IAM-DC Parameters: WBTC-A, LINK-A, UNI-A, COMP-A, YFI-A, AAVE-A

Hey all,

Based on the outcome of the on-chain poll to implement DC-IAM for other vault types, we are releasing the first batch of proposed DC-IAM parameters for larger vault types. Both ‘gap’ and ‘ttl’ values below are based on the same decision making process and intuition that we already described last week when proposing these parameters for ETH-A. We basically look at historical net minting behaviour of these vault types to define the appropriate ‘gap’ value, whereas ‘ttl’ value is proposed to be unified for all vault types.

‘Line’ parameter on the other hand is a bit more tricky and the most important parameter here. ‘Line’ in our mind corresponds to a number that fits our Risk Premium calculations and basically represents a “maximum debt ceiling where rates start reaching double digit values and beyond and is no longer intended to increase debt exposure beyond these levels”.

Since our ‘line’ estimates are based mostly on liquidity of these collateral assets and to some degree on subjective qualitative assessment of assets, we would want to Signal for appropriate ‘line’. Below are base case calculations our models are estimating, but we decided to Signal for alternative ‘line’ parameters (cca. -30% & +30% from proposed values).

For instance, the model is proposing 140m max. debt ceiling for LINK-A, since LINK is one of the most liquid ERC-20 assets. However some might prefer lower maximum exposure to LINK due to various concerns. On the other hand model estimates “only” 350m Maximum Debt Ceiling for WBTC-A, but the model only partially includes real BTC liquidity being the underlying asset of WBTC. If one is confident about WBTC being instantly redeemable for BTC by keepers in large quantities, ‘line’ for WBTC-A could be higher.

Proposed DC-IAM Parameters

| Vault Type | current DC   | DC-IAM line | gap        | ttl      |
|------------|--------------|-------------|------------|----------|
| WBTC-A     |  210,000,000 | 350,000,000 | 15,000,000 | 12 hours |
| LINK-A     |   20,000,000 | 140,000,000 |  7,000,000 | 12 hours |
| UNI-A      |   15,000,000 |  50,000,000 |  3,000,000 | 12 hours |
| COMP-A     |    7,000,000 |  10,000,000 |  2,000,000 | 12 hours |
| YFI-A      |   30,000,000 |  45,000,000 |  5,000,000 | 12 hours |
| AAVE-A     |   10,000,000 |  25,000,000 |  2,000,000 | 12 hours |
What should be WBTC-A max. DC (‘line’)?
  • 250m
  • 350m - Proposed value
  • 450m
  • Abstain

0 voters

What should be LINK-A max. DC (‘line’)?
  • 100m
  • 140m - Proposed value
  • 180m
  • Abstain

0 voters

What should be UNI-A max. DC (‘line’)?
  • 35m
  • 50m - Proposed value
  • 65m
  • Abstain

0 voters

What should be COMP-A max. DC (‘line’)?
  • 5m
  • 10m - Proposed value
  • 15m
  • Abstain

0 voters

What should be YFI-A max. DC (‘line’)?
  • 30m
  • 45m - Proposed value
  • 60m
  • Abstain

0 voters

What should be AAVE-A max. DC (‘line’)?
  • 15m
  • 25m - Proposed value
  • 35m ‘line’ be?
  • Abstain

0 voters

This Signal will be closed on Friday, February 5th. Winning votes will proceed to on-chain poll next Monday, February 8th. Potentially we might propose to include proposed DC-IAM changes for WBTC-A in this Friday’s Executive Vote if debt utilization gets close to full.

9 Likes

I feel a bit silly voting for “proposed value” for every asset type.

2 Likes

@Primoz @SebVentures and @Andy_McCall what is your Risk Analysis on this new Alpha Homora monologue? Seems like if Alpha Token drops in value, Alpha Smart Contract Risk, CREAM a.k.a Iron Bank Risk, or USDT posts some media headlines courtesy of regulators, etc., folks will not be able to exit–will be a Liquidation event? Looks like a one way street, a.k.a a dead alley? Am I overthinking it? Legos on top on Legos on top of Legos? How does this movie end?

I guess what I am asking–have you taken time out to analyze it?

1 Like

I don’t think there is a distinct risk with Alpha Homora. I didn’t spend much time on that topic. We have no relationship with them.

More broadly, leverage is building up and it will most likely end badly. “Only when the tide goes out do you discover who’s been swimming naked”

Currently, our exposure to USDT is super low (2.5M) and our only protocols dependencies are only on the safest ones (WBTC, Uniswap LP).

We are building up the Surplus Buffer so any big issue will no longer be an extinction event. But for sure ETH/WBTC vaults growth is no longer the main target. The Surplus Buffer just can’t follow quickly enough.

I caught this from LobsDAO TG:

image

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If this thing works tho–we won’t have any worries–it will :rocket: IMO

hi @Primoz
On a few of the polls I opted for a higher Debt Ceiling compared to the proposed value. Why? Because there is such a lag between analysis->governance->implementation that in the present bull market the proposed figures can be on the low side when presented to the market. So in other words the Risk Team should feel free to add some millions…

2 Likes

So far clarity’s sake these are going on-chain on Monday as six separate polls, I’m also going to put them all up as binary, even though IRV could be justified for those with multiple options exceeding 50% support.

In this case I just don’t think it’s worth the extra complexity given that we’re polling on multiple parameters for each individual vault-type. This first set of parameters should be seen as a starting point, if anyone wants to run signals with additional options for setting the max line on these, feel free.

Otherwise, I suspect the rates group will expand it’s remit to cover debt ceiling parameters in the next few weeks anyway.

3 Likes

I just want to say I really like the polling style of having what risk recommends but also having other options as well. Something to keep in mind for future polls. Great work!

3 Likes

What are the implications of the Alpha Token dropping more beyond $1.70? Any worries—or we good as good is going to get?

This signal has now passed on-chain in an executive vote and these DC-IAM parameters are live in the Maker Protocol. Thanks to all for voting.

2 Likes

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