[Signal Request] Increase the YFI Debt Ceiling

At the time of writing, the YFI vault facility, just launched, is almost full.

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Considering the fees that such facility generates, the low risk from a smart contract perspective, oracle and the liquidity/volatility risk profile.

Do you want to increase the YFI debt ceiling?

Increasing the debt ceiling will increase the fees but also expose to more risk. Regarding liquidity, the trading volume of YFI on Binance alone was 130M$ in the last 24h.

The winning option will be put in a governance poll if it’s not no.

  • no, keep the debt ceiling at 7M
  • yes, increase it to 10M
  • yes, increase it to 15M
  • yes, increase it to 20M
  • abstain

0 voters

Poll will end Sunday, November 15th.

11 Likes

Given my post here, DsChief 1.2: Flash Loan Protection for Maker Governance. I think we should move up the timeline on this signal request. As a TL;DR the governance contract migration means that we may not have a regular executive on either the 27th November and the 4th December.

I’m hoping @SebVentures doesn’t object, but I think we should consider this poll to end on Sunday 15th November, such that it can go on-chain on Monday and potentially be included in next weeks executive.

Debt ceiling increases don’t tend to be too controversial, and given that so far of 36 voters none have voted against, I don’t think there is serious risk to the governance process by expediting this.


I would also like to point out that this will be the only change we can make to the YFI debt ceiling for 2-3 weeks, so a larger increase may be more advisable in this instance if governance wants to ensure that we don’t hit the ceiling before we have a chance to modify it once again.

8 Likes

Beside moving to a higher ceiling (i voted for 20m) I would propose to adjust the SF (now 4%) to a higher one, like 6% and see if the market accepts this value.

The current 7m DAI at 4% were minted in like 24h. So I am optimistic.

More generally speaking, we have currently embarked about 4% of all YFI in circulation, and we are going to have 2x/3x more after the increase. We should just increase the SF until a healthy equilibrium is reached (e.g., to occupy 60/70% of the chosen DC).

3 Likes

Yes, It would be easier for me to vote for higher ceiling, if SF is increased simultaneously.

1 Like

This is not a guarantee. I’m also optimistic, but yeah.

I’m also not thrilled about adding changes that aren’t necessary for next Friday, which changing the rate would fall under, imo, unless @Risk thinks otherwise.

2 Likes

I get where you are headed with this, but fundamentally I do not agree.

In general, the Risk Premium should be viewed from the lens of insurance. That is to say what should the insurance premium be to offset the risk of “default” or loss based a rapid drop in the price. The DAI that is then minted (or maintained outstanding) with that risk premium is “in-effect” riskless DAI (and the reason why the DSR can be used to offset it, as it too is a riskless reward).

Once that risk premium is determined, the only time to change it is when the underlying risk of the collateral changes. The core difference here is monetary policy vs. risk policy. We really should avoid mixing them where possible.

2 Likes

A lot of recent demand came from people refinancing from Aave. Looking at loan book at Aave I think between 20-30m seems to be some organic demand threshold, for now. So maybe 20m DC might be “high” enough not to hit it again too soon, but hard to say as there might be some users who originally weren’t borrowing at Aave…

As for risk, YFI is one of most liquid tokens out there, also having high on-chain liquidity which decreases auction risks. Definitely risk premium rises with increased debt exposure, but I personally think that token such as YFI with 175% LR can have much higher DC as 20m. So the question is if we really want to increase rate by 1% at this early stage, because more than that probably isn’t needed from risk perspective. The downside are high volatility metrics of YFI, but that is mostly related to initial pump and dump cycle that I hope is behind us, so volatility should decrease going forward.

The question is if community wants to raise the rate above RP just because there is a clear signal of demand at 4%. I personally don’t think we should be reacting so quickly as we might just become unreliable and damage new user adoption.

5 Likes

No problem at all to close the poll on Sunday, participation is exceptionally high.

Except if there is strong disagreement from the community, I will stay with the current 20M DC (assuming nothing changes until Sunday).

Maybe I should have added more debt ceiling and a combination with stability fees. Making a new poll would be messy and it’s already a x3 of DC in less than few days. Messing with SF in a rush is not Maker culture neither I think. The matter will be discussed in the rates group anyway I expect.

I also think it is best to not push too far and avoid the proposal to be refused by MKR holders with would be the worst possible outcome.

5 Likes

@Eason_Chen @Cryptoyieldinfo @magTech @alextes @bengii @CryptTano @Cryptouf @sanchopansa @Jonathan_Joseph @Sam_Ikkurty @yolau @Cast_UrbanDubz @YFI_1M @yeezy @yemyy @melenxyz @Amit_Bhonsle @cadrem , thanks for taking an interest and voting in this poll. We’d love to have you take a more active role in Maker Governance. You can even earn DAI by doing so.

However, your accounts were all created shortly after this poll went live, and given the subject matter there is an incentive for sybil votes and vote brigading from other communities, so I’ve discounted your votes on this poll. The final tally is below.

Final Tally

20M - 42/51 - 82%
15M - 23/51 - 45%
10M - 8/51 - 16%
7M - 0/51 - 0%

Yes, Increase it to 20M’ is the winning option and will move on-chain on Monday versus the status quo.

Thanks to all for voting.

12 Likes

no problem. didn’t know that. But happy about results anyway !

2 Likes

Very nice to see YFI has finally been onboarded and is being used as I suspected it would be. 2021 will be a good year for DeFi. Now I would like to see yUSD, cDAI, and aDAI added to Maker DAO.

1 Like

did not know that - happy ith the result though!

3 Likes

I’m a little late to the party here, but…

I was looking at @monet-supply risk summary for YFI earlier today.

Based on that IDK how to feel about the idea of the DC going to $20MM.

If you look in that sheet his simulations put the VaR for YFI at about 20% ~ 25% of the debt ceiling with the current LR. I don’t have access to his model he used to run the simulation, but at $20MM I think the VaR would a bit higher than the stability buffer which is a slightly worrisome situation.

If we want to go this high with the debt ceiling would we also consider raising the liquidation ratio to offset the extra risk there?

Update:
I updated some of my numbers. I had thought the Liquidation ratio was set to 150% but overall concern still stands for the 175% LR. Situation is not quite as bad though. My napkin math puts the VaR to be approximately a few hundred thousand over the stability buffer.

Going to start a separate thread to discuss.

2 Likes

Doesn’t look like YFI has been added to http://makervaults.descipher.io/

Does anyone have insight on what the collateralization ratios look like for YFI vaults currently?

Would be really interested to know what the CR is for the lowest 1 ~ 0.5%.

Couldn’t find this elsewhere, so apologies if this is the wrong place. When will the debt ceiling increase take effect on chain?

@Jonathan_Joseph

If the governance poll passes, (https://vote.makerdao.com/polling/QmZUdsMC?network=mainnet#vote-breakdown)

It’ll be included in the executive proposal on Friday. After the executive proposal gets enough MKR there’s a 3 day GSM delay before it can get executed.

1 Like

Ok thanks. Couldn’t find the voting details.