Raise USDC SF vs fix peg

Chats from Rune,

honestly guys its baffling to see the arguments downplaying the importance of the peg here. Its like you’re running an ice cream truck, and there’s a sewage problem so theres a bit of shit in your ice cream. But then you have people arguing that we can’t focus too much on solving the shit-in-the-ice-cream problem, because we need to focus about how to turn a profit and how to expand our franchises

Lets take a hypothetic scenario - imagine that a group of MKR holders vote to increase the spread in a period where the peg has been broken for a prolonged time and there’s already doubts about whether it can possibly hold or not. The effect of the fee increase is a loss of faith in governance by vault holders, and following panic, who then rush to purchase dai at whatever price they can in order to close their vaults. Coupled with a market downturn and auctions that start breaking, it is soon clear that the only viable option is an emergency shutdown. After the emergency shutdown, two new deployments emerge - one that maintains an identical MKR balance, and one that burns the MKR balances of anyone who voted for the spread increase that led to the emergency shutdown. Which one of these two deployments do you think users who were just ES’ed will prefer to migrate to?

Of course I dont think that scenario would happen if the 1% USDC raise passes, but it certainly brings us closer to have something like that happen in the future because we’re opening the door to the “profits before peg” argument.

Okay I better expand on this a bit because obviously i’m exaggerating for effect here. Even in the worst case market downturn scenario it is hard to imagine that governance turning a little bit irrational could directly lead to an emergency shutdown. It’s only if it was persistent and would continue moving the rates the wrong way even after observing the consequences that it could cause an actual ES

Secondly really what I’m pushing against is not increasing the spread - i think that could certainly be necessary in some conditions. But if you want to argue for a higher spread when rates are at 0 and the peg is broken, please at least have the decency to also argue for negative rates, so you aren’t just spreading anti-peg rhetoric

But most importantly I want to make the point that the sustainability of the DAO critically relies on user growth in the long run. Short run value extraction doesn’t achieve anything if there isn’t long run user growth, and if there is long run user growth then the short run value extraction at low usage won’t even register on the radar.


Completely agree - its insane to vote to increase the USDC stability fee right now. The far bigger risk to MKR is emergency shutdown to price spiking well above the peg than the highly theoretical black swan case of USDC locking down the DAI adapter without giving any advance notice (which is definitely less likely than an ETH flash crash). USDC is the first collateral that is uncorrelated with ETH and has given us 12m desperately needed DAI- no other collateral type is making a difference right now apart from ETH

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