would immediately sold of with a flap again
  • this could be prevented by raising the SB

bottom-line: we can and should stop burning and instead filling the SB. there is a signal poll running for another week, hope we can move forward here.

3 Likes
#3

I was worried this was a limitation with the flop mechanism. I hope we can add a mechanism for governance to authorize a once-off with a specified amount of MKR (or specified amount of Dai) so we can use this method in the future.

#4

I have to admit that I - as a MKR holder - would rather not get my precious MKR diluted. we do have a solid revenue coming in (roughly a dollar per minute), so we can easily build the reserves we need without printing new shares

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#5

That’s true, I also support running DCs higher than risk bandwidth would suggest for a period of time as long as there is urgent motion to raise surplus to the required levels. Crypto expansionary periods don’t last long (only about 2 years) and every day spent stuck at debt ceiling is a day wasted.

#6

I am personally against this.

We need some stability with this MKR burning mechanism. It has been active, now, for only a couple of months (after many many months of 0 burn after BT) and you already want to mint new MKR? Let’s wait for a while and send the ‘market’ the message that MakerDAO is profitable and consistently burns MKR.

We are currently burning ~50k usd of MKR/day, and I think this is good enough for increasing the SB over time.

We should burn all the time: when MKR is high and when MKR is low.
It’s not our job to try to time the market on MKR price.

3 Likes
#7

I believe the only viable solution is MIPs 33.

If you think this too please like and subscribe the MIPs :smiley:

#8

Agree with ultraschuppi. Looks like we have majority support on raising the SB to $10M but are still split regarding if we should continue to burn while the SB is filled (and at what rate).

Even if we could flop, I would be opposed as I still believe MKR is significantly undervalued despite the rally and we will be diverting fees to increase the SB over time per the Surplus Buffer signal request.

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