Parameter Changes Proposal - PPG-OMC-001 - 28 June 2021

Parameter Proposal Group: MakerDAO Open Market Committee

Authors: @Primoz @LongForWisdom, @Monet-supply, @SebVentures, @Akiva, @hexonaut, @ultraschuppi

The Open Market Committee has identified the concerns of the community around tail-risk with USDC as being a material discussion point on the topic of the longevity of MakerDAO. As a result we have concluded that the optimal course of action is to increase DAI supply (from non-PSM ilks). Even though we deem it unlikely to move all USDC off the balance sheet immediately from these changes - we think that as long as it shortens the time span till we can onboard better collateral it is a net positive. We have intentionally kept sufficient revenues in place so as to be able to continue to pay for our core units.

MakerDAO continues to attract high quality clients who are borrowing at scale due to our significantly larger capital base than many other Defi protocols and centralized lenders. We believe that even in the presence of yield farming issuance from Defi competitors we can continue to grow the DAI supply for these reasons. We continue to be motivated to maintain proper System Surplus (i.e. Capital Ratios) so as to maintain MakerDAO’s creditworthiness.

The following policies are commensurate with our above stated views and analysis.

Source: Risk Premiums & Competitive Rates June 2021

Table Notes:

  • Risk premiums and Maximum debt ceilings are based on Liquidations 2.0 which is in rollout right now

  • Negative competitive rates are mostly due to liquidity mining rewards at Compound & Cream and due to rates and rewards accrued on deposited collateral

  • Lending products between secondary lenders and MakerDAO are not standardized and therefore rates can not be strictly compared.

Proposed Changes

ETH-A:

  • Decrease SF from 3.5% to 2.0%

ETH-B:

  • Decrease SF from 9.0% to 6.0%

ETH-C:

  • Decrease SF from 1.0% to 0.5%

WBTC-A

  • Decrease SF from 3.5% to 2.0%

LINK-A

  • Decrease SF from 4.0% to 1.0%

YFI-A

  • Decrease SF from 4.0% to 1.0%

UNI-A

  • Decrease SF from 2.0% to 1.0%

AAVE-A

  • Decrease SF from 2.0% to 1.0%

RENBTC-A

  • Decrease SF from 4.0% to 2.0%

COMP-A

  • Decrease SF from 3.0% to 1.0%

BAL-A

  • Decrease SF from 2.0% to 1.0%

UNIV2DAIETH-A

  • Decrease SF from 2.5% to 1.5%

UNIV2USDCETH-A

  • Decrease SF from 3.5% to 2.0%

UNIV2DAIUSDC-A

  • Decrease SF from 0.5% to 0.0%

UNIV2WBTCETH-A

  • Decrease SF from 3.5% to 2.0%

UNIV2UNIETH-A

  • Decrease SF from 4.0% to 2.0%

UNIV2ETHUSDT-A

  • Decrease SF from 4.0% to 2.0%

Final Note

Proposed SFs will get included into this week’s on-chain poll on June 28, 2021, and if passed will be included in an executive vote on July 2nd, 2021.

14 Likes

This has been included in the weekly polls this week in an effort to increase response time to the changes in the market. It will go live at 17:00 UTC today.

3 Likes

Market is already responding :wink:

I’m fairly certain these changes will make us unprofitable on an operating basis. I don’t like this, as it requires liquidations to maintain long run solvency if there is not upwards of a 30% increase in vault debt

I will check the math when I am not in the field, but this is unsustainable. We should compete in ways other than price

1 Like

The OMC has identified moving the USDC off the books as a primary goal.

1 Like

I cannot support that. Why would we pay money to remove float that is free?

Please walk me through the thinking, because this sounds like a disaster

1 Like

Many people are concerned about blacklisting of USDC.

Let me be more specific. If we purposefully lend at a loss, not only does that make us unprofitable as our costs continue to rise, not shrink. It also means that we require liquidations for profits, and the optics will be “Maker is a predatory lender” trying to entice a bunch of degen small traders to lever up and get rekt

We all recognize the downsides to the approach. Consider weighing against the optics of “DAI is a USDC wrapper”

Historically, DAI has been branded as a decentralized stablecoin. So as far as branding goes maintaining Decentralization has been made a priority.

3 Likes

Right now it is not about being most profitable but to remain relevant.

4 Likes

Out of curiosity, what is the target percentage of dai backed by centralized stablecoins that your team is aiming for? 30%? 50%? You have to be aiming for some reserves to maintain the PSM

For the record I am aligned with the proposal and support protecting DAI’s decentralized integrity.

Actually ideally there would be no PSM, instead there would be a DSR.

3 Likes

I would be interested in seeing the math anyway but can you be more specific about which rates you think make us unprofitable? If the ETH/WBTC vaults are at an operating loss, this would be very surprising given how large those vaults are and given that all costs are fixed.

and the optics will be “Maker is a predatory lender” trying to entice a bunch of degen small traders to lever up and get rekt

Maker has offered zero or near zero rates before. The bad publicity wrt rates actually came about when rates were high (20% at one point), but even then they were annoyed more at how quickly the rates rose, not the rate itself!

4 Likes

Agreed with @AstronautThis – historically low rates were never a PR issue, and that would be some surprising logic if people jumped from “rates just got lowered” to “Maker is now more predatory”.

Also agree; the main issue here is the success of the Oasis platform and the continued incentives for borrowers to interface with it and use it to mint DAI. Moving rates lower ensures continued competitiveness against the current top 3 defi platforms by TVL, and may reduce the platform’s reliance on USDC.

We should also be thinking about what we can do with all this USDC. I’ve seen a few folks suggesting that USDC is an opportunity, but I’ve yet to see someone put together a concrete plan to employ it to make money for MakerDAO.

But do we realise that it will be a bearish santiment for MKR holders. Things moving very fast, There are only 10 days since last decrease. That way we can get a massive sell of mkr tokens as soon as this proposal gets throw. Maker is more transparent than any other protocol from not a tech user. But more expensive from liquidation point. What is really can make sence are changes of 13% LR. differentiation.

1 Like

Maker is actually the cheapest for liquidation. Other protocols take everything, maker return the excess.