[Signal Request] Adjust ETH-A Debt Ceiling (2021-03)

Overview

Since the last urgency exec raising the DC of ETH-A to 1000 MM almost 65M of DAI-from-ETH-A were created (within 3 days) - makerburn predicts us hitting the debt ceiling in 14 days

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While the risk team is already preparing to introduce DC-IAM, we might run into the need for another urgency exec again. Even if we don’t, a signal from the community certainly helps the risk team on making a proposal for the initial line of ETH-A.

Please note there is also a signal request about creating a new ETH-C vault type as an alternative/addition to ETH-A.

Changing the Debt Ceiling

Pros:

  • more fees collected
  • more DAI in circulation

Cons:

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

  • 1500 MM (+ 500 MM)
  • 1250 MM (+ 250 MM)
  • 1125 MM (+ 125 MM)
  • 1000 MM (no change)
  • Abstain

0 voters

Next Steps

The Poll will run until February 4th; its outcome will either result in a on-chain-poll assuming the outcome of the poll deems it necessary or its intermediate results are going to be taken to another initiative - another signal (lead by the risk team), onchain-poll or urgency executive.

7 Likes

I feel conflicted in this vote mainly because of the timeline. If this was looking one week into the future I’d vote for +125 MM, as I want to protect the system from a potential bug by having the increase be as small as possible. But since it’s 12 days, I have to try to anticipate the Dai supply over this period which introduces a lot of uncertainties. If the supply is back to 750 MM 12 days, I definitely would not want to raise the DC by + 500 MM, and I assume most others would not want to either. While it’s possible to come back and change your vote, the reality is that this post will likely get buried and most participants will end up keeping the vote they placed with limited information. All this is to say that I’d feel much more comfortable in placing a vote if this was on a weekly cadence…would love to hear other’s thoughts though.

6 Likes

In general I love signals, but I voted “Abstain” on this one.
The reason is twofold. As we will be getting more and more collateral types this type of signaling will soon take on an element of noise. Second is that we have a risk team and we have IAM so I think we should be transitioning over to using these two levers instead.

3 Likes

I totally share your thoughts and also don’t feel too excited about spamming the forum with Eth-A DC increase signals (third one this year…)

On the timeline: we are now just 10 days away according to makerburn prediction, so it is not likely this poll will run the whole time.

Regarding uncertainties about the future: DC-IAM will help to solve this issue. But a even more sustainable path forward will probably be putting those duties into a domain team which is not only going to handy the rates, but also debt ceilings (and probably other dimensions that needs to get taken into account).

2 Likes

We have to do this immediately, at next friday executive. There is no reason to repeat the embarrassment of the last 2 times when we hit the debt ceiling right at the moment when demand is highest. No other defi protocol would allow its users to deal with that kind of user-hostile experience.

If we overshoot, it can be reduced which is easy and doesn’t need to be rushed. If we fail the exact same way 3 times in a row at the simplest possible task, what does that say about maker governance?

6 Likes

Given ETH hit ATH I wouldn’t be surprised if we hit the debt ceiling before 7 days…

The other thing to consider here would be to bump up the SF from 3.5% to 4-5%. The idea being we can not only slow down the generated DAI, but also account for increased risk/volatility that ATH ETH could have. We were previously there 2019 so it seems fairly conservative to make it back there first before pushing up the ceiling imo.

I recommend restraint here for some simple reasons. The community has routinely shown that it can gather in short order to bump higher if a sense of urgency is needed. The implementation timeframe and the market conditions when that would be enabled is as uncertain as the crypto market as a whole. Ultimately, getting increased DCs for ETH is a straightforward process which can be done many times. Unless there is a direct “need” for a large increase, incremental ones are going to be my recommendation.

4 Likes

I guess @Andy_McCall VaR talk has fallen on deaf ears. Numbers only go up. I guess gravity does not pertain to Ethereum. I mean do I want ETH to be 2K, 5K, 10K, 20K, yesssss. But realistically–do you really really really really really really believe at this point in Ethereum’s history it is more valuable than Walmart, Amazon, and Apple combined? I mean I am exaggerating, but gravity is real. unfortunately.

1 Like

Euphoria? Probably not… :slight_smile:

GameStop jumps another 50% to above $100 at one point, trading is halted

“Shares of the video game company soared more than 50% to $101.01 at its high of the session shortly after the open. The stock was last up 35% to $87.80 when it was halted for volatility. GameStop quadrupled in January alone, up from just about $6 four months ago.
Monday’s premarket jump came despite a double-downgrade from Telsey Advisory Group.” --CNBC

ETH is the only collateral where Maker has found product market fit, and we need to increase the Dai supply. Does anyone have a better idea to look for more Dai? I think it is misguided to turn up our noses at more ETH when almost half of Dai is still generated from USDC at 0% SF.

Anyway, ETH is less likely to have large short-term drops when it is close to ATH, not more. Let’s onboard ETH as demand allows and used the increased stability fees to figure out how to offset the risk.

4 Likes

Yes. Real World Assets.

3 Likes

I’d love to see them succeed too, but we haven’t demonstrated PMF with RWAs yet. We have reservations for like $6M in loans? We should continue to invest in our core competency until we can demonstrate that demand for RWA loans outstrips demand for crypto-backed loans.

Not to mention it will at least be months before RWA starts to come online. We need solutions for right now.

3 Likes

I hear ya… my view is precisely the opposite. We have proven the core competency and can easily expand it. Now it is time to expand off-chain where there is sustainable credit demand. RWAs, as collateral, are inevitable and not far off.

6 Likes

It’s incredible how frothy the stock market feels with retail chomping at the bit to throw money into the market. I started investing in 2009 and I’ve never had so many friends reaching out for advice on stocks / looking to get into stocks. The only thing I can compare it to from personal experience is the crypto bubble in 2017. Crypto feels ‘hot’ right now but NONE of my friends or colleagues have asked me about what’s going on in crypto which leads me to believe we have a lot more room to run in this bull market.

Regarding the ETH-A DC, I voted for a 250M increase. I’d love to hear an update from risk, but 500M seems excessive at this stage without any changes to the box parameter and with liquidations still being an issue. 125M seemed too low given the current run rate of new ETH-A demand. We would likely end up with a new signal request a week later and potentially hit the 1.125B DC rather quickly and potentially lose share. A mixture between increasing the ETH-A DC and creating a new ETH vault with a higher LR originally suggested by Primoz feels appropriate.

1 Like

In the meantime, @Primoz proposed activating IAM-DC for ETH-A taking the intermediate results of this Signal Request into account.

thanks everybody for contributing here, the corresponding spell got scheduled yesterday - we will have ETH-A with DC-IAM with a line of 1500M tomorrow 3pm UTC

3 Likes

PSA: we are hitting the current DC of 1B in the next minutes - in a couple of hourse we will have some headroom again. nevertheless, I opened a new signal again since i don’t think those additional 500 MM will help too long.

also keep in mind, the larger DAI gets the less important it is to hit the DC.

in the early days it was almost instantly noticed with the dai peg moving.

now the price impact will be delayed and proportionately smaller.

the above being said, i do agree we should stay vigilant in monitoring and increasing as needed.

At this point it’s more of a UX issue than a peg issue. Whenever someone can’t mint DAI they invariably come the the forum to complain. Any time this happens we may lose potential customers.

2 Likes

fair point. and i agree