The idea is to replace the current DSR Rate governance poll with a new poll that asks for the DSR Spread instead. The DSR Spread governance poll gives us the DSR Rate by taking the weekly MCD Global SF Rate and subtracting the DSR Spread.
MCD Global SF Rate - DSR Spread = DSR
MCD SF voted as 4%
DSR Spread voted as 1%
DSR will be 3%
MCD SF voted as 10%
DSR Spread voted as 3%
DSR will be 7%
See this thread for a full discussion: Request for Adjustment to DSR Phrasing
I will summarize the pros/cons below:
The Negatives of Switching to a DSR Spread
- Increased Cognitive Complexity
- If you want to think in terms of absolute rates then it makes sense to keep things the way they are.
- Adding Low Volatility Assets
- If we end up something like SAI as a collateral type, then we will likely not be able to impose the global stability fee on those assets.
- Example) Borrowing DAI from SAI makes no sense on any rate other than 0%.
- Note: This could be countered by setting a negative vault fee that follows the exact negative of the global SF. EDIT apparently we can’t do this according to the dev team.
The Positives of Switching to a DSR Spread
- Reduction of Weekly Votes
- By switching to a DSR Spread vote we will only need to vote on the MCD Global SF Rate every week to affect peg stability (+ SAI SF Rate before migration ends). This is because the DSR and Global SF Rate perform analogous actions in terms of peg stability. One increases DAI demand whilst the other decreases DAI supply.
- DSR Spread will likely only need to be voted on every few months as it does not affect peg stability.
- Simplification of What Each Vote Means
- Currently raising the DSR and the Global SF do the same thing for peg stability. It is not clear what the community thinks when these numbers are both changing week to week. Is the peg off of $1? Do we want to incentivize more users with a higher DSR? Answering these questions is currently not clear. By switching to DSR Spread we use the Global SF to manage peg stability and the DSR Spread to manage system growth speed vs profit taking to MKR holders.
- Remove the Possibility of a DSR mistakenly being higher than the Global SF.
- So even though it’s not entirely clear whether this situation is desirable or not, there are some weird incentives that come up when we run the DSR > Global SF. As vault creators can earn an interest rate with their collateral from this scenario. This would be similar to running the SCD SF rate at a negative value.
- By making the DSR Spread >= 0% as a limit (same as we do with the rates), we can remove this from accidentally getting added to the executive.
Proposed New Poll Option
The poll would use the exact same rate stepping as the current DSR poll except it will be used to determine the DSR Spread instead of the DSR with an optional lower bound of 0%.
The DSR will be calculated as:
DSR = max(Global SF - DSR Spread, 0)
(the max() prevents the case where the DSR is negative)
Note: This wasn’t explicitly stated when I originally wrote this post, but currently the MCD Global SF is 0% during migration and we are emulating it via the ETH-A, BAT-A vault fees. It is my assumption that we will begin using the Global SF instead of the vault fees once migration is over, but perhaps that wasn’t clear to everyone. This is not a mission critical change for migration, so I think we can wait until migration is done to proceed with the vote.
- Yes, switch DSR voting format to a DSR Spread with a lower bound of 0%
- Yes, switch DSR voting format to a DSR Spread without a lower bound of 0%
- No, keep the current DSR absolute rate vote
- Abstain (I want to see results)
- Abstain (I have no opinion)
- Abstain (I don’t feel I am knowledgable on the subject)
- Abstain (I disagree with the poll options)
- Abstain (I have a different objection)
This is a multiple choice poll, vote for everything you are willing to vote for in an on-chain vote. Poll results will be reviewed on January 7th, 2020