Should we print 100M DAI to buy ETH?

We are approaching a point where fixing the peg with stablecoins won’t be possible without having a great majority of collateral locked in centralized stablecoins. From past experience, it’s clear to me that the problem (peg) won’t go away if we add just another 100M of stablecoins to the books.

Instead of waiting a month or so for this to happen and losing more market share and reputation because of being way off the peg - I suggest a new approach. Let’s print 100M DAI, buy ETH and deposit it as collateral that we keep on our books for as long as we decide. Assuming we buy ETH below $450, we can keep it (sell for DAI and cancel the debt) until:

  • 1 DAI = $1 OR
  • 1 ETH = (insert any value here, i.e. $600) OR
  • the emergency shutdown OR
  • until needed (as a kind of surplus(hopefully) buffer) OR
  • forever

We can have a separate discussion/governance poll about what to do with the ETH collateral.

Pros :

  • 100M DAI will be sold immediately for ETH bringing the DAI price down.
  • decreasing dependence on stablecoins
  • the announcement and the purchase of ETH could start the positive loop and keep the ETH price above our purchase price avoiding the system being undercollateralized.

Cons

  • DAI may become temporarily or permanently (if ETH price never goes up) undercollateralized
  • probably needs some manual action for execution
  • sets a precedent (this is not good, right)
  • 100M might not be enough to lower the DAI price to $1

So, should we print 100M DAI, buy ETH with it and deposit it in a vault?

  • Yes
  • No
  • Abstain

0 voters

All the technical details could be worked out later if there is a will to use this method. If you like (not hate) this method but you are afraid that we won’t be able to execute it successfully (i.e. ETH price moving too fast, the amount is too big/small, problems with unwinding, other complications… please vote Yes and No)

The poll will be open for 2 weeks unless there is a majority for “Yes” who wants to move faster with the implementation.

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@bit I have no idea how well this is going to go. But you clearly put a lot of effort into this signal post and following the guidelines. So thanks for that, much appreciated.

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Clearly the USDC-A vault is a sort of pouzi shema as USDC user has to go out without underline value (aka leverage).

I guess the first move is to buy USDC-A either via unpaid debt or directly via QE until we are full of it probably around 200M or 300M then come others assert PAX or ETH, MKR are the least risky I guess.

I think you might do well to also poll the forum about what the amount in question here.

Speaking personally, generally i am supportive of this idea and have been advocating for selling DAI for other non-protocol assets for some time, but i could see someone taking issue with the 100M price tag.

Additionally I also have a question of what we would be doing when we “buy ETH and deposit it as collateral.” Presumably we are opening a vault here. Would we draw DAI out against that ETH at that point? If so how do we manage servicing that debt?

Lastly there is the question of if ETH is the right choice. I suspect that it is given the options available but it probably warrants some discussion.

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  1. Mint unbacked DAI from the vault ETH-Z requiring 0 collateral, DC=100M
  2. Sell DAI for ETH on the market until the peg is reached or 100M spent
  3. Put all ETH into vault ETH-Z
  4. Freeze that vault (no liquidations, no more debt)

The procedure above might be modified for safer execution or compatibility with current vault options if possible. If the peg is reached at some point before spending all 100M, stop.

It’s the least risky collateral and the backbone of our system (DAI). We are buying a stake in the network we are using and on which we depend for success. We could buy a mix of ETH+tokens but it’s too complicated and there is not much to gain.

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It is hard to imagine how the public could take this action, but I can easily imagine an article in Coindesk where it is discussed how MakerDAO prints money similar to any central bank, how that will make the DAI not reliable, or trustful.

In fact, we could print any amount of DAI here. I’m not sure how to explain it, but it doesn’t feel good or honest…

I’m feeling this action is like opening the Pandora box in MakerDAO and it could represent a big blow to DEFI. Cannot support it.

An interesting tangent to this post is that if MKR holders feel as asset like ETH is more undervalued than MKR, I believe they could buy that with stability fees instead of buying and burning MKR.

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The stability fees are at least an order of magnitude smaller (~$550k) than needed to fix the peg.

I know, that’s why I highlighted the comment as a tangent. Didn’t mean to distract :)…

Ethereum is too volatile for the protocol to hold. If we want to buy ethereum, we may as well just buy and burn maker. I do like the idea behind this signal request, but only with less volatile assets.

This is a very dangerous precedent to set for the system, as the system using Dai to purchase another asset will allow the possibility of future asset manipulation. Dai is a product of the system not a baseline, so lets keep it that way. Deflation is dangerous, but we are trying to avoid any major inflation here without corroborating value in the system to back the minting.

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We should have flash vaults that mint an arbitrary amount of DAI so long as you provide sufficient collateral in the same transaction.

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Right now the portfolio is about 2/3 ETH already. We already have ETH pricing risk in our loan portfolio lets try not to grow that one. I am a solid no to the proposal. Literally if one wants to grow ETH start paying a return (negative rate) for people to deposit ETH and borrow DAI. But it looks like everyone is against that.

I also looked at total USDC in circulation and this is currently 2B. I wonder what centre will do if they end up with .5-1B USDC deposited in Maker vaults? Particularly if this starts causing them liquidity issues. Frankly I think this would be a boon to them as they take the USD and earn interest on the USD deposited for USDC. :slight_smile:

I really want to peel out this PEG issue look at what we have as constraints here because we may find that we can’t provide enough DAI liquidity to manage the PEG given the 1:1 collateral DAI backing constraint and may only have one single tool left.

Devalue DAI somehow.

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