Signal Thread: Do we compensate vault holders that were completely liquidated?

If the above points are accepted, how could MakerDAO appeal to a larger number of people who don’t have the technical know how to dig through the source code? As someone who doesn’t have this knowledge base, I can only go off of what I read on Maker’s website and adjust my strategies accordingly. If we want to build trust for this community long term, we need to inform users that the liquidation fee could in some cases be more than 13% or fix that error. This was not the case and it’s only right to find a way to bring this back into balance and build trust with the many people who lost everything.

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Just a random thought but very much related to this topic:
You know why the DAI peg is still not restored? It’s because people don’t trust the protocol anymore. They are afraid to open CDPs and vaults because now they know they might lose ALL of their money. They are afraid to borrow DAI and sell it on the market.
Until you restore trust in the DAI peg will be off.


To be clear the liquidation fee/penalty is always exactly 13%. The variability is with the price paid for collateral at auction.

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DAI is not a stablecoin (anymore) because there exist no measures in the current design to bring it back to $1.00.

Polls closed. I’m going to try to summarize this thread into a proposed on-chain poll.

I agree the ETH price doesn’t move down smoothly. If any compensation should occur it should at the lowest ETH price over the event.

@ Joshua_Pritikin
Please don’t create a poll with such vague terms, instead give the ETH-USD price that is used to compensate vaults in a certain time period.

  1. 100 USD for 1 ETH + 13 % penalty
  2. 90 USD for 1 ETH + 13% penalty
  3. 80 … ect
    High, Medium, Low doesn’t mean much and it allows people to vote ‘High’ without thinking of fairness

Yeah and it is one of the reasons why people who can look at this objectively from all sides is key to doing good business. I agree I feel some compensation is warranted but what you wrote are all valid reasons why to only go 1/2 way in terms of compensation and not 100%.

Absolutely. We need to make clear a whole bunch of risks we will NOT be compensating for. But we also need to get a clear idea of when ES is a valid option because based on what I am seeing as a tendency. ES to many people does NOT appear to be a valid option - EVER as it basically shuts entire system down and tosses entire risk on DAI holders at point of ES.

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Non of his points are valid.

1)You were not expecting your users to run keeper bots, no where on any page is it explained when taking out a cdp.
2) My ratio was always in green or orange. I did agree to keep it collateralised and maker agreed to take my eth to pay back my loan not all my eth.
3) You didnt make this clear ANYWHERE, you intentionally marketed yourselves WITHOUT letting the user know the risks.

This is the only valid point.

Yes, it will force you not to make such mistakes in the future and take some responsibility in the way you market your products going forward.

Again, as i said before the question should be how to compensate not if. Non of these points are valid or fair.

I’m a MKR holder and a Vault holder who didn’t get liquidated because just prior to the crash I sensed something like a Blackswan event would happen due to Coronavirus. I therefore pumped a lot of Eth into my Vault to Super Collateralise it.
It worked I didn’t get liquidated. Outside events effect all financial tools including crypto. Watching charts isn’t healthy.

Now that DAI is back to the peg I assume compensation can begin, correct?

I would agree this well made point - the liquidation mechanism was intended and advertised to have a 13% penalty - the liquidation mechanism failed and people lost everything or shades in between. Therefore I think compensation up to the advertised penalty is appropriate.

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I think that approaching this from a consumer protection standpoint is missing the mark. How can MakerDAO explain how your funds are at risk if it does not make the user interface?

Can MakerDAO be responsible for people misunderstanding factually correct information? The liquidation penalty is always exactly 13%.

Every interface you open a cdp displays clearly the liquidation penalty, in the same way it should inform the user that by opening a cdp you are agreeing to 13% liquidation penalty (in the best case) or 13% penalty plus losing all your funds.

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No one misunderstood the 13% liquidation penalty. No one is complaining about losing 13% liquidation penalty.

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The next step is an on-chain poll, On-chain vault compensation poll, draft

Keep in mind that maker holders is not equal to Maker Foundation. Are they responsible for documentation and Oasis UI?


To proceed with this issue we are waiting on analysis from @MakerMan with regards to the liquidations. Please be patient, the guy has a full-time job. Once that report is public, we’ll discuss it in its own thread.