[Signal Request] Adjust UNIV2DAIUSDC-A DC-IAM-line

Overview

@PaperImperium just pinged me as we are about to hit the Maximum Debt Ceiling (line) for UNIV2DAIUSDC-A of 50 MM - most probably because the latest stability fee change to 0% makes it quite irresistable :wink:

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Changing the line for UNIV2DAIUSDC-A

I want to signal for changing the line of UNIV2DAIUSDC-A. We don’t even have half a million of headroom left, so we should act now.

Pros:

  • more DAI in circulation
  • maybe even removes USDC from the PSM
  • more DAI/USDC liquidity on uniV2

Cons:

  • as this is a 0% stability fee ilk we are not making any more money with this move

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

  • 50 MM (no change)
  • 100 MM (+50 MM)
  • 150 MM (+100 MM)
  • 250 MM (+200 MM)
  • Abstain

0 voters

Next Steps

The Poll will run until 2021-07-30T13:00:00Z; 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, onchain-poll or urgency executive.

8 Likes

Presumably it’s clear, but I fully support this proposal. It can function as a small relief on the PSM (which has seen very minor outflows this week) while still maintaining peg via similar arbitrage mechanisms at the core. We forgo the modest 10 bps of revenue from the PSM and acquire an extra layer of risk from the LP intermediation, but it also gives us a collateral we can liquidate without messing with the peg.

I urge everyone to vote for this.

4 Likes

Does MakerDAO keep the FEES for having the Uniswap LPs or not?

1 Like

No, they stay with the user.

2 Likes

in UniV2 the fees are added to the position by increasing the amount of DAI+USDC you get back when handing back the LP-token. so: no, they are staying with the holder of the token

1 Like

Hi everyone,

Forum poll had been closed, will move onchain on 2021-08-01T22:00:00Z

Thanks for participating!

I had not read this, how cool, then the user can earn as pool commissions and general interest that will allow him to increase his position. That’s great.

It’s like having a Vault in which you earn interest for having it hahaha and also enjoy the DAI generated, of course as long as you pay it back.

Everyone, we need to wait longer to see system-wide effects before submitting signal requests. It’s only now becoming clear that the added liquidity in this pool is causing the APY for fees collected to drop drastically. The reason this is a problem is that this pool is 50x leverage (each round of leverage requiring 4 transactions) for a total of 200 transactions. This means it costs gas, a lot of gas. Even if one uses a flash loan to spin this up, the slippage on the trades in this range amount to a significant loss. In both cases, the participants in this Vault need to stay in this vault long enough to offset the losses of spinning up/down for it to be profitable. At the current APY, this pool is beyond that profitability. It would take many years to make these costs back with the APY. Adding more liquidity is not bringing more traffic to the pool in large enough numbers to offset this APY drop.

One can see the daily updated APY numbers here:

Pay particular attention to the 7D/14D average. As time goes by since this was levered up, the APY has dropped drastically, and trapped these Vault holders at a loss (until that APY increases).

3 Likes

Thank you for this observation. I’ll admit I didn’t even check on what it looks like at the destination for these funds.

Why do they keep maxing out the facility if they’re losing money?

2 Likes

It was a cause and effect. Everyone maxed it out, which dropped the APY. I suppose we can add the extra DC and a rational market will just stop using the facility.

1 Like

Hey everybody

The results of this signal request are now in the voting portal, please express your support or opposition here.

The poll will run until 2021-08-05T16:00:00Z

1 Like

By basic economic law, it is known that the market is not rational. Therefore one can only hope for the best, I think.

2 Likes

This change passed in an executive vote on 2021-08-22.

1 Like