I want to poll opinion for an idea to create strategic reserves (a Maker wallet for discretionary usage at the hand of the governance) to fix the peg. This can move to a MIP13 declaration of intent if there is a bit of support and with the new insights that this discussion can bring.
What we’ve done/explore already (not exhaustive):
- USDC-A vault with no liquidation SF 0% and LR 110% => was used for COMP farming and a whale used it for a day before using Compound only again.
- Increasing DC everywhere again and again and SF 0% => did help to bring exchange rate towards 1.015
- Discussing to print unbacked DAI (here and a poll here). Not strong support for the idea.
- negative rates. Not strong governance support.
- The PSM that is no longer worked by the foundation (no community work that I’m aware of).
- Forward guidance that is under discussion.
Here we are, needing more DAI supply because the peg is rock solid @ 1.015. We have room for that in the vaults, but no one cares or use it for farming which doesn’t help much. That was a bet that WBTC-A would be filled in less than 8 hours … well …
Arbitrage doesn’t happen most likely because 1.015 is becoming the new normal and the outside spread to provide arbitrage is currently 1 (where we can raise rates) and 1.10 (where USDC-A can be used for arbitrage). A bit too wide.
All our tools are passive, meaning we teak some parameters and hope third parties will change their behavior. Maybe we should explore way to do it more directly.
Proposal : MakerDAO strategic reserves
The idea come from the discussion about the surplus buffer which is from a discussion about system reserves that have good gems in it. It’s not different than what was discussed at the end of the thread but with 3 more months and more details. I already touched that I think MakerDAO need some equity and a real balance sheet.
The proposal would be having a Maker wallet (the strategic reserves) outside of the DAI system with a multisig for MakerDAO governance (not sure the details). Those reserves would be used for:
- Arbitrage the peg
- Develop the DAI ecosystem (providing DAI to Aave to decrease the borrow rate or to the Uniswap DAI-#### pairs).
- Generate earnings to Maker that can be used to pay for stuff or burn MKR tokens. That would provide earning when SF are @ 0%, a diversification of earnings.
There will be a need for a something similar to MIP14 to manage this wallet.
Strategic reserves will have to be funded by a MKR issuance. At some point we could channel the surplus of the surplus buffer to it but let’s keep thing simple.
Strategic reserves can use Maker to borrow DAI but doesn’t have any privilege. It stays completely separate from the DAI subsystem.
It remains to be discussed if strategic reserves are another insurance for DAI holders. It will probably be used to buy MKR if needed avoiding MKR holder dilution. In such case, it’s also a safety buffer for MKR holders.
An example can be to raise 10M USDC for x MKR tokens. Use them in a USDC-A vault to generate 9M DAI. Sell 100k DAI per day for USDC (sell order on Oasis @ 1.015 to start). Leverage if needed. We can add liquidity to Uniswap DAI-USDC or lend on Aave/Compound while we are at it or stay using only Maker tools (which seems a safe start if not the best for earnings).
We can use TUSD and/or PAX as well of course.
Strategic reserves are not the best yielding opportunity (because we will have to be careful) but they will increase (hopefully) the value of the Maker ecosystem a lot hence the MKR valuation.
- Provide power to MKR governance to act directly in the markets instead of waiting for third parties to act.
- Quickly accretive on MKR earning per token (starting from almost 0 that’s easy)
- Should be technically easy to setup (I assume, not sure).
- We have 100% of control over it.
- Such reserve can prove to be not enough to fix the peg.
- It requires to issue MKR tokens, diluting existing token holders (but increasing the earnings per token)
- Using other protocols can induce a risk (not that we have to use them, I assume we are okay to use our own protocols)
- It has some management complexities
- Yes, we need strategic reserves but it should be limited to the peg issue and dissolved
- Yes, we need strategic reserves as a strategic tool for the Maker ecosystem
- No, we don’t need strategic reserves. Ii will not help
- No, we don’t need strategic reserves. it is too risky
- Abstain, I don’t want to influence
- Abstain, not sure what to think
If you think we need strategic reserves, what amount should be raised in $? Notice the market capitalization of MKR is around $600M