I’ve aggregated recent RocketChat comments with the aim of promoting discussion to clarify how we will shutdown SCD. I’ve referred to the action of shutting down SCD as Global Settlement because it is a planned process with a date and defined parameters that need to be collectively agreed and voted upon.
For this process to be complete, we can think of the SAI debt ceiling as essentially being reduced to zero. However, before this occurs there are some nuances that need to be defined, including:
- Stability Fee
- Debt Ceiling
- A previously unused
- The date of the planned shutdown
The Stability Fee for SCD accrues throughout the life of a CDP and is paid at the end when a user repays their Sai. This is done in MKR. With the current system parameters, if Emergency Shutdown were to occur, users who incurred debt through the Stability Fee and did not migrate to MCD would avoid paying the Fee. Alternatively, there is a Tax parameter that Governance can introduce through a vote to account for this. The fee would be applied to CDPs that remain open in order to prompt their closure and/or migration to MCD.
Brief summary of community feedback & viewpoints (2 sides to a coin):
- Dai is generated at a cost to the borrower. There is a reasonable argument that CDP owners should be responsible for repaying the incurred cost. Global Settlement should not be an excuse to avoid such costs.
- Motivations for not closing a vault could be due to: desire to not pay the fee, avoid slippage on paying the fee, or simply laziness.
- The Ethos of DeFi is against forcing people to use a new system or to force them to close their position. People who retain their CDP really aren’t hurting anyone - when opening their CDP, users were not aware of a shutdown date.
- There is a cognitive overhead to support two systems. There may also be a risk of arbitrage between the two.
A) Implement a tax in the lead-up to SCD and eventually implement global settlement
- Communicate a SCD global settlement date - derive feedback from current forum post, Parameters for SCD Shutdown.
- Introduce & vote on a tax - derive feedback from Primoz data.
- Tax accrues on CDPs as intended.
- CDPs are either closed by the owner (paying the stability fee) or liquidated over time through debt accrual (tax).
- Once global settlement occurs, stability fees are forgiven, however debt accrual through tax is paid.
In this scenario, tax would ideally be set at a suitably high enough level with enough advance warning in order to account for the stability fees that would otherwise have been paid (Discussion remains open for how this would be applied across CDPs of various size).
B) Have a 3rd Party supply enough liquidity to support closing out large CDPs before implementing the above solution, along the lines of:
- Announce a settlement date
- Have a 3rd party lock in a sufficient amount of ETH to generate SAI (while ensuring that the 3rd party isn’t without their ETH for too long - would the right economic incentives be in place).
- Promote users (like 3088) to close out their CDPs using this liquidity without paying a tax
- Implement a tax through the executive vote
- With advanced warning Implement global settlement through executive vote.
C) Keep the system running with a combination of incremental Debt Ceiling reduction management.
Trying to remain impartial - recapping some outstanding questions:
- When should we plan for Global Settlement?
- Whether or not we need to implement the Tax?
- How should this be calculated and over what timeframe?
- What is the right liquidity mechanism to allow those that want to migrate to do so?
- What is our plan of action for lowering the SCD Debt Ceiling over time, what parameters/bounds are we comfortable with?
Looking forward to ideas and feedback as to how best we should implement Global Settlement. Thanks!