REPLACED - [Signal Request] Offboard unprofitable collateral types

Replaced

I replaced this Signal Request with this one: [Signal Request] Offboard unprofitable collateral types

I think it makes a lot more sense to first find out which ilks the community wants to offboard and then later on build a plan on how to execute on this.

Overview

I want to follow up on the topic raised by @NikKunkel in the G&R-Call on 2021-05-20 about unprofitable ilks.

Since MCD we onboarded a pretty decent amount of collateral types, and it shouldn’t be a surprise that not all of them got the adoption we hoped for. We already have a couple of collateral types where the gas we pay to keep the oracles running exceed the SF we collect.

There are a couple of steps that we could do before actually stopping the oracles for the ilks we want to offboard. I really believe we should start doing something ASAP so with this Signal Request I want to focus on the easiest steps:

  • check if the community is fine with offboarding specific ilks
  • if yes, as a first step:
    • set the line/DC to 0
    • set a SF high enough to motivate vault holders to unwind

All other (potential steps) afterwards like even more raising the SFs, fiddling with the LR (which is debatable) to force liquidations or at some point just shutting down the oracles to not further update the oracle prices are not part of the Signal Request - but I would be happy to hear your ideas and thoughts about the next steps.

Pros:

  • less gas-costs for updating the oracles
  • less complexity for oracles team
  • less complexity for PPGs

Cons:

  • fewer ilks ¯\_(ツ)_/¯

Increase the SF for TUSD-A

image

Please vote for all options you would support in an onchain poll

  • no change
  • set line to 0 but don’t change the SF
  • set line to 0 and increase SF to 5%
  • set line to 0 and increase SF to 10%
  • set line to 0 and increase SF to 15%
  • set line to 0 and increase SF to 20%
  • Abstain

0 voters

Set line for UNIV2-AAVEETH-A to 0 and increase the SF

image

UNI-AAVEETH is one of the least succesfull collateral types so far, we never even reached a supply of 50k DAI. Time to get rid of it.

Please vote for all options you would support in an onchain poll

  • no change
  • set line to 0 but don’t change the SF
  • set line to 0 and increase SF to 10%
  • set line to 0 and increase SF to 15%
  • set line to 0 and increase SF to 20%
  • Abstain

0 voters

Increase the SF for KNC-A

Offboarding of KNC-A has already started with this executive, we can increase the unwinding-speed by increasing the Stability Fee.

Please vote for all options you would support in an onchain poll

  • no change
  • increase SF to 10%
  • increase SF to 15%
  • increase SF to 20%
  • Abstain

0 voters

Set line for UNIV2-LINKETH-A to 0 and increase the SF

image

Please vote for all options you would support in an onchain poll

  • no change
  • set line to 0 but don’t change the SF
  • set line to 0 and increase SF to 10%
  • set line to 0 and increase SF to 15%
  • set line to 0 and increase SF to 20%
  • Abstain

0 voters

Set line for COMP-A to 0 and increase the SF

image

Please vote for all options you would support in an onchain poll

  • no change
  • set line to 0 but don’t change the SF
  • set line to 0 and increase SF to 5%
  • set line to 0 and increase SF to 10%
  • set line to 0 and increase SF to 15%
  • set line to 0 and increase SF to 20%
  • Abstain

0 voters

Set line for BAL-A to 0 and increase the SF

Please vote for all options you would support in an onchain poll

image

  • no change
  • set line to 0 but don’t change the SF
  • set line to 0 and increase SF to 5%
  • set line to 0 and increase SF to 10%
  • set line to 0 and increase SF to 15%
  • set line to 0 and increase SF to 20%
  • Abstain

0 voters

Set line for LRC-A to 0 and increase the SF

image

Please vote for all options you would support in an onchain poll

  • no change
  • set line to 0 but don’t change the SF
  • set line to 0 and increase SF to 10%
  • set line to 0 and increase SF to 15%
  • set line to 0 and increase SF to 20%
  • Abstain

0 voters

Set line for ZRX-A to 0 and increase the SF

image

Please vote for all options you would support in an onchain poll

  • no change
  • set line to 0 but don’t change the SF
  • set line to 0 and increase SF to 10%
  • set line to 0 and increase SF to 15%
  • set line to 0 and increase SF to 20%
  • Abstain

0 voters

Set line for BAT-A to 0 and increase the SF

image

Please vote for all options you would support in an onchain poll

  • no change
  • set line to 0 but don’t change the SF
  • set line to 0 and increase SF to 10%
  • set line to 0 and increase SF to 15%
  • set line to 0 and increase SF to 20%
  • Abstain

0 voters

Set line for MANA-A to 0 and increase the SF

image

Please vote for all options you would support in an onchain poll

  • no change
  • set line to 0 but don’t change the SF
  • set line to 0 and increase SF to 5%
  • set line to 0 and increase SF to 10%
  • set line to 0 and increase SF to 15%
  • set line to 0 and increase SF to 20%
  • Abstain

0 voters

Set line for AAVE-A to 0 and increase the SF

image

Please vote for all options you would support in an onchain poll

Next Steps

The Polls will run until 2021-06-17T13:00:00Z; their outcomes will either result in on-chain-polls assuming the outcome of the polls deems it necessary or its intermediate results are going to be taken to another initiative - another signal, onchain-poll or urgency executive.

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So as an advocate of doing this, I do want to point out that we shouldn’t jump to punitively high rates overnight. That’s a bad customer experience. More than 500 bps per month seems abusive. Can we lerp SF rates?

Also, KNC-A and AAVE-ETH should just have oracles disabled as soon as line is 0. They probably cost more to monitor than the total debt, so it’s better to just see if the users repay without liquidation and write down any bad debt.

All in favor of the spirit of this Signal Request. I just don’t want to see us jacking up rates by 1000+ bps overnight.

Agreed. Further, the social communication of this should be considered (with an emphasis on when we onboard collateral as well). We should internally plan on off-boarding taking at least 3-6 months before rates are increased in my opinion. This should be included during the deliberation process when onboarding.

1 Like

I am quite confused here because aave for example is probably n2 in market cap. If we can’t find a market for it, may be we are just failing to set an appropriate market rate.

Is there any better collateral? May be there are not the best but I don’t think there is better collateral yet.

If I were to take the other side of the argument, AAVE-A has only been around for about six months. Perhaps adoption will accelerate in the future and become profitable.

Unfortunately, 1) no one in Maker tracks historical usage that I’m aware of, so it’s a pain to go figure out the ebbs and flows of adoption for AAVE-A, though I can say that only 7 vaults have been added since I checked on May 17th, and 2) only 32 vaults out of 117 opened since inception ~6 months ago are currently used.

That we don’t have a standard process for this needs to change, though it’s understandable why it wasn’t done this way originally.

We should be willing to try new collateral types, but we ideally need some mechanical way that doesn’t require a new vote to offload them. Something like, “if at 6/12/18 months, the 12-month trailing fee revenue and estimated 12-month fee revenue are less than X, set line to 0 and begin raising SF by Y bps on the first of every month until the ilk is empty.”

My issue is that all others collateral are under 1b capital market, which means at best we can source 10% max which is the max from a risk perspective.

If we can’t make aave/comp/… good enough as collateral there is nothing else that can be good enough.

Yep! Something to keep in mind going forward. Our users are risk-managing whales and institutions, so small market cap probably isn’t worth our time. All the more reason to look outside the crypto universe for business, as there’s not much left for us unless we attract greater market share of ETH and WBTC.

So… let me know when you’re a supporter of taking some profits in off-chain fixed income. Crypto, RWA, and financial instruments as a three-pronged approach would give us a much higher margin and more safety

Agree, and that’s why we should be careful by removing the bottom one. There are not the best but we should be able to make them profitable.

I am supporting the RWA. As said before, we don’t have the choice, we have to go the RWA way. After that, it is our weakest point and 0.1% is probably not worse the risk. I would prefer an eth-c at 0.5%.

This is great @ultraschuppi . I do think we should be voting yes/no on off-boarding and have a standard process to do so instead of picking a per-collateral SF. Could this signal be updated to just be off-board or not, and we can work out what that looks like in another proposal?

2 Likes

unfortunatelly not, but it is pretty easy to just repost it with this options - shall i do that? would mark this one as stale then

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sorry for the unconvenience, I replaced this SR with this one: [Signal Request] Offboard unprofitable collateral types

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^^^
Check message above :slight_smile:

Closing this thread to avoid confusion.

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