Some great counter points here.
@LongForWisdom I hear and agree with your concerns about the perception of tempting people in then turning up the SFs. I do not support rent seeking beyond a modest amount as protocol forks are always a danger of being too greedy. What I am arguing for now is to forego the modest profits we should aim to have in a mature system to keep things growing as fast as possible in this new market.
I sympathize with the temptation and I would only be weakly opposed to some very short term, limited growth boost.
@swakya I do not believe this should be a short term plan. We should forego profits until we reach market maturity or at least somewhere decently far along the adoption S-curve.
Still here’s why I think it’s a bad idea, generally speaking: it will be hard enough to maintain the DAI price while managing MKR risk. Beyond the DSR we may have to directly tune the SF for supply reasons (rather than risk reasons). That’s already one source of tension (in the “monetary trilemma” sense). I would like to refrain from adding a growth/profit function to the SF knob, let growth come the way @Planet_X described it, and let profits come from good risk management and whatever margin the landscape will allow. On top of that @LongForWisdom’s concerns about what happens when we reverse course are very much justified.
This should be no more difficult to maintain then any other plan as we are just setting the DSR to be some constant factor away from the ETH-SF (could be 0). As @cyrus said above something like raising the DSR to 3% and lowering the (BAT/ETH)-SF to 3% makes sense to me since the fees work in opposite directions for peg stability. After that you would raise and lower those numbers together for monetary policy.
I like the idea of fast healthy growth of DAI supply by temporary lowering MKR holders’ revenue.
but we need to know how to define healthy and secure growth
at what DAI supply we should stop subsidizing DSR?
what percentage of total ethereum market cap being held in maker vaults can be considered the upper safe limit (5% ,10%?), how about other less secure collaterals?
also I remember that with MCD we should be able to give different SF to different collateral ratios to encourage safer loans!
@mmoossttaaffaa I am calling this the fastest possible healthy growth because we are maximizing both the supply and demand to the largest amount possible. In theory minimizing the SF will maximize supply growth and maximizing the DSR will maximize DAI demand growth.
So, the downside of this is that with extra losses, the MKR market is lower (ignoring projected growth increases due to increased users), and the tolerable debt ceiling would be lower. So once we start discussing what tolerable debt ceilings are (soon™), we can try to predict what type of monetary policy would be needed to achieve our “growth” goal.
@cyrus As we discussed in the chat, I don’t think taking losses upfront will necessarily lower the MKR market cap as the market cap is not a measure of the current MKR burn, but both current and projected MKR burn. If we are making smart decisions to grow the user base then the MKR market cap should increase even with short/medium term losses.
The debt ceiling is probably the main piece that I am uncertain about because there become non-trivial risks if we grow the supply too fast. I’m looking forward to hearing more about where the limits of that are.