[Signal Request] Offboarding MATIC

EDIT: The original introduction to this poll has been removed

Currently the MATIC vault is unprofitable with Maker losing money due to the limited amount of Dai generated. Should the MATIC vault be able to generate around 30M Dai, this vault would become profitable. Perhaps this is something the Polygon team could assist with.

This poll is to determine whether Maker Governance should offboard the MATIC token as it recently has with similar unprofitable vaults including KNC, BAL, COMP, AAVE, LINK-ETH, and AAVE-ETH among others.

Offboard MATIC
  • Yes
  • No
  • Abstain

0 voters

Conditions:

This signal will be active for 10 days before closing (11/30/21 00:00 UTC)
This is a conditional signal request. I will withdraw the signal request if the following two conditions are met.

  1. The MATIC vault has 20M generated against it
  2. There is a commitment from one or more community members or entities to extend the borrow to 30M Dai if Maker Governance were to pass a debt ceiling increase to 30M Dai.

If this poll completes the full 10 days and the community has voted to offboard MATIC, then the offboarding process will resume.

7 Likes

I think that if they have a protocol in their network like QiDAO, we are no longer attractive to them. MAI is liquid, so I don’t see any incentive for them to stay with us.

Therefore I will vote YES because I see it as a waste of time to keep on inisisting them if they are no longer interested. I find it disappointing on their part.

3 Likes

Hey @NikKunkel there seems to be confusion.
Initially, we had requested fro 100 mn DAI DC vault, which would have been a separate institutional vault. However, after speaking with the risk team, they mentioned that they can’t do 100 mn mainly because of less liquidity on the DEX. From there, we discussed that max. they could do is 25-30 mn DAI for an institutional vault, but we did not move ahead considering the timeline was much longer than we anticipated, and also that it was not a community vault.

Moving forward, the max. risk team agreed to do was 10 mn DAI DC vault, with an ability to increase it in future and that’s what we agreed and moved forward. Now, we have a separate public vault with 10 million DAI debt ceiling, and we did utilize close to ~90% of it (mainly because it was painful to mint all of it at once).

At the same time, we have requested to discuss the issuance of DAI on Polygon PoS. It feels like when we put across the idea of issuance on Polygon PoS, team goes silent. It is one of the most adopted scaling solution, and has good composability in DeFi. Only missing piece of puzzle is MakerDAO. We would more than happy to mint the original 100 mn DAI we request if native issuance is possible as part of the multi-chain roadmap, and I believe there would not be any concern of low liquidity since MATIC on Polygon PoS is fairly liquid.

Regarding the commitment, our commitment was to mint 10 mn DAI publicly, promote it and we have committed to it utilising ~90%. There seems to be mis-communication on what was agreed, so I have tried to put the timeline of discussion as it happened.

Having said that, it feels like a threat the way Nik has put it forward, and it undo a lot of good work we are working on with Growth unit viz. Mariano, and Nadia on promotion of DAI for Polygon’s different scaling solution.

We are here to support Maker’s vision and promote DAI, but don’t feel like such a threat is warranted. It seems like mis-communication between different teams.

Eventually, it is a community vault, and all are part of the community.

4 Likes

@Saludiego_201 QiDAO is built on Polygon PoS, and taking the market share for native DAI like debt bearing stablecoin mainly because MakerDAO is not willing to work on native issuance.

We promote and support all the projects equally, we don’t pick winners.

Currently, we are working with different MakerDAO teams on promoting DAI via multiple channels for multiple Polygon scaling solution, and we intend to do the same. We support Maker. At the same time, we have publicly committed to mint 10 million DAI from the foundation treasury. If this isn’t enough to show “our interest” , do let us know your thoughts on what better would you expect from us, more than happy to do it.

On the other hand, from MakerDAO’s side, not even discussing the possibility of having native issuance of DAI on Polygon PoS (which is fairly battle tested) definitely feels like MakerDAO isn’t interested in working with Polygon.

1 Like

That’s why I raised QiDAO, it is easier for the community or the Polygon Foundation to issue a stable currency of equal value but with more chains to operate as MAI.

No doubt that what you mention about the inoperability of different chains is a yoke for Maker. Not everyone has the possibility to open vaults of 10k or 25K DAI.

Maybe what I recommend and I hope, is that you publish it in the forum, agreements what is working and so, so avoid passing those posts offboarding Nik and the Maker community learn what is doing the Matic Team.

1 Like

I can see why there may be confusion generated through miscommunication. I apologize for that. I can only speak to our internal communications which went from discussing 100M Dai to a lower figure of 30M Dai due to the liquidity profile of MATIC. The 30M figure is essentially a minimum amount borrowed the Maker Protocol needs to make a collateral profitable. The Core Units refrain from onboarding any asset that will generate less than this minimum threshold. MATIC was prioritized because it was believed a deal was in place that would guarantee that floor.

So I agree with you, maybe the expectations for both sides were unclear, so we can hardly hold that against you. I’ll edit the original post to remove any references to a deal and frame it exclusively from the economic point of view.

That said, it doesn’t change the situation that the Maker Community finds itself in where MATIC is unprofitable. This isn’t singling Polygon out, Maker Governance has been very active in offboarding collateral types that fail to meet this floor including USDT, KNC, BAL, COMP, AAVE, ETH-USDT, DAI-USDT, LINK-ETH, and AAVE-ETH. This is likely to continue with the community already having MANA, UNI, and UNI-ETH as future possible candidates for offboarding. If we can get the MATIC vault above the 30M threshold then the vault would be profitable and the Maker community would have no reason to offboard.

Maker currently does not support borrowing of Dai on other chains, and doing so would be a huge undertaking. Whatever may happen in the future with regards to issuance on Polygon PoS is out of scope for this particular poll which exclusively is limited to MATIC on Ethereum.

9 Likes

I think there’s a misunderstanding because Polygon team has been actively engaging with Maker protocol even before years before the Foundation dissolved. They also have been introducing various projects on Polygon to Maker Growth team to help to integrate and promote Dai.

So unlike many other collateral types, MATIC is one of few protocols that clearly has benefited the Maker protocol in other ways even if their vaults might not be profitable at the moment.

7 Likes

Remember that there’s 400 million + Dai on Polygon. Even if we consider their contribution at 10%, that’s already 40 million (which is more than 20 million to make the vault profitable) and as more and more projects have been on boarding to Polygon and they continue help to connect with Maker Growth team, they will continue to increase the demand for Dai.

Therefore, the community should consider long-term consequences

7 Likes

The current DC is set to 20 MM and the gap is also increased to support minting all of the DAI in just one TX.

Zooming out, onboarding of MATIC hasn’t been profitable so far. So I do agree to the basic statement: if it is not utilized in a way profitable for the protocol, we should offboard.

3 Likes

Understood, thanks for sharing the thoughts @NikKunkel

I understand, and good to get the perspective from the Maker team.

We would work more to promote it, and see Polygon community support the MATIC on MakerDAO.

1 Like

Can you walk us through the math a bit? At 3% fees, that would equate to 900k in oracle costs to cover the MATIC vault.

This seems contradictory to the estimates you give in the MIP for oracle gas costs – where OSM + medianizer + spotter is around 500k in estimates.

It also seems likely that YFI should have comparable oracle costs, and is a much older vault that is not currently at all-time-high useage. Given that MATIC is only 3 months old, should Maker consider offboarding YFI? Or is there something that makes MATIC specifically a more expensive ilk to provide oracle services for.

Thanks!

-Paper

6 Likes

Based on comments:

Given my understanding here I believe a reassessment would be appropriate. It looks like the Polygon team wants to move to satisfy Maker demands, but also has goal objectives it would like to meet.

I honestly have been watching this vault for a while and wondered why the full 20M DAI wasn’t drawn. I think there is significant potential with Polygon being missed here.

I will vote no to offboard MATIC as I think this would send the wrong signal from Maker to Polygon. We really need to straighten this out. Right now we are earning perhaps 1/2 the 600K/yr needed. It will cost us 75K DAI to give the teams 3 more months to work out some arrangement. I think this 75K and up to even 150K would be well spent to try to secure a 15B Token ecosystem with Maker. Polygon could easily become a 100B MC and is one of the largest side chains in operation.

5 Likes

I voted NO for the following reasons:

  1. Polygon team committed to open a vault using $50M worth of MATIC, and they did that (currently, there are $54.6M locked). I understand that for us, what’s essential is the minted DAI, so before approving their vault we could have asked for that. They never committed to mint 20m DAI nor 30m DAI.

  2. It Is not clear what “unprofitable collateral” is. Is it collateral with less than 900k annual fees? After how many weeks/months should we evaluate each collateral and classify it as profitable or not? Are we going to offboard all collaterals with less than 900k annual fees?

  3. Once we are clear on classifying collateral as unprofitable, we could think of raising the SF to make it profitable or giving the team that represents the ilk x amount of weeks to increase their debt to make it profitable.

  4. We need clear rules and a procedure to offboard collateral. This will help our community and partners to determine when to initiate this process.

  5. Polygon is a strategic partner for Maker. Currently, there are almost 300M DAI in their network, and we are working with them to integrate DAI in the Dapps on polygon

15 Likes

@monkey.irish , is this something that @collateral-core-unit is looking into? I want to make sure there’s no duplicate work.

2 Likes

Yes, as we’re getting more familiar with the current processes our goal is to identify where we can make improvements. Providing clear guidelines for collateral offboarding is a key part of this work that is already on our radar and has been discussed a bit in the team.
Having clear guidelines on collateral offboarding will also help clarify what type of collateral is “good” collateral in Maker, in terms of minimum requirements, which can help set the right expectations for MIP6 applicants and current collateral partners.

3 Likes

I can say after experiencing the Aave offboarding myself, that the process needs to be revamped. I’ll keep this short and would love to discuss further with the MakerDAO team as the current expedited and abrupt process has caused great financial loss.

How many of the total offboarded vaults were liquidated vs. self-closed? I think the numbers will show there was a lack of communication and hurt those that were attempting to help diversify the system. Sure there was no liquidation penalty, but those positions weren’t given many opportunities to minimize impact.

I don’t disagree with the decision to offboard those collaterals given the “costs” but there NEEDS to be a more orderly process once approved.

7 Likes

I had some thoughts on this about a month ago. The main sticking point I had was coming up with a way to get votes on chain in a timely fashion outside of the Signal Request process. I discussed this with some other GovAlpha members at the time. I’ve subsequently been distracted by some other things so haven’t really returned to it.

I’m happy to discuss further in DM here or on discord.

1 Like

One issue I encountered is in regards to Defi Saver, which I heard from Nikolaj is that “The thing with these offbarding processes is that dfs automation cannot react to them, as the system cannot recognize this “next liquidation ratio” as it keeps going up”.

Overall though, there needs to be a longer period before the dss-lerp begins to increase. You gave a very minimal window to vault holders from the time of the Executive vote being passed. I would recommend a “communication and preparation period”. What are the checks and balance differences on onboarding vs offboarding assets?

Just in this thread alone, based on the confusion between Matic and Maker, it’s clear that communication and process are lacking and improvement required.

2 Likes

I do think there needs to be a revamped process around communication of offboarding to users. As someone who was impacted by this, do you have any suggestions on what method would have been best to inform you? Keep in mind we don’t control the front-ends for the Maker Protocol.

I don’t quite see why your comments re DeFi Saver are relevant. These vaults aren’t getting liquidated because the price is dropping, they’re getting liquidated because the collateralization ratio is being lerped higher. With the liquidation being set to 0, it makes little difference whether DeFi Saver Automation liquidates one hour earlier than the Maker Protocol.

I only brought up DFS as I had it activated yet it did nothing. I wanted to bring light to why it did what it did as other users may be in a similar situation. I was initially stuck wondering why it didn’t sell my collateral in chunks to maintain ratio, but the dss-lerp would be moving too fast and DFS is a fixed %.

I’m in the process of writing a bit of a briefing / impact statement and will be happy to post it.

1 Like