We have been noticing smaller vaults don’t get “kicked” soon enough as the variable 0.1%
chip incentive is too small to compensate for gas costs when triggering a liquidation. We have been aware of these potential issues but have been advised by the @Protocol-Engineering team to evaluate this parameter at a later stage as it can have many attack vectors.
Based on data of today’s liquidations, gas costs for kicking an auction measured around $100. Last week, these costs were higher and reached up to $300.
Tip is a flat fee incentive for keepers when triggering or resetting an auction. In general,
tip should be lower than the penalty fee applied to the smallest debt size defined by
dust of 5.000 DAI currently (650 DAI). This protects the system to remain solvent.
We believe 300 DAI
tip value should be large enough to incentivize keepers to kick vaults. It may not be enough in a scenario where gas price goes over 500 gwei, but in such a scenario it is also questionable whether these smaller vaults will get settled at good prices. It is advised to still stay on consevative side since “incentive farming” at each auction reset is still a threat. Note also that the current
chip incentive of 0.1% comes in addition to the
Second parameter adjustment is based on the recent PSM-USDC-A exposure increase. Since the first price crash 4 days ago, DAI supply decreased by about 800m, while PSM exposure increased from 800m to 1.4bn currently. It is possible that another 30% decrease in prices leads to the current 2bn PSM becoming close to fully utilized. If it gets fully utilized, another 300m DAI demand not met with increased supply would increase the DAI price towards $1.03 (based on 1inch slippage estimations).
Now, normally we would advise to increase PSM-USDC-A to 3bn but we have to note here that the full 2bn utilization might already lead to USDC backing 50%+ of DAI. Increasing PSM-USDC-A DC further has other consequences and the community should have a quick vote here.
Do you agree with the
tip value of 300 DAI?
What should be the new PSM-USDC-A Debt Ceiling?
- 2bn (no change)
- 2.5bn (+500m)
- 3bn (+1bn)
- 3.5bn (+1.5bn)
The outcome of this signal may be included in an urgent executive depending on further developments in the market.