[Signal Request] Adjust the BAT Risk Premium and Debt Ceiling

KNC/ZRX Vaults were recently launched with 4% Risk Premiums and a 5m debt ceiling. BAT currently has a 0% Risk Premium and 3m debt ceiling. The main reason why Risk/Governance has decided to subsidize the BAT Vault in the past is because of its inclusion in the MCD launch.

Pros:

  • Stop subsidizing the BAT vault. The Risk Premium will be more in line with other collateral.
  • More DAI can be generated from BAT

Cons:

  • A Risk Premium increase may make DAI generation from BAT too unattractive.
  • Lower DAI generation is worse for the peg.

Increasing the BAT Debt Ceiling

  • 3 million (current value)
  • 4 million
  • 5 million
  • Abstain

0 voters

Adjusting the BAT Risk Premium

  • 0% (current value)
  • 1%
  • 2%
  • 3%
  • 4%
  • Abstain

0 voters

Polls will run for ~1.5 weeks from July 24 to Aug 5. Please leave any thoughts or comments below!

8 Likes

I like the idea of pricing risk of like-tokens the same.

I’ve always thought BAT was similar to ZRX. Both are OG crypto projects with good distribution and mostly stable prices. I’m of the opinion that stability fees for these vaults will not put much (if any) upward pressure on the peg right now. So if we really think ZRX is worthy of a 4% risk premium, I think we should include BAT as well. But whatever that % is, it makes sense to me that they are priced the same

3 Likes

I was about to make a comment about how bat is barely utilized, but did not realize that we were running up against the debt ceiling now, wow! Did that happen this week? We are really maxing out every debt ceiling now I guess, great to see! :slight_smile:

3 Likes

Thanks for making this signal @Jiecut! BAT does seem like it has similar risk profile to ZRX and KNC, but on the other hand we don’t want to disincentivize BAT borrowing demand too much when DAI is above peg. I think it might be good to raise the risk premium 1-2% to start and then see if demand is still strong.

On another note, is there interest in raising the liquidation ratio for BAT-A vault type as well? From the governance call yesterday it looks like the majority of DAI from BAT is above 300% collateralization, so it might be a good time to raise the LR towards 175%.

3 Likes

@befitsandpiper Vault #11464 minted 2.7m DAI from BAT on Jul 19.

1 Like

Someone would need to create another signal request if they think the CR should be increased. It’s an interesting idea.

Compound uses a 167% CR. A CR increase for BAT-A will decrease attractiveness. The vault uses 300% so that they can avoid liquidation and have a safety buffer. Raising the CR decreases their safety buffer.

Sad that we have to wait 2 weeks to raise the BAT DC :frowning:

2 Likes

An executive vote was passed to increase the BAT-A debt ceiling to 5m DAI.

1 week left for the signal request on the BAT-A risk premium.

4 Likes

BAT RP Poll closes in less than 20 hours.

Just a friendly reminder that poll wording should be submitted on the community github here https://github.com/makerdao/community/tree/master/governance/polls by end of day. Please tag me as a reviewer on the PR.

1 Like

Polls have been closed. The community has signalled support for a BAT Risk Premium increase from 0% to 4%.

PR created for an on-chain governance poll - https://github.com/makerdao/community/pull/711

3 Likes