I’ll attempt to lay out my arguments here as to why I’m against this tax.
First and foremost, this issue is only coming up because of the way SCD was designed, whether it was an accidental oversight or an intentional trade-off against some other criteria, it doesn’t really matter. The point is we ( technically the Foundation but outside of this community I would suggest most don’t see a distinction ) are responsible for this situation.
If we implement a tax, then some percentage of CDP Holders are going to end up paying that tax. Game theoretically, this percentage should be low. The only reason people would get hit by this is if they’re completely oblivious to crypto news/announcements etc over whatever timescale we announce the shutdown.
The issue is that we are punishing these users for a problem that is not their fault. One can argue that ‘they should have been paying attention’ and there is an element of truth to this, but I think it is important to consider why these people may not be paying attention. I would argue it is one of the following:
- They’ve lost interest in crypto to the point they are willing to abandon the value in their CDP.
- They are taking a break from crypto and trust the Maker Protocol not to screw them over in their absence.
- They are for some reason unable to spend their time actively engaging with crypto news / announcements etc.
Now for point 1, we have no problem. However for point 2 and 3 we are fucking these people over in order to fix a problem that we created. This is unacceptable. Under SCD, fees were only to be paid when a CDP is closed. If you had a very low liquidation price, you might well have stopped paying attention safe in the knowledge that fees would not be due until you closed your CDP, by implementing the tax we are breaking that implicit promise.
Secondly, if everyone has to close their CDPs by a certain date or else get hit with a huge tax, it will cause a liquidity crunch for SAI. As soon as we announce the tax, there is a reason for everyone to buy and hold as much SAI as they can acquire for under $1 and sell it once the liquidity crunch hits and SAI is trading well above a dollar.
Well! You may say, if SAI is trading above a dollar, we’ll just emergency shutdown early. But doing that would defeat the entire purpose of the tax and would mean that we’d have to go against the timeline we had already loudly announced. Cue huge backlash to absolutely no gain. (We still won’t see the fees because we’ll be forced to shutdown long before the tax hits.)
Thirdly, the optics of this look terrible. I’m still not sure that I 100% understand the game theory around the tax, if it’s that complicated then no one outside out community is going to make the effort to bother. Instead they will assume that we are:
- Charging people twice for SCD because we are greedy.
- Making other people pay for the flawed design of SCD.
- Forcing people to migrate because we can’t be bothered to manage both systems.
This has the potential to harm the future income from MCD.
Fourthly, if we screw over CDP Holders in this way, there is a chance that they will be less inclined to take advantage of using MCD for leverage in the future.
Fifthly, the tax is not equitable. This is also horrible optics, and despite the game-theoretical fact that it should not apply to most users, you can bet that there will be a massive uproar from the people that understand the tax well enough to realise this.
Sixthly, there is unlikely to be SAI in the migration contract for this period, at least there certainly won’t be enough for everyone to migrate, which means we are not even forcing SAI CDP Holders to migrate, we are forcing them to close their positions and re-open them, potentially incurring taxable events.
In conclusion, this is an occasion where we should accept defeat. We cannot claim those fees without causing ourselves a whole bunch of damage. The CDP Holders that have held out until now have won. There will be plenty more fees to burn under MCD, we should cut our losses on the SCD fees and take a less dangerous path.
In my view the less dangerous path is the following:
- Sai Debt Ceiling -> 0 ( Prevents more Sai being minted. )
- Sai Stability Fee -> 0% (Irrelevant at this point since we aren’t going to see the fees.)
- Set a date for Shutdown some months in the future. (We don’t want to be paying money to the DSR for Dai locked in the migration contract indefinitely.)
- Make sure that MCD continues to be net-positive over the months until SCD Shutdown (Sai locked in the migration contract can accrue the DSR without paying the stability fee.)