dust parameter is the minimum possible debt of a vault. Currently all vault types have 100 DAI dust value. The last time governance increased dust from 20 DAI to 100 DAI was in mid August when gas prices started to rise due to the liquidity mining craze.
We saw how gas price increased over 200 Gwei on Black Thursday and even above 700 Gwei during the summer due to hype around yield farming opportunities. @monet-supply made this really nice table a while ago, which 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 $160 of gas fees. This means the debt size (or
dust) can not be below 323 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 462 DAI. Also note that unwinding of a vault costs approximately 400k gas which again, in extreme events of gas price around 500 Gwei, costs can amount to $90.
We propose governance to increase
dust above current 100 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.
The question of course is what amount of
dust is still tolerated by governance, since we know increasing
dust has downsides related to excluding part of retail users. Furthermore, according to our knowledge other platforms such as Compound and Aave don’t use
dust equivalent debt limits.
Few reference data points:
- There are currently around 1.700 Vaults opened having debt less than 500 DAI, which sums up to 180.000 DAI in total. Some of them might be abandoned.
- There are currently around 2.000 Vaults opened having debt less than 1000 DAI, which sums up to 400.000 DAI in total. Some of them might be abandoned.
What should be the new
- 100 DAI (no change)
- 250 DAI
- 500 DAI
- 750 DAI
- 1000 DAI
This poll will close on Sunday 15th November.