[Signal Request] Should Urgent Action be Taken to modify the proposed TUSD Risk Parameters?

Currently we are taking emergency measures to increase DAI minting via stablecoin collateral. The latest executive which has passed but has not executed yet would lower USDC-A and PAX-A collateralization ratios to 103% and increase debt ceilings to meet the increased demand for DAI.

Current proposed TUSD Parameters:

Collateralization Ratio: 120%
Debt Ceiling: 2M DAI
Risk Premium: 0%

The goal is this signal request is to modify the proposed TUSD Risk Parameters to match the USDC-A and PAX-A Vaults. This will also diversify the MCD collateral stablecoin pool from being primarily dominated by USDC.

New Proposed TUSD Parameters:

CR: The lower of 103% or the winning governance poll vote.
RP: 4% - This is inline with USDC-A and PAX-A.

Should Urgent Action be taken to modify the proposed TUSD Risk Parameters?

  • Yes - Urgent Action should be taken to modify the TUSD-A Risk Parameters
  • No - Use the proposed TUSD-A parameters in the governance poll.
  • Abstain

0 voters

What should the TUSD-A DC be set at?

  • 2M DAI (current)
  • 10M DAI
  • 25M DAI
  • 50M DAI
  • Abstain

0 voters

TUSD currently has a circulating supply of 488M.

There is a high amount of on-chain TUSD liquidity. 150M TUSD is in the curve ypool. 227M TUSD is in the swerve pool.

TUSD recently upgraded their contracts. While they’ve been audited by Peckshield and Certik there’s a chance that there are hidden vulnerabilities.


Polls will close on 2020-09-17T16:00:00Z. The goal is for the TUSD-A Vault to be implemented in the Friday Executive.

A 50% majority and a required quorum of 40 voters are required to take Urgent Action.


Footnotes:

TUSD-A Implementation Governance Poll
Reduce USDC-A and PAX-A CR Governance Poll
[[Signal Request] Should we take Emergency action to fix the peg?]
[[Signal Request] Approve New TUSD Implementation]

7 Likes

Great options and detail. Thanks for putting this together.

4 Likes

Yep, I’ll second this, much appreciated @Jiecut.

3 Likes

Seeing a fair few people abstain on these. Is there anyone abstaining because they feel they need more information? If so, what is it you’d like to know?

1 Like

So a few points I want to share.

  1. I agree that TUSD should get onboarded through the Weekly Governance Cycle.

  2. If the community has come to a consensus that they are comfortable having stablecoin fiat-backed collateralization ratios at 103% (and possibly even 101% down the road) then there is no reason we shouldn’t onboard TUSD at the same CR.

  3. That being said, with the TUSD contract being new, there is significant smart contract risk. Even audits aren’t enough, it’s really a matter of withstanding the test of time. One just has to look at the recent bZx hack, their third! Their contracts were audited by Peckshield and Certik, both well respected auditors in their own right, and they still had a critical bug that allowed anyone to drain funds. We should not be underestimating the fallout of smart contract risk just because we haven’t had any incident thus far. To that end, I’m highly skeptical of having a high debt ceiling for TUSD like our approach with the USDC and PAX debt ceilings. I would much rather sandbox TUSD with a lower debt ceiling like we’ve done with USDT to account for the extra risk and then raise it over time. Out of the current polling options, I would advocate for a 10M debt ceiling, Oracle price fixed at 1, with no liquidations and SF at 6%.

8 Likes

Out of interest, why 6% over 4% with the others? If it does explode due to a contract bug, it’s going to be in the next few months, not enough time to recover any serious percentage with the SF. Would you advocate for lowering it in the future?

3 Likes

If we are going to have Friday’s executive for 101% LR on USDC and PAX I think we should approach DC increase for each stablecoin (USDC, PAX, TUSD) with a strategy to diversify Maker’s stablecoin exposure. Most likely people will arb the price by minting DAI mostly on USDC until DC is hit. But once DC is hit, they will be forced to use PAX or TUSD to make profit, no matter what. We can basically set MakerDAO’s stablecoin exposure in advance by setting DC for each. Why I think this is important is because there potentially won’t be another possibility to diversify stablecoin exposure for some time. Ideally you would want to diversify at least among three of them, but we would then soon need to assess the risks of a much higher DC on TUSD on Friday (and same 101% LR / 2% SF), associated with Nik’s comment.

10 Likes

TUSD is insignificant and we shouldn’t be bothered with this micromanaging when the peg is at +4%. I think it is obvious that we cannot rely on centralized stablecoins to fix the peg (even in the short term) unless we want to become a centralized stablecoin.

If we want to stay decentralized we should force borrowers to go through ETH to get their DAI as we have enough centralized collateral already.

If 10% of ETH is locked in vaults that’ll give DAI $4B MCap at current ETH price.

That’s not how this works. ETH-A is only 70% utilized and isn’t increasing DAI supply fast enough to meet the insane demand. You can’t just “force” people to use your product the way you want them to.

2 Likes

We are already forcing the users to use DAI as we think is best by setting all kinds of parameters.

I agree! What do you propose we do to promote dai generation from ETH?

1 Like

DAI with multiple assets is reasonable. It is unreasonable for any single asset to account for more than 50% of DAI’s collateral. Currently, ETH accounts for more than 80% of DAI. Many people think this is reasonable, but I think it is unreasonable. ETH shall not exceed 50% of DAI mortgage assets.

We should increase the proportion of stable assets. I think this is correct.

4 Likes

Its an interesting quandry as a vocal subsection of the community only wants a stablecoin backed by ETH but from another perspective the system is actually stronger with more uncorrelated, custodial options spreading the risk.

6 Likes

@Primoz What are your thoughts on future DC raises. I don’t think 200M on USDC-A and 30M for PAX-A will be enough. I think we’ll need more DC raises before Friday.

Hah, I was going to put 100M as the top option for TUSD-A but made the top option as 50M because of the concerns Nik raised.

You can’t simplify it so much, since collateral have different risk premiums. While in the longer term, i agree with your premise, i strongly disagree short term.

One of the problems is ofc to set eth RP, imo especially because of migration to eth 2.0.

1 Like

I believe that the substantial increase of various stable currencies DC can quickly reduce the proportion of Ethereum to below 50%, and we can achieve it as long as we are willing. Now is a good opportunity for us to adjust the proportion of mortgage assets.

Even the most well intentioned polls (from well intentioned authors) come across to me as advocating a point of view (good from authors, bad from polls).
I’m frustrated that this proposal only polls on DC, not RP or CR (binary choice only).
Should poll for all 3, with minimallly biased ranges.

I vote, this is not urgent but I support normalizing the RP.

1 Like

You probably mean SF (stability fees). MKR holders can do this by voting for higher base rate (currently at -2%).

I agree if it were to blow up we wouldn’t be able to recover any significant chunk by having 6% vs 4% SF. The SF is probably the parameter I’m the least opinionated on. My thought process was more along the lines of signaling risk tiers through SF magnitude. Perfectly fine with keeping all the SFs for the fiat backed stablecoins the same for now. Later the SF can be used as a pseudo rebalancing mechanism between all the different stablecoins.

3 Likes