Overview
A week ago the executive spell to increase the Surplus Buffer from 4MM to 10MM got executed. Until now the System Surplus has grown to 5MM. At the time of the last Signal Request the SB/DAI-ratio was at ~0.33%, by the time we reach a System Surplus of 10MM the ratio will be at 0.63% (assuming we stick to a total DAI of 1.6B)
Aside from usual risk mitigation (where we might have probably at least 2%), we are seeing a lot of conversations around the increased ETH-exposure circling around that we should not (only) think about raising the Stability Fee for ETH-A, but also about increasing the Surplus Buffer.
We are still 5-7 weeks away until the Surplus Buffer is full again (depending on extra income through Liquidation Penalties, PSM fees, adjustments on the SFâŠ), but I donât think it is too early to make a decision about raising the Surplus Buffer again. If we want to raise it, it would be nice to do that before the MKR-burning starts again.
We have to decide on two things regarding this topic:
- How high do we want to set the Surplus Buffer
- Do we want to put all the fees into the Surplus Buffer or do we want to slowly
lerp
it so some of the fees get into the MKR-burning
To make it more tangible, I added some tables. Please bear in mind, that the fees might go up (and down) based on vault-utilization, Stability Fee changes - so I based the tables on the current state of the System (1.6B DAI, 2.38% average fees)
Letâs start with the Surplus Buffer itself. Assuming we stick to 1.6B we would end up with the following ratios:
Surplus Buffer in MM | Surplus Buffer/DAI |
---|---|
10 | 0.63% |
15 | 0.94% |
20 | 1.25% |
25 | 1.56% |
30 | 1.88% |
Now looking at the effects on increasing the Surplus Buffer. The two dimensions are: how much do we want to increase it, how much of the fees accrued shall be used for MKR burning. This result is the amount of weeks it would need to get the Surplus Buffer getting filled. Please bear in mind that Weeks until SB filled up counts from the point in time where we reached the current (10 MM) Surplus Buffer. The guestimate about the weeks is probably pretty conservative and might be a bit lower (due to more DAI in circulation or higher Stability Fees).
Increase Surplus Buffer by MM | MKR Burn Fraction | Weeks until SB filled up |
---|---|---|
5 | 0% | 3.7 |
5 | 25% | 4.9 |
5 | 50% | 7.3 |
5 | 75% | 14.6 |
10 | 0% | 7.3 |
10 | 25% | 9.8 |
10 | 50% | 14.6 |
10 | 75% | 29.3 |
15 | 0% | 11.0 |
15 | 25% | 14.6 |
15 | 50% | 22.0 |
15 | 75% | 43.9 |
20 | 0% | 14.6 |
20 | 25% | 19.5 |
20 | 50% | 29.3 |
20 | 75% | 58.6 |
Increasing the Surplus Buffer
Pros:
- likelihood of
flop
ping new MKR in a âtoo much bad-debtâ-event gets decreased - I hope we feel a bit better about keeping up with the DAI-demand without going crazy on SFs.
Cons:
- DAI in SB is DAI taken out of circulation (probably not a big issue anymore, the supply side is elastic due to the PSM)
- no / less MKR burning
Please vote on ALL options you would support in an onchain-poll.
- 10 MM (no change)
- 15 MM (+5 MM)
- 20 MM (+10 MM)
- 25 MM (+15 MM)
- 30 MM (+20 MM)
- Abstain
0 voters
How much of the fees should go into the MKR burning?
Pros:
- We burn some MKR again
Cons:
- It takes longer for the Surplus Buffer to get filled (see tables above on the effect)
Please note that the actual % cannot get guaranteed, as we would basically just calculate the end-date before adding it to the exec - if we accrue a lot of more fees than expected the burn-ratio will go up, if we accrue less, the ratio will go down.
Please vote on ALL options you would support in an onchain-poll.
- 0%
- 25%
- 50%
- 75%
- Abstain
0 voters
Next Steps
The Poll will run until February 11th; its outcome will result in a on-chain-poll assuming the outcome of the poll deems it necessary.