Maker faces difficulties with maintaining vault types that have low usage. While our stability fee revenue directly correlates with the total amount minted against a collateral asset, our primary operating expense of maintaining oracle price feeds does not - rather it is dependent on prevailing ETH and gas prices. This creates a situation where we need a certain minimum amount of DAI minted to operate vault types profitably.
The minimum required usage depends on a variety of factors, including the vault stability fee, ETH price, gas price, and oracle sensitivity (eg does the oracle update price on 1% variation, or less frequently on eg 3% variation in price). So while the exact cutoff for when a vault type becomes unprofitable varies, there is general agreement among the core units that collaterals requiring their own price feed with less than 10 million DAI minted are operated at a loss. In addition, Maker also bears lending risk on the associated vaults.
With this in mind, MakerDAO can consider offboarding assets with very low usage that lack a realistic prospect of becoming profitable in the future. This could improve financial performance with minimal impact on DAI supply and user experience, and allow MakerDAO to direct these resources towards more impactful goals.
First, Maker must decide which assets will be offboarded. We propose a three part test:
- Is total DAI minted against the collateral asset (and all others sharing the same price feed) more than 10 million DAI?
- Is there a realistic prospect of the total amount minted reaching 10 million DAI within 6 months?
- Does Maker gain a significant benefit for retaining the collateral type that offsets the costs?
- Eg. Is the oracle price feed used for other purposes, or sold to clients outside of MakerDAO? This may make it worthwhile to maintain the asset.
If we answer no to all 3 questions above, then the asset should be offboarded.
There are other cases where an asset should be offboarded even if we can answer yes to one or more of the above tests:
- If the asset has been migrated to a new token (eg KNC)
- If the asset would present unacceptable risk at a total debt exposure of 10 million or greater
For assets that MakerDAO chooses to offboard, the following actions will be taken in sequence (subject to governance approval):
Stage 1 -
- Publicly communicate that the asset will be offboarded
- Set debt ceiling to 0 DAI
- Increase stability fee to 5% (if currently less than 5%)
Stage 2 -
- Set liquidation penalty to 0%
- Set liquidation ratio LERP to increase to 500% over 3 months
- Lower oracle sensitivity to 5%
Stage 3 -
- Set liquidation ratio high enough to liquidate all outstanding debt
- Deactivate oracles for affected collateral type
24 August 2021 -
- Removed “stability fee increase to 100%” from Month 6 Offboarding Actions
- Added context to “offsetting benefits” condition in Choosing Assets to Offboard section
7 September 2021 -
- Changed offboarding actions from specifying “months” to “stages”
- Consolidated offboarding actions into fewer steps, and with fewer stability fee increases