Parameter Changes Proposal - PPG-OMC-001 - 29 July 2021

Parameter Proposal Group: MakerDAO Open Market Committee
Authors: @Primoz @LongForWisdom, @Monet-supply, @SebVentures, @Akiva, @hexonaut, @ultraschuppi

Source: Risk Premiums & Competitive Rates August 2021

Table Notes:

  • Risk premiums and Maximum debt ceilings are based on Liquidations 2.0
  • 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.

Lending Market Overview

Will be delivered tomorrow

Proposed Changes

ETH-B: Decrease SF from 6.0% to 5.0%

image

The current SF on ETH-B is still pretty high compared to the rest of the market. As we haven’t seen a lot of USDC unwinding from PSM-USDC-A we suggest lowering the rate a bit to encourage more DAI from non-USDC.

Decreasing the SF will cut our revenues by ~ $340.000/y.

LRC-A: Decrease line from 3 MM to 1 MM

image

Liquidity for LRC has dropped a lot - even on Loopring itself - so the Modeled Debt Ceiling is lower than the current utilization. We suggest lowering the Maximum Debt Ceiling therefore.

Note there is also an ongoing task for the mandated actors to make a plan on how to offboard LRC.

UNIV2ETHUSDT-A: Decrease line from 10 MM to 0

image

@Risk-Core-Unit proposed to offboard this ilk as the utilization has been really low and generates virtually zero income, whereas downside risks related to USDT are high considering available debt ceilings. We support this idea and therefore propose to change the line to 0 as a first step of offboarding.

UNIV2DAIUSDT-A: Decrease line from 10 MM to 0

@Risk-Core-Unit proposed to offboard this ilk as the utilization is at 0 and generates zero income, whereas downside risks related to USDT are high considering available debt ceilings. We support this idea and therefore propose to change the line to 0 as a first step of offboarding.

UNIV2DAIUSDC-A

image

We are not proposing any changes to this ilk but we support the outcome of the Signal Request dealing with the line change.

Final Note

Proposed changes will get included into next week’s on-chain poll on 2021-08-01T22:00:00Z, and if passed will be included in an executive vote on 2021-08-05T22:00:00Z.

10 Likes

Thanks Schuppi. Just wanted to say that I appreciate that you’ve added the effect on income under the ETH-B entry. Is that going to become a new standard moving forwards?

3 Likes

Yeah, it is part of the spreadsheet now. So no reason not to add it in the future.

It is still a guesstimate based on current usage. If ETH-B adoption goes up, we can even end up net-positive

2 Likes

Yeah its useful and definitely hope we do end up net positive. I’ve wanted a more liberal approach to ETH-B for some time. I think on the last PPG proposal several people asked for it so nice to see the proposal being adapted for it.

If there’s more than one ilk having the SF lowered (or increased!) would you look at providing the net projected change at the end of the proposal?

2 Likes

Competitive Rate Methodology

Previously, we’d used an average value of the effective borrowing rates from Aave v1, Aave v2, CREAM Finance, Compound, Nexo, Celsius, and BlockFi, with each lender comprising 1/7 of the final value. However, liquidity has declined significantly on Aave v1 and CREAM so beginning this month I will no longer be including these two defi lenders in the competitive rate calculations. We’ve also found that rates on CeFi lenders tend to be much higher than Compound or Aave v2, which skews the competitive rate calculations. To account for this, their weight within the average has been reduced.

Beginning this month onward, the average competitive rate value will be calculated with 1/3 weighting to Compound, 1/3 weighting to Aave v2/AMM market (depending on the collateral asset), and 1/9 weighting to each of Nexo, Celsius, and BlockFi. I believe this offers a more accurate view of the competitive landscape for crypto lending.

Lending Market Overview


Source: Paperclip Labs Compound Dashboard

Borrowing rates have continued to be relatively low across defi lenders. The chart above shows Compound’s stablecoin borrow rates over the past month (including the effect of COMP subsidies but not including interest earned on collateral). Rates have begun to pick up in the past few days, but remain low by historical standards.


Source: Coinalyze FTX ETH-Perp Chart

Similarly, perpetual swap funding rates on CeFi exchange venues have been negative for most of the past month, but have recently begun to flip positive. If this bullish dynamic continues we may see growing demand for leverage against our crypto collateral vaults, potentially helping to reduce Maker’s stablecoin exposure.

9 Likes

Good riddance to Tether USDT. If you’re not up-to-date on the Tether story, check out The Grant Williams Podcast: The Tether Discussion feat. Bennett Tomlin & George Noble - FULL EPISODE. At the end of the podcast, I learned that the guys being interviewed have their own podcast, https://cryptocriticscorner.com/

1 Like

Hey everybody

The proposed changes are now in the voting portal, please express your support or opposition here.

The poll will run until 2021-08-05T16:00:00Z

2 Likes

This topic was automatically closed 14 days after the last reply. New replies are no longer allowed.