the deployment contract will flash mint and fill up to the limit and then governance can again flash mint to unwind the vault.
But in my example using existent component, you can also create incentive with negative fees on the input let’s say -0.001% on 50M it is like 500dai. You can even use the progressive fees change from Sam.
And to empty the vault, you will need to reverse the fees. Aka - output fees -0.001% with input fees >1%.
It is not cDai it is dai. you convert dai into cDai.
cDai it is a sort of wrapper like wEth. you convert dai with a 1:1 + interest.
I think it is the opposite as I explain above cDai is a wrapper, so why do we want to pay a percentage to provide us Dai. That seems silly to me.
There is no collateral market fluctuation risk, the risk is on compound + our contracts and in both cases we as makerdao carry this risk.
PSM plus Vault
Thinking, both mechanism can cohabit, the PSM is better to maximise profit, where the vault is better for adjustment. It can be use to align compound interest to what we think it is the best for us.
For example :
PSM 100M can’t be easily adjust, need governance execution.
Vault 100M with 2% interest and let’s say 175% collateral.
The vault will increase or decrease depending to be above the 2% interest.
PSM will be at 2%+ automatically cause of the Vault.
if cDai interest goes under 2% interest the vault will adjust automatically with the incentive to match 2%+
if cDai interest goes up the vault will increase.
if Vault is full, we can increase PSM
if Vault is empty, we have to decrease PSM