dust parameter is the minimum possible debt of a vault. Currently all vault types have 500 DAI dust value.
The last time governance increased dust from 100 DAI to 500 DAI was in November. Since then, the price of ETH has more than doubled, which leads to an increase in the USD cost of transactions for any given gas price. Additionally, gas prices have increased sharply in the past few weeks and are frequently over 100 gwei. From such a high base utilization rate, gas prices could potentially spike to extremely high levels during a price crash (for reference, gas prices increased by a factor of more than 10x on Black Thursday).
This table shows what is the minimum debt (
dust) size tolerated if gas price increases and we want auctions to clear without a loss for Maker.
For instance, when liquidating a 150% collateralized position in a distressed scenario where gas price increases to 500 Gwei, auction costs (kick, tend, dent, deal, trade) for keepers amount to about $420 of gas fees. This means the debt size (or
dust) can not be below 840 DAI in case the keeper makes such a transaction with zero profit or loss and no loss is made for Maker. If you assume about 10% profit for the keeper, minimum tolerated debt size already increases to 930 DAI. Assuming an additional 10% price drop during the 1 hour OSM delay before a vault can be liquidated, this would further increase minimum tolerated debt size to ~1030 DAI.
Also note that unwinding of a vault costs approximately 400k gas which again, making it less economical for vault owners to deleverage if gas prices spike.
I believe governance should consider increasing
dust above current 500 DAI level due to concerns mentioned above. There are also other negative effects that low
dust levels may cause, particularly related to keepers’ reduced incentive to bite smaller vaults. The fixed gas costs compared to small dusty positions they bid on might outweigh their expectation of profits in a competitive bidding strategy that takes 6 hours.
What should be the new
dust level? (please select all options you would support in an on chain vote)
- 500 DAI (no change)
- 1,000 DAI
- 1,500 DAI
- 2,000 DAI
- 2,500 DAI
This poll will close on Friday, January 15. I’ll submit this for an on chain poll if a majority of forum voters support changing the