[Informal poll] Should the USDC PSM tin be increased?

What’s the problem?
We have had a few developments in parallel regarding the USDC PSM.

  1. The amount of USDC in it has gone up from 800M to 1.4B over the last week - see here for current amount. With the additional 240M USDC in vaults, 37.2% of DAI is backed by USDC.

  2. The PSM debt ceiling will soon be raised to 3B.

  3. The tout fee looks like it will be reduced to 0.

  4. Some shady stuff is going on with how USDC is backed. I have to admit, this point is extremely worrying, at least for me. I’m sure similar stuff happens with all the other centralized stablecoins too.

What can we do about it?
We do not have a good short to medium term solution to boost DAI supply and get it below $1. Given the current situation, I propose that we raise the tin fee and decrease the amount of USDC flowing in.

What are the consequences?
The upsides are

  1. We will decrease the rate at which USDC gets added to the PSM. This combined with other measures will be what we need to eventually make DAI independent of other stablecoins again.
  2. We will earn more fees from the PSM.

The downside is

  1. DAI may now trade for higher than $1.01 before the PSM kicks in.

Why is it worth doing anyway?
Personally, I do not think the downside is as bad as it first sounds and here’s why:

  1. During calm market periods, DAI is mostly below $1.01 anyway. The change to the tin will have no effect during such periods. This is today’s (26/05) chart from dai.stablecoin.science

  1. During volatile market periods, DAI goes off peg anyway (as does USDC) and it takes a while before arbitragers use the PSM to get it back in line. Our response time to bringing it back to peg will get longer but I find this acceptable.

  2. DAI was always meant to be soft pegged to USD. There is nothing special about $1.01 and if we’re happy/unhappy to see DAI trading at this price in the worst case, then we would also be similarly happy/unhappy to see DAI trading at some other 1 + delta as long as delta is widely seen as “reasonably small”.

TL;DR I think the “off-peggedness” of DAI will not be as bad as some might fear.

In summary
The higher tin balances our two conflicting goals of keeping DAI pegged and staying a decentralized and fully backed stablecoin. I think this is a reasonable compromise, particularly with questions being raised around the backing behind USDC. Please vote and make your voice heard!

  • Increase tin
  • Keep tin the same
  • Abstain

0 voters

Next steps
If there is some consensus here, I will start a signal request with a poll for new tin options.

Would love to be able to see who voted.

Interesting proposal. Not sure how I feel about this. My bias is towards no change but am open to persuasion.

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I would rather decrease tin than increase it. We should stand for DAI holders first. That’s how we will reach 1 trillion DAI. Having a broken peg is not great for DAI holders (and 1% is too much).

The inability to find better ways to invest our balance sheet is MKR holder’s fault and MKR holder’s problem.

Breaking the peg would hit badly our RWA efforts.

9 Likes

How can I make that visible?

When you build the poll there is a gear icon that gives you more options. At the bottom you can check “Show who voted”.

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I think it’s too late to edit the poll since two people have voted, sorry about that. Will use that option next time.

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Hard pass. DAI are effectively private debt that is guaranteed by Maker Protocol and made fungible to make it marketable. Keeping a tight peg also makes it liquid – and I think people assume marketable (can sell at any time) = liquid (can sell at any time for the actual value).

DAI cannot just be marketable. It has to be liquid as much as possible. Given where most of our DAI come from – large users – I’m not in favor of telling our biggest users they have to suffer a million dollar in slippage just because we can’t get it together about diversifying our balance sheet.

Want to reduce pressure on the PSM? Then we need to make more inflationary parts of the protocol – overcollateralized loans when operating as designed are unlikely to do that. RWA may do that, but it’ll be a long time before that’s material to the DAI supply. I don’t have a great answer for this that’s better than “get more collateral that pays us fees” but busting the peg even a little is the fastest route to DAI looking like FEI or LUSD or any number of other semi-failed stablecoins.

We’re a serious organization that wants to do serious business with Very Serious People, and we have to take our responsibilities seriously – unlike almost all other stablecoins. That’s part of why Maker is a success and others have been languishing.

4 Likes

So ya—the growth of USDC has been explosive—not only are they expanding into other Layer 1s but they are recruiting future employees that will get USDC in to your local coffee shop, sneaker shop, surf shop, etc.

Hence, auditing an explosive growth company cannot be done in 30-days ( auditors need to rest) — this is why in my opinion their month-to-month reporting was too generous (meanwhile USDT could care less what you and I think about their balance sheet).

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