This post is in response to the recent Signal Request to Increase the Dust Minimum on Maker vaults. It is my belief that we need to explore other ways to ensure liquidations are profitable for keepers before Liquidations 2.0 is implemented. Otherwise if ETH continues to increase relative to DAI we could easily find ourselves forced to set the dust limit even higher, pricing out more individuals who would otherwise be keen to engage with the Maker Platform. It’s additionally worth noting that many of our competitors in the DeFi space (Aave and Compound for example) have been able to offer collateralized positions similar to our vaults without the high minimums we have at Maker.
One “easy” fix to the problem of smaller vaults not being profitable to liquidate is to offer a rebate on the cost of calling bite on such vaults. Such a rebate would cover the gas fees for keepers that call bite on small vaults, encouraging them to participate in what should be a profitable action. Below is a draft of the code written by @yaronvel that could be implemented to enable such rebates. With this code keepers would call biteWithRebate instead of bite -
It should also be noted that:
- Liquidators could still call the standard bite function (like today) if they want to.
- A potential bug/failure in this contract will only compromise the funds that were deposited in this contract. And will have no effect on the overall stability of the dss system.
- This is a temporary patch, until the liquidation 2.0 is deployed.
- If implemented, MakerDAO only needs to approve the initial fund deposit as there would be no changes in the existing dss or its parameters.
This poll is to gauge if there would be support for funding this rebate program with a small amount of DAI from the surplus buffer. @yaronvel has proposed an initial funding of 10k DAI for gas rebates, with B.Protocol donating 1k DAI to show their support for maintaining smaller vaults while we wait for implementation of Liquidations 2.0.
- Could support with added features (comment below)