[Signal Request] Should we increase stablecoin DC and diversify exposure?

Hey all,

Unutilized debt ceiling on stablecoins currently amounts to 90m (100m including USDT). DAI price seems to be more or less fixed around $1.01, but we shouldn’t underestimate new DAI demand from upcoming farms in the next few weeks. We learnt the lesson with SAFE when more than 170m DAI was drained out of liquidity venues in only a few days. We would also want to have an additional stablecoin debt ceiling buffer always ready that provides liquidity in an event of unwinding ETH and WBTC vaults due to an unexpected crash in crypto markets.

Question is by how much and if we want to increase the debt ceiling on stablecoins and how do we diversify stablecoin exposure. I also want to note that the community already voted to increase the PAX debt ceiling by at least 30m to 60m. There were some concerns on PAX DeFi liquidity and circulating supply, addressed by me here, therefore I suggest we increase it by only 30m at this stage.

  • No increase of stablecoin DC
  • Increase stablecoin DC by 100m
  • Increase stablecoin DC by 200m
  • Increase stablecoin DC by 300m
  • Abstain

0 voters

  • No Increase of stablecoin DC
  • Increase DC across USDC and TUSD by equal amounts, and limit PAX increase by 30m
  • Increase DC for TUSD, and limit PAX increase by 30m
  • Other - comment below
  • Abstain

0 voters

The Signal poll closes this Thursday and will proceed to Executive vote this Friday, 25th September.

2 Likes

Since we are not currently in a crisis mode and have unutilized debt ceiling for stablecoins, I think we should focus on diversification. I do not think we should increase the debt ceiling for USDC rn (since it already makes up an uncomfortable percent of the total dai supply) and focus on just TUSD and PAX.

5 Likes

We cannot increase the DC for stablecoins forever. Now we are backed 58% with centralized assets. We cannot bring DAI lower than $1.01 even if we go 90% centralized. The sooner we stop with this practice, the sooner we’ll be able to find a working solution to bring the peg all the way down to $1.00.

1 Like

I agree that we need to increase stablecoin DC’s to increase the buffer and also to defend the $1.01 DAI price.

3 Likes

I really want to see MIP17 come on line to deal with DC than just ripsawing DC up here.

90M right now is enough overhead. I guess if I had to make a vote and I may alter mine is to up the cap another 100M and spread it around according to current usage. I think PAX needed a bump and USDC-A still cranking up.

I want to re-iterate something I said on the call here. While everyone seems confident that we can eat up stablecoins to encourage growth in their ecosystems there is no guarantee this all will make it to Maker. I am not entirely sure we want to have DCs that approach 100% or greater of any stablecoin as this may introduce some risks and hazards we are unaware of.

I do want to add here that it is my own impression that we always want to have DC room. Why I advocated having multple LR tiered DC levels in another poll/post

A wiser move would be to allow the USDC and other DCs to be hit mostly to ascertain a signal from markets through the PEG what would happen if we didn’t keep expanding DAI liquidity here. We are now 800M DAI and growing at some point we need to gather information from these markets and doing a pause on expanding the DC is one way to do that. We can be ready with the next tranch of DC increases in short order if we see a strong reaction upward in the PEG.

Hitting the DCs definitely gives a good signal, that is true. There is a signal on the other end of the spectrum as well. When I look on Dai stats on the USDT-A usage, it’s basically zero (7K vs 10M DC). In that case the risk parameters for that new vault are so unfavorable (whether the LR or the Interest rate or both, I’m not sure) versus other options in the market no one is using it, so that collateral type is not helping the peg.

I understand that the community has justified concerns about USDT risk but if a collateral type isn’t serving DAI stability then perhaps it deserves some fine tuning of the parameters.

8% is steep I think.

Hey Hodges, welcome to the forum!

At 101% Liquidation Ratio, having a higher fee doesn’t really help us significantly. The most we can earn from any DAI minted is 1%. Whether we make that 1% over 3 months or 1.5 months seems largely the same to me.

2 Likes

Outcome here is +200M total debt ceiling split as follows:

  • PAX 30M to 60M (+30M)
  • TUSD 50M to 135M (+85M)
  • USDC 400M to 485M (+85M)

These changes will be included in the executive vote tomorrow (25th September, 2020)

8 Likes

Hodges what you are talking about is why I proposed a tiered set of USDC-A LR/DC. The point was to build in a higher deposit buffer.

From what I can see the market is taking oh something on the order of 20-40M DAI/day from these facilities and the PEG is just sitting at 1.01 going nowhere.

Very quickly these vaults are going to be underwater and the DAI in the surplus effectively ‘fake’ gains.

Hey folks, Rafael CEO of TrustToken here. Glad to hear about the increase to the TUSD DC, we just hit the cap ~6 days after being supported. The additional 85mm could go pretty quickly, but we can deal with that when we get there.

We’ll keep an eye on the vote and let our community know when the additional allocation opens up :slight_smile:

At some point would like to also discuss TrueAUD, TrueGBP, and TrueCAD, I think having some uncorrelated assets would help here.

5 Likes

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