Currently Maker governance is considering changing the USDC-A parameters.
Currently recently changed USDC-A parameters:
Collateralization Ratio: 103 (lowered just a day ago from 110) soon to 101
Debt Ceiling: 200M (raised from 100M just a day ago from 100M)
Risk Premium: 2%
The goal of this signal request is to modify how Maker is extending Debt Ceilings against Liquidation Ratios on not just USDC but all of the stablecoins. I use USDC here just to give a flavor of what this proposal is suggesting.
- LR/DC consistency across all the stablecoins
- To provide for some control over the amount of stablecoins the system holds against the DAI minted indirectly controlling the PEG value via liquidity available in the total facilities.
Proposed is the idea for stablecoins to create multiple vaults with alogrithmic LR/DC consruction based on a singular BASE_LR_STABLECOIN value - which in the example below i set to 101
Construct the following USDC vaults.
USDC-A1 with LR of BASE_LR_STABLECOIN=101 and DC of 100M
USDC-A2 with LR of 2 x BASE_LR_STABLECOIN=102 and DC of 200M
USDC-A3 with LR of 3 x BASE_LR_STABLECOIN=103 and DC of 400M
Initial suggestion is to keep the SF the same on these vaults.
The point here is that if the PEG is < 1.01 then all of these vaults can be used with varying amounts of leverage and differing amounts of DC. My primary concern here was lumping all of our stablecoin borrowing into the same LR and hence the same backing collateral amount to DAI printed. In the above model the average USDC deposit for 1DAI minted grows as the vaults are filled and the amount of leverage that can be applied diminishes. (see point below)
One primary point. If the DAI-USDC price is > 1.03 all vaults have infinite leverage only controlled by the DC level available. This is the prime reason to have multiple vaults with different LR and DCs, and to have an exponentially (factors of 2) increase in the DC size of the vault to apply against the LR. For each pricing tier breached another facility with effectively infinite leverage comes into play with DC to beat the PEG back down to the target. These all are always in play at all times but it is my expectation these will fill sequentially due to ability to apply higher leverage with lower LRs.
Realize while I picked a number of vaults and some basic parameters (the BASE_LR, and the 2x DC multiplier and 3 vs. 4 vaults) these are up for further discussion and refinement if the proposal passes with yes otherwise we leave this as a no.
Should Maker use the above proposal as a multiple vault model to address the DAI liquidity in stablecoin facilities available to control the amount of stablecoins relative to DAI minted and hence PEG price with various levels of liquidity.
- No - The approaches being taken now are good enough.
- Yes - We need something like the above (for at least USDC and perhaps all Stablecoins) and should would up a formal proposal.