[Signal Request] Should we take Emergency action to fix the peg?

The dai peg has been broken since black Thursday, despite a breath taking rally which would normally push dai below $1. Peg issues are largely attributed to yield farming and the recent boom in defi activity. It has been difficult to find adequate levers that governance can pull to improve the peg, but recently the community has rallied around some variant of lowering the USDC LR.

At the moment the DC is full for USDC. Any lowering of the LR will be moot unless we raise the USDC debt ceiling as well. Since we also recently onboarded the PAX stablecoin, we will be able to diversify our stablecoin custodial risk by applying similar DC and LR to PAX.

I propose we create an emergency executive vote for Monday with one of the following emergency actions:

Option 1: 1.01 LR

USDC-A LR: 101%
USDC-A DC: 200 million
PAX LR: 101%
PAX DC: 100 million

Option 2: 1.05 LR

USDC-A LR: 105%
USDC-A DC: 200 million
PAX LR: 105%
PAX DC: 100 million

Should we take Emergency action to fix the peg?

  • Yes, ranked vote of LR
  • Yes, Option 1 (1.01 LR)
  • Yes, Option 2 (1.05 LR)
  • No
  • Abstain

0 voters

More discussion on this topic here: [Signal Request] Dai is at 1.04, going towards 1.05. Should we fix the peg with an emergency vote to lower stablecoin LR and increase stablecoin DC?


In order for this to be put into the executive on Monday, we will need at least 40 voters, and at least a 50% majority in favor of the action as per the emergency process here: Emergency / Urgent Governance Process

8 Likes

Yes, I think emergency action is warranted, we need much more stablecoin DC room. A 1.05CR is also a solid move, we can always decide to lower the CR more in the future. Emergency action and ‘only’ implementing a 1.05 CR is not being too slow. We’re still making big steps forward.

We’ll also be having the USDC-A CR ranked choice governance poll on Monday, so that further CR adjustments can be placed into the executive next Friday.

Once the emergency passes, if we want to increase the LR, how would that work?

Globally pinned this so it gets more visibility. Feels like this is better set up than the original poll, so I’d rather push this as the favoured approach over the first poll.

3 Likes

My only suggestion is that we consider these debt ceilings conceptual and raise them as needed. Having a DC that’s very far away from its utilization puts the system at risk of various bugs or rare economic conditions. I would prefer to see it as “the governance facilitator can include a 30M DC increase in every executive up to 100M, after which additional polling is required.”

6 Likes

Why are people afraid of 1.01 LR? Do you honestly think the U.S. Government is going to dial up Circle/Coinbase and ask them to blacklist USDC on Maker?

Think about it… If the U.S. Gov & it’s Allies were terrified of Crypto–they would have banned BTC a long time ago, IMO. Remember that BTC, DAI, USDC, etc., are ALL priced/settle in the Mighty U.S. Dollar. Hence, there’s no need for U.S. Regulators and there Allies to mess with an Asset that is Quoted throughout the world in U.S. Dollars–the most powerful weapon in the World, IMO.

So, don’t worry about Jeremy Allaire & Brian Armstrong losing sleep because Maker has a low LR and high DC on USDC–they have bigger and better things to worry about. And if you’re not using USDC to wash money for Pablo Escobar and the Mexican Cartel, then you shall have No Fear my friends… simple and plain.

2 Likes

1.05 is the responsible move imo.

2 Likes

The main issue is that with this move DAI will probably be backed mainly by stablecoins for a time. If you can’t live with that vote no.

105% might be not enough and just leave a half broken peg. We only take fierce actions when the peg is fully broken. IMO, three months ago this poll would have a clear no. Now no is at 0%. We just have wasted 3 months for nothing. We need to be proactive, not reactive.

The solution could have been better and smarter but the more we debate and wait, the less we create value for customers and token holders. We are now behind Synthetix in market cap. Unacceptable.

If you are serious about having a good DAI product 101% is the way. Let’s solve the peg, raise SF and burn some MKR.

Let’s move forward.

4 Likes

I’d just dump my USDC for DAI and take <1% loss. When the DC is reached, sell that DAI for 1.03 USDC and proft.

We will have to try harder.

2 Likes

It would be nice to see how much Dai is generated against USDC after the debt ceiling is raised to 100m (assuming the executive passes). Since USDC debt ceiling is already maxed out, it could get significant usage without lowering the CR.

If it does not, then I’d support lowering the CR to 1.05, but raising the debt ceiling to 200m immediately seems more risky that necessary.

I’d vote for 1.05 CR now, but will abstain because I can’t vote for it without also voting for massively increased debt ceilings.

Well, not voting for 1.05 is a vote for 1.01.

How about upping the DC on USDC-A back to 100-150M first.?

I mean with the DC pretty much at 100% utilization changing the LR won’t do much.
Even then I am against a 101LR - 105 is as far as I go simply because I still have to see anyone making the case for how such a beast unwinds.

Also no-one talking about how even low SF’s have a multiplied effect on USDC-A with high leverage.

2% with 20x leverage pretty much ends up in the 40% APR rate range unless I am completely whiffing on some basic math here.

Hi, it´s not leverage, rather reinvestment of the debt so IMO it should not have that effect.

As per increase DC it is being voted in the executive today

How does it not unwind?

Dai < $1 – unwinds due to the same arbitrage that allowed it to wind up in the first place

Still didn’t unwind for some reason? Wait for liquidations 2.0, raise the SF above 0, and liquidate the vaults.

We need to consider SF and Liquidations if we’re going to 101.

1 Like

Might be good to set Base Rate to -4 if we’re gonna implement this no? Don’t want USDC vaults to abandon their collateral.

Most of the increase was recently so they should have 5 to 6 months to unwind if I’m not mistaken, also for that to happen they should mint the extra available debt. I hope this measure has impact before then.

If they leverage doesn’t that compound the interest rate?

If you have a 101% CR, you won’t be able to collect stability fees.