[Signal Request] Adjusting Dust Parameter (2021-1)

Instead of voting for a specific Dust parameter setting I think we should vote for the argument behind the parameter. After we agree on the argument the actual Dust parameter is then left to the team behind @monet-supply’s excellent spreadsheet.

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Got it. So, we have gone from banking the unbanked to forget the low income. We will let the Low Income go to Libra (Facebook) a.k.a Diem, which means Devs who are currently not in crypto–will develop on top of Diem. What more can I say ¯_(ツ)_/¯

We are going to need millions of these :point_down: type of folks since our mission statement is to be the next “Goldman Sachs.” Jason is going to need a TESLA Vault :slightly_smiling_face:

@ElProgreso while I agree with you in principle, I think in this phase is it just completely obvious that ETH and MKR are NOT “money/banks for the unbanked”. The vast majority of people playing in DeFi are whales, rich or at least wealthy people, often coming from the richest countries in the world.

The focus now for MakerDAO, IMHO, should be to provide a solid and secure framework. If this requires raising the Dust limit, be it. I don’t think many people from third word countries are opening CDPs at 500usd anyway, right now.

What we could actively do (now, or soon), is to invest resources on a Working Group to investigate L2 solutions for MakerDAO.

E.g., Next week we are going to have a call to talk about the onboarding of STAKE (staking token of xDAI). In my opinion it would be reasonable (in we eventually accept STAKE as a collateral) to allow Vault creation using STAKE directly in xDAI. The fees are negligible there.

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For sure. Totally agree. I was really surprised when I came across this statement:

“The number of active accounts has been trending upwards but is still roughly 33% lower than its peak of 714,225 reached back in 2018, when ETH price was nearing $1,400.”

I totally agree with securing the protocol. I as you, have more upside in protecting Maker than worrying about the good of billions of people. But sometimes in life you can’t measure success by the value of your wallet…

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sorry, i dont get it. DAI is still helping on “banking the unbanked”. In the libra analogy you would also not expect that running a libra-validator would be needed for that mission.

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Probably not too surprising that I voted against raising the dust limit. My first post here on the forum: Fears about new Dust Limit Increase was me freaking out about moving the dust limit from 100 to 500. I think 500 is too high, but am willing to let it sit there while we figure out more efficient ways to preform liquidations.

I think raising the dust limit is the easy way out. There are so many more creative solutions out there than can have the same effect of securing the protocol without turning away small vault holders/new users. I was attracted to the MakerDAO sphere because it was offering collateralization to anyone that understands how to use it. If we increase the dust limit, it will be a huge barrier to entry, potentially turning away new users who wouldn’t feel safe “testing” the vaults with too much money.

I think L2 offers a lot of solutions for this but we also don’t have to wait around for that or Liquidations 2.0 to start improving the underlying problem.

While this might be a hard sell to MKR holders, I think we need to step back and realize these thoughts as equally valid to raising the dust limit.

At the end of the day, if there are no vault users there is no DAI and I think we should be very careful with any proposals that effectively price potential users out of our ecosystem. This is an incredibly intelligent and gifted community, why don’t we use our collective brain-power to come up with some novel solutions to incentivize keepers that encourage true DAO participation from everyday users at the same time.

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:laughing: All good Schuppi. We’ll agree to disagree. Will go forward w/what the community believes is the best path fwrd.

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More and more of unsolvable problems for DAI. Switched to 500+2000.

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i totally get that from a user-perspective (especially if you already have a vault with 500 DAI) this is really disturbing. and we should offer something to help those people (like payback with flashminting)

but we have to be clear about this: in the current gas-situation it is probably not economically sound to open a vault for 500 DAI. you might end up - even if your long works out - with net-negative just because of the big gasfees.

our users are DAI-users, users of the vault system is just a fraction of it. so you can even say that raising the dust is actually helping people not to make bad decisions by “playing around with MKR and then being angry because of the fees”

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It’s not just the existing vaults that create a problem though. Yes, we need to look into this because last time something like 10% of the existing vaults were 100 DAI or less and I imagine that number is far greater with 500 DAI.

Economically sound to who? The vault ecosystem allows users to decide what is in their best interest, this is what makes Maker different from traditional finance. If I think it’s worth $100 in fees to avoid selling my crypto before my next paycheck comes in, I should be allowed to make that choice. Otherwise we offer no competitive advantage over traditional finance IMO.

I wanted to push back on this as well. The only way DAI is created is though the vaults. So if we are closing off access to vaults to average people we are drastically limiting the use cases of DAI and thus DAI users. If only wealthy people can access these instruments we are then competing directly with the banks who already offer collateralization to wealthy clients. There is a huge market of people that are not served by this and DAI is able to capture them.

To me, having a vault with a low limit creates endless opportunity across the globe. Someone can start a small business without having to sell off their assets in doing so. The beauty of the system is that you can maintain your long position on a number of assets while also accessing funding at way lower rates that credit cards and traditional debt instruments. The system will definitely survive if people can’t afford to do that, but I think it’s a much more elegant and resilient platform when we make it possible to use no matter what your net worth is.

I would imagine that 10k USD (DAI) is a small price to improve user UX.
But the approval process itself might be harder than the actual implementation.

Anyway, from my side I am more than happy to implement such rebate smart contract, that just give rebate to eth accounts that call bite of small vaults. this is very easy to verify on-chain, and can be done outside of the core protocol.
Knowing bite will be called, eliminates the attack vector @monet-supply mentioned (of whales splitting their vaults into many small sizes).
We are even willing that B.Protocol will seed it with 1k DAI (as this is our interest as well).

The implementation is something i can do over the weekend, and the risk for funds is very minimal.
But getting the community approval will take much more time than that… So if you or @ElProgreso want to take the lead on the community, I can commit on implementing it (if accepted by the community).

  • this is a proposed solution to Maker as a whole, does not benefit directly with B.Protocol in any way. Our interest here is that Maker (and thus also B.Protocol) will be able to offer small Vaults.
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Ok, even if a user thinks it is economically sound - it is not for us as MKR holders as we think liquidations could run pretty bad resulting in bad debt that we are going to cover - right?

Even if there is something that could fix that - that is all future talk and not a fix doable in short time.

If we have something that would allow lower dust again without hurting the system - I am all in for that. But with the mechanics we have right now there is no alternative to increasing the dust

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I guess that’s my point, that so often what we do is say well this works so let’s do it despite the downsides. @yaronvel is saying he could have a solution very soon for this that only costs the platform 9k DAI. I proposed several alternatives in my initial post to the forum and I’ve seen others talked about as well since then.

How big of an issue are these vaults under 500 DAI? If high gas prices + high ETH cost are the reasons we’re trying to change, it’s worth pointing out that splitting a large position across many small vaults would also be prohibitively expensive and only profitable if the vault(s) holder knew they would not be bitten because of their actions.

The risk of not being able to sell undercollateralized vaults is super important. But I would argue turning away users and making the protocol harder and harder to access is also an important risk to consider. When I first came to the forum I was told the dust minimums would be coming back down once we figured out liquidations and I really want to believe that is true. But it seems to me that we are walking down the path of catering to whales and institutions and that’s a dangerous path to take.

For a flourishing DAO we need a multiplicity of actors with different backgrounds and experiences. As we start to price out potential vault holders we drastically limit those that can participate in our platform. I think this is a problem that warrants some capital investment rather than leaning back on the cheap and easy solution.

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Which other cases are you referring to?

It is a question of resources and priorities I guess. Imho finding a solution to this is not very high in my personal list

There is a long way from a forum post to an actual implementation in the system. This signal is about now. No need not to think about future alternatives, but don’t stop mitigating risks now if it is fixable now.

We are turning away users if we don’t e.h. fix the peg. Accessibility of vaults is not priority A. DAI is the product not vaults. We haven’t seen any decrease in DAI printing since the last dust increase I guess?

That is a pretty harsh statement.

I am pretty sure everybody wants to have dust as low as possible. But I would rather have a higher barrier to entry the vault system then again suffer from badly running liquidation on the next big dip. Maybe liq2 brings new option?

That’s fair. The reason it’s high up on mine is because if we don’t find a solution who knows how high we will have to raise the dust limit. Working on something now to bring forward so we can get back to having a dust limit that’s accessible for average people globally.

I think we’ve been holding the peg pretty well since the first PSM went live and will continue to do so as we offer more PSMs. Vault users are our customers as well, and utilizing a vault is a great way to get involved with Maker Governance. There are a lot of stablecoins in existance if all you want is exposure to USD on-chain. The collateralization of crypto assets is part of our value proposition to the public, just like maintaining the peg is. For Maker to succeed, IMO, we have to be focused on both.

Lastly, I don’t think my comment that it feels like we are walking down the path of catering to whales and institutions is harsh. Not to unnecessarily inject politics here, but it’s worth noting that the US government finally issued a second general stimulus to its tax paying citizens for COVID relief. After nearly 6 months of waiting, these people received the equivalent of 600 DAI. Both inside the US and outside of it 600 DAI is a lot of money to many individuals. If we forget that, we will no longer be able to serve average people and all that is left are big players that already have countless options for collaterilizing assets. Cutting out small vault holders is a huge risk to the longevity of our platform.

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At least in the last discussion on increasing the dust parameter, I remember one for the arguments in favor was an assumption that liquidation 2.0 will be able to support smaller dust parameters.

I have some concerns about that, which I expressed here, and I think the community should get clarifications from the smart contract team on that.

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Gas prices today are crazy high.

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few hours ago they were more than 10x lower.

Seems that circa 40-50 gwei is price floor currently. It can go lower, but not for long.

I just wanted to remind people that we need a majority for a specific change in order for this to move on-chain. If you’re currently only voting for an option with less support, consider compromising and voting for a second or third choice.

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Words from the Wise:

  • “If you aren’t embarrassed by your product, then you launched too late” --Reid Hoffman

  • The best products make people say, “Where have you been all of my life?”

  • Because of this, early customers are willing to tolerate a half-finished product (or something future you will be embarrassed about) because you’re the only person showing up with something they’re desperate for

  • non-consensus insights are critical

  • It’s time to pursue an idea when:

    • No one can talk you out of doing it
    • The pain of regret from not trying > any possible pain experienced from failing

Vote wisely.

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