[Signal Request] Adjust ETH-B line (IAM-Ceiling)

to be on the safe side I would not touch the gap and the ttl but apart from that I am not feeling uncomfortable with raising the line

I think @Primoz will have to weigh in on this because I think we’ll have to increase the SF if we push the line past 50M.

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If the debt ceiling of ETH-B exceeds 50 million, we must increase SF accordingly, which is necessary.

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Max Debt Ceiling that were based on thresholds where Risk Premium start reaching double digit values, in case of ETH-B around 14% at 50m. At current debt exposure Risk Premium would be around 6%. Rates Group did propose SF increase to 5% for this reason last week and this should be implemented when executive passes.

We’ll monitor situation and react at next possible executive. We are noticing though that ETH-B users are a bit more risk taking versus ETH-A (apart from lower collateralization levels used, they also seem to be using less collateral buffer to protect against getting liquidated). Since the box parameter is only 15m, this might be becoming an issue. Potentially we should also revaluate if box of 15m is still appropriate. This limiting factor is probably one of the biggest hurdles right now that makes me a bit uncomfortable against increased portfolio risk exposures despite higher compensation from fees.

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The problem with increasing eth b vault type to double digit interest rates is that we are punishing early adopters for new customers and the end result could ultimately lead to a loss of revenue. I’d prefer to cap eth b vault to a debt ceiling that matches market rates and create a new vault type for further rate increases. I understand however this implies more work for SC domain teams and I’m not entirely sure how a new vault type affects auctions efficiency/liquidity in case of liquidation

How does this reduce our risk w.r.t. to liquidations? If Eth vaults with a fixed low LR gets liquidated it does not matter if it is eth-B or eth-c

I mean whatever the market rate is, determine the cap on the DC.

Further increases that imply higher rates to cover risk to be integrated through a new vault type with a different rate and so forth.

That way you keep the customers and can adjust your premium accordingly through the new vaults.

update: we are now at 39MM dai-from-eth-b, if we stay with the current velocity we are going to hit the DC at the end of this week

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update: we lerped up to the upper boundary of 50 MM ceiling, 45MM DAI minted. have been a little optimistic with my prediction, but lets see what happens today :wink:

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I’m not seeing a lot of consensus in this poll so far. Please remember that you can vote for multiple options.

I also feel like this is one of the situations where voters should consider modifying their votes based on the input from the Risk team. It’s naturally hard to tell if this is happening, but yeah, worth consideration if you haven’t thought about your vote since you made it.

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I don’t particularly like increasing ETH-B DC at this stage to be honest.

One reason is that until liquidations 2.0 are released we are relying on 15m box parameter which is very low considering current DAI debt exposure and this is particularly dangerous for ETH-B. I am not sure if we have good argument to increase box, but it would be very beneficial knowing that we have more support from keepers and increase it.

Second reason is low Surplus Buffer and the outcome of the Poll where people aren’t necessarily in favour of increasing it. We can’t have Surplus Buffer representing 0.3% of DAI debt and meanwhile aggressively increasing debt exposure of both ETH-A and riskier ETH-B.

Third, are we ok to come into situation where debt exposure to ETH-B increases towards 100m and then realize we need higher SF to compensate for risk? Are we going to be ok by suddenly charging 10% or more for ETH-B? We had similar situation with YFI-A and it didn’t turn out good.

Fourth, I know nobody wants to miss on new DAI mint, but ETH-B users could very well be same users who would use ETH-A otherwise. It is possible Maker is stealing users from Compound and Aave currently with ETH-B, but don’t forget that Maker has OSM and others don’t, so these people might prefer to use Maker even at slightly higher LR. This is only speculation though.

Fifth and lastly, maybe we should just slightly press brakes during this insane growth. But it’s me representing Risk so maybe I am too cautious for some.

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I think you are alright we need to consider that as fast as it went up, it can go down even faster and the ETH-B is not really the type of vault we want to have wildly open during this type of event.

Thanks for being this too cautious guy. Changed my vote.

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Agree with this, much preferable, even if it takes more time to create a new vault type with the same LR and higher SF in order to avoid a similar situation as with YFI, difference is ETH holds 75% of our revenue. If it cannot be done I’m fine keeping it at 50m

After seeing how the ETH have gone easily from $750 to $1200 in almost no time, the speed of that movement and current market behaviors, I’m starting to worry much more about a big market correction to occur at anytime, I don’t see at this point a 25% or even 30% correction in less than 24h like something rare, that’ll be more than back in March?

Not saying not to adjust the ETH-B line later after proper assessment by the risk team has been done, but in this precise moment, it is a huge risk IMO.

Added to Primoz points above: I changed by vote to no.

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I think if we are going to do an ETH-B line increase it should be married with a larger SF increase as well as a substantial surplus buffer increase. That should be enough to satisfy all parties I think.

That is as long as the 20% gap in the LR invested exceeds the gap in the rates which with the new parameters it’s 3%.If not people will switch to eth A

Is that the quantified opportunity cost of the additional 20% buffer? Thought it was more abstract than just that based on risk profiles.

Yes, that 20% extra capital you get to invest generates a 3% extra cost on the total debt, not much for short term trading or perhaps if you factor in moon shot targets on leveraged crypto but a number to take into account if, for example you are simply providing stablecoin liquidity.

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So I’m going to say we need to push this poll back a week (targeting a poll on the 18th if still necessary.) The reasons for this are:

  • Risk is pushing back pretty heavily, and I want to give them a chance to speak to this in the governance and risk meeting tomorrow prior to the poll closing. I’d also like people to have a chance to change their votes after the meeting.
  • The poll was put up during the holiday break, and Risk (and me) didn’t give it the priority it perhaps should have had until the new year, once lots of people had voted. This is largely my fault, in retrospect it might have made more sense to disallow signals over the holiday period as well.

Apologies for the last minute change of plans.

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You can add that context changed too, with the bull running last couple of days.