[Signal Request] Should Emergency Action Be Taken Due To Elevated Peg

Overview: During the 7/23/20 governance call there was support for taking emergency action to help restore an elevated peg via adjusting USDC-A parameters. The debate was centered around whether the peg ($1.033 on Coinbase as of poll creation) required emergency intervention, or whether it will organically decrease with the unwinding of YFI mining (estimated to be completed Saturday ~1030 UTC)

This poll will help signal whether to expedite the ongoing signal request to adjust USDC-A vault parameters.

Should the community take emergency action?

  • Take emergency action by adjusting USDC-A parameters
  • No emergency action at this time
  • Abstain

0 voters

Notes:

  • The poll will run for 24 hours or until the Risk Team intervenes
  • @LongForWisdom mentioned that a winning option would require > 50% of the vote
1 Like

I’ve been thinking about this a bit overnight, and I’m struggling to figure out what an emergency response should look like in this situation. Please consider the following points as you vote:

  • This poll won’t complete until after 16:00 UTC, meaning that the result here will miss the regular Friday executive.
  • Even if a collateralization ratio change was included in the Friday executive, I think it’s unlikely it would be implemented and have much of an affect before Saturday 10:30 UTC
  • We are struggling to reach consensus in the other thread on a particular CR, this makes me worry about bundling this with other changes in an executive.
  • We are struggling to reach consensus on this thread as well, with many choosing to abstain.
  • The monthly MIPs executive is scheduled for Monday and seems to have general support.
  • Having multiple executives active at once is not great in terms of system security.

Even if the community does want to expedite the collateralisation ratio change on USDC-A, it may still need to happen next week and it’s going to be awkward to fit in with the regular governance stuff, and I really don’t think it’s a good idea to skip or postpone the regularly scheduled governance votes (ie the MIPs exec).

5 Likes

Based on the current state of the polls, and given that today’s executive doesn’t have a lot of content. We’re going to include the change the USDC-A Liquidation Ratio to 110% in today’s executive (unless the results of these polls change meaningfully before it’s time for it to go live.)

7 Likes

I think it’s a very reasonable step to decrease USDC-A LR to 110%, it does not seem to have any serious downsides. I think going much lower than that could start to introduce problems around interest accrual and lack of liquidations.

2 Likes

Just want to remind people (repeating myself from the governance call) that the situation will look dramatically different in 24 hours. 100mil Dai will no longer be locked up in YFI. Peg could be much lower (or much higher). That being said, because I think some expedited action might be needed regardless, I can support either side of the poll.

3 Likes

I think increased ETH debt ceiling is the primary emergency action that needs to be taken here. USDC vaults are still being opened and the risk parameters do not seem to be a big detriment to their use. The amount of USDC available is also not enough to restore the peg. In a world where a new DeFi token is introduced and consumes $125m DAI liquidity in 5 days, the market just flat out needs higher debt ceilings of scaleable collateral assets to adjust. Literally 99% of DAI liquidity is being used for DeFi projects right now, and the true demand side there likely goes many multiples higher than what we are providing.

I know we want diversity in collateral assets, but ETH is the only thing we have available now that scales up to these numbers.

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