Is it really not possible for the system to liquidate DROP tokens? If this is the case then the entire risk needs to be balanced by the stability fee and collateralization ratio, which would be higher than they otherwise would need to be than if there was a liquidation option.
I was criticizing @Planet_X’ “Alternative Design” without actually correcting this in the their description of the current design. So maybe let me do correct that:
It is very much possible to liquidate DROP tokens of course. We are talking to keepers who are be interested in participating auctions and there is a market for DROP token holders. Taking ConsolFreight as an example, there are 8 parties that bought DAI 250k worth of CF-DROP a few weeks ago because they are interested in directly investing in these assets.
@Planet_X suggested that because there is not a liquid market there was no way to price an asset. I think that is what led to the confusion. You can value a portfolio of loans and give it a price, this can be used to derive a DROP token price. This is similar to getting your house appraised to refinance your loan, the bank won’t ask you to actually sell it to discover the price of it.