This post presents a plan for completing the offboarding of the KNC legacy token, and seeks confirmation from the community to move forward with the proposed next steps.
Kyber network began an upgrade to a new KNC token contract earlier this year. Much of the supply has now migrated to the new KNC token, and support and liquidity for the legacy KNC token is declining.
There are 5 remaining Maker vaults using the KNC-A vault type, with the following collateralization and debt levels.
The KNC legacy token price feed is not used by any third parties, so once these vaults are closed Maker will be able to remove support for the KNC price feed and reduce operating costs.
I propose the following parameter changes to complete offboarding of the KNC legacy token.
Set the KNC-A liquidation penalty to 0%
Removing the liquidation penalty ensures that we don’t penalize users for deprecation of the KNC-A vault type. This is important from a user experience and public relations perspective, and the total remaining debt from KNC legacy token is only ~9,000 DAI so the amount of revenue gained from keeping the liquidation penalty is negligible.
Increase liquidation ratio to 5,000% over 2 months
We can use the lerp module to linearly increase the liquidation ratio from the current 175% to 5,000% over the course of 2 months. This should be high enough to trigger liquidation for all remaining vaults, allowing for the removal of the KNC-A vault type and related price feed.
Based on current vault collateralization levels, all existing vaults should be below liquidation ratio within roughly 1-2 weeks of the linear stability fee increase beginning. The longer lerp period with higher final liquidation ratio is intended to accommodate any potential changes in KNC price.
The two parameter changes have been bundled into one signal request because of their shared purpose. Feel free to comment if you object to these changes being bundled together, or for any other feedback.
Do you support the parameter changes outlined above to offboard the KNC-A vault type?
This signal request poll will run for the next 10 days, until Thursday September 9. If a majority of forum voters (excluding abstain votes) are in favor and the signal request receives sufficient community engagement, the proposed changes will be submitted for an on-chain governance poll the following week.
30 August 2021 - Removing KNC-A stability fee increase from proposed changes based on feedback. Stability fee will remain set at 5%.