Proposal for Collateral Onboarding of USDC

I agree with dawson.

Let’s reduce liquidations of ETH for a while. The high Dai price is almost all people with large vaults dumping their ETH to push down their liquidation point.

Actual demand for Dai with a significant bid behind it begins around $1.02. The rest is arb driven with thin books.

We don’t need to panic about the Dai price right now given the macro environment, IMO.

I also recommend postponing the MKR auction until global markets stabilize.

3 Likes

dawson

The $30M rough number is based on liquidating at 1/2 outstanding value. Basically what I leave the SCD alone here as this requires SAI not DAI and everyone was warned to get out of that long ago. SO if I just look at the MCD we are basically at 83M including the SCD. Liquidate at 1/2 value - apply 13% liquidation fee and one lands around $30M max Maker is on the hook for here. Sorry the 107M was just incorrect.

Also the only way to deal with a liquidity crunch is to supply liquidity - we want to decrease demand not increase it. When markets are falling people and there is a confidence crisis in the system everyone will be trying to find DAI to close their loans. It really is a real hazard with these systems is that one has to find liquidity in only a single thing to pay back a loan vs. having multiple options for how to pay down a loan - particularly when liquidity in what one needs to pay with is low.

2 Likes

As an additional recommendation, we can let people know that if they sell their DAI for USD, USDC or other depository dollar token, they can make $1.05 (more than a half year’s interest) if they do it now.

This will free up lots of supply.

Lots of people bought Dai to get 8% interest. That’s dead until the bull market returns. In the meantime, some of them can get a really fat bonus payment right now by selling their Dai for 5% more than it cost them.

You should also be having conversations with Compound and the other secondaries and see what they can do to free up Dai.

All of this seems more apropos than rushing in a new collateral type with a kill switch.

1 Like

@IslandHunting Most of the secondaries have no DAI reserves.

UNISWAP LIQUIDITY TOKENS AS COLLATERAL
In our urgency we may be overlooking a more decentralized solution right under our nose. I may be too late to the conversation to be considered. But I’ve long felt that the perfect collateral would be Uniswap Liquidity Tokens. They are redeemable for a reasonably stable value after you factor in for the impermanent loss. You also could create some novel feedback loops if, for example, ETH-DAI were to be selected as the accepted liquidity token. Each minting of new tokens adds additional price stability to the ecosystem. Then regardless of what happens to the price, approximately the same value can be recovered at scale.

One other consideration would be to use USDC-ETH pair, then you get the stabilizing aspects of USDC without the centralized tradeoffs of USDC. It’s like adding a DeFi wrapper to USDC.

2 Likes

Speaking of SAI, I would imagine that most of the CDPs there are held by people who want to hold open their ETH margin position.

So if a timeline for SAI global settlement came out, they would be likely to migrate their positions over to Dai.

This seems to me that it would create a lot of new Dai, correct?

I don’t know much about Uniswap liquidity tokens. Can you provide more info?

Thanks!

Just created an account to say how much I love this idea and totally support it. Especially the point about which tokens to use. Understand its probably too late, but this is a great idea.

I have concerns about the USDC minting process. Unlike TrueUSD, which has on-chain ratification of large mints, multisig governance, and a tiered pool system to limit risks, USDC is issued from a private key of unknown security. There are no limits on this key, and it is possible or even likely that a disgruntled employee could mint an unbounded amount of it.

1 Like

I’m strongly in favor of using Uniswap liquidity tokens for collateral we already support. I previously proposed it in this thread.

1 Like

Yes, Circle has the ability to freeze funds at any address. They have promised to use this functionality in a large variety of situations:

you will not be using the USDC Services for any illegal activity, including, but not limited to, illegal gambling, money laundering, fraud, blackmail, extortion, ransoming data, terrorism financing, other violent activities or any prohibited market practices, including, but not limited to, those listed under Sections 23 and 24

This can also mean that a future US administration could find things some DAI holders are doing is illegal, and they may consider sabotaging DAI to fight that activity, or to purify USDC in the eyes of regulators. DAI is likely already in use for “prohibited market practices”, so we could be setting ourselves up for catastrophe.

Edit:

Just gonna paste this here. I have bolded the things I am sure DAI is already used for.

24. Prohibited Transactions

Using the USDC Services for transfers related to the following is prohibited, and Circle reserves the right to monitor for transactions that relate to:

a) any Restricted Persons or persons or entities located in Restricted Territories (as each term is defined in Section 38);

b) weapons of any kind, including but not limited to firearms, ammunition, knives, explosives, or related accessories;

c) controlled substances, including but not limited to narcotics, prescription drugs, steroids, or related paraphernalia or accessories, unless licensed and authorized by the jurisdiction in which the customer is based as well as by the jurisdiction in which the transaction takes place;

d) gambling activities including but not limited to sports betting, casino games, horse racing, dog racing, games that may be classified as gambling (i.e. poker), or other activities that facilitate any of the foregoing, unless licensed and authorized by the jurisdiction in which the customer is based as well as by the jurisdiction in which the transaction takes place;

e) money-laundering or terrorist financing;

f) any sort of Ponzi scheme, pyramid scheme, or multi-level marketing program;

g) goods or services that infringe or violate any copyright, trademark, or proprietary rights under the laws of any jurisdiction;

h) credit repair services, or other services that may present consumer protection risks;

i) court ordered payments, structured settlements, tax payments, or tax settlements;

j) any unlicensed money transmitter activity;

k) layaway systems, or annuities;

l) counterfeit goods, including but not limited to fake or “novelty” IDs;

m) wash trading, front-running, insider trading, market manipulation or other forms of market-based fraud or deceit;

n) purchasing goods of any type from “Darknet” markets, or any other service or website that acts as a marketplace for illegal goods (even though such marketplace might also sell legal goods); or

o) any other matters, goods, or services that from time to time we communicate to you that are unacceptable and which, for example, may be restricted by our and your bank or payment partners

(such transactions, “ Prohibited Transactions ”).

In the event that Circle learns you are making any such Prohibited Transactions, Circle will consider it to be a violation of this Agreement and may suspend or terminate your USDC Account, which can result in the potential forfeit of any US Dollar funds otherwise eligible for redemption.

5 Likes

me too although Uniswap V2 is coming soon enough that I don’t think its worth the technical effort to get this working for V1 :slight_smile:

3 Likes

I wasn’t aware that UNI-V2 would have ETH pairs; I thought it was just going to be token-to-token. The gas-efficiency of UNI-V1 is fairly critical.

UNI-V1 is strong collateral because of its high yield. It can support a much higher DSR than its underlying components.

Ok, this is rather sobering. I guess they can kill it by address.

This is exactly the kind of risk I was trying to warn for in the chat (and why I requested for the 3rd option to be put in the poll) :expressionless: .

There are lots of posts on social media complaining about USDC. It would be really great if Maker committed to adding more stablecoins (e.g., TrueUSD @RyanRodenbaugh) as soon as the protocol is recapitalized and out of immediate danger. I believe a blog post announcing this intent would be a welcome step.

1 Like

Hi, let us join this discussion from Japan. I’m one of the community member of Japan.
This topic is hot in Japanese community related with 2 issues.

Please note that my intension is improve communication.

  1. We have no time to have discussion about this matter because it decided very quickly. Especially we have time difference and I think other Asian country have same problem.

  2. There is some misunderstanding to include USDC. The back ground is complicated.

I know this was the urgent matter but Making a decision in such a short time didn’t give us in Asian region enough time to understand.

I ask those who feel the same way join us in Japan in supporting this suggestion/or recommendation going forward.

Also this is the first time for me to post here. Please let us know if I have some mistake😉

6 Likes

Yes, geographical distribution of all the decision makers (devs, foundation, community members) - Western Europe/Americas - is a problem. It was one of the things i wanted to bring up when we will start seriously discussing what we learned from this black swan.

3 Likes

Thank you for prompt reply and your kind understanding!

Of course speed is most important thing for black swan. And we can understand thanks to
Kathleen that your team do the best in difficult situation.

But the fact of “Community was included and understanded” is important factor as a process.

We wish your team and us make it as a good experience from black swan to golden duck🐣