Vault Compensation Plan v2

Nothing has to be auctioned - if the compensation is paid in MKR.

Only more MKR need to be minted.

If the compensation is paid with DAI, then an auction might be needed. That would tank the MKR price. The auction is made in large lots of 50`000 DAI, so only whales would get the benefit of the lower price. That centralizes the protocol even further and leaves a bad aftertaste.

Read up about one auction example:

As I understand, the MakerDAO system has surplus DAI because of this auction.

However lost gains need to be calculated.

If the liquidation system works efficiently, than the vaults get up to 24.67% of the collateral in ETH, BAT back. Calculated in ETH terms this is a 4x in DAI value since 12.03.2020. It will be more, much more later in the bull run.

Timely compensation matters. If the compensation is delivered in 10 Years, then the DAI value will be 100 to 1000x.

MakerDAO is responsible for the technical risks of the protocol.

The vault users are responsible for the market risks.

The accountability should be at the least


50%-vault users.

0-bid loses are clearly technical.

The market was also in a big dip.

Are you a whale? Distributing some surplus peanuts?

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If ETH goes to 50 tomorrow I would still say compensate in DAI.

Ya I agree. Sooner is better. We’re (people like me who quietly voted against both previous proposals) are trying to come to the table with a fair offer. We want get through this too.

Wrong. Read my first post above. To sum it up, you got rekt by: DAI speculators, liquidation hunters, and keepers. You played a 0-sum game and lost on all fronts.

loss due to DAI being +1.07 - not our fault
loss due to ETH volatility - not our fault
loss due to keepers - partially our fault

This discussion needs to be around what keepers would have bid at that time if the auction system was working. As a keeper whose analyzed and participated in Maker liquidations since 2018, I can say with confidence that you were not getting anywhere close to max yield - 9% max, but probably closer to 3-6%.

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Yep, if I would have been a keeper, than I would have known about the 0-bid technical fault (insider knowledge). I would have closed my CDP. The same, what you did. This is what rocketed the DAI price and tanked the liquidation price.

THE KNOWLEDGE of the o-bid technical fault rocketed DAI price and tanked the liquidation price.

Instead i trusted the system and pushed the liquidation price down as far as possible and relied on the liquidation system to keep at least some of the collateral safe.

It would be nice, if MAKER shows, that it is trustworthy and not a one sided game.

That is just market risk. That is normal vault owner risk. We choose the collateral type and the risk associated with it. You KEEPERS do not have to babysit the vault owners an tell us what is good for us.

Oh, you would have? I completely missed it. Things like this seem pretty obvious with the aid of hindsight.

Not far enough.

Do you have anything constructive to add to why you think liquidated vaults should get back more than what I’m suggesting? I will change my mind if you can show me where I’m wrong.

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For you as a KEEPER it was not hindsight. For you it was real time and very obvious.

0 would have been far enough.
If everyone should follow your thinking, than we should not open CDP`s at all.
We should not trust the MAKER system.
And if a CDP is open, then we should close it at first sight of trouble.

Yep fair points and thank you again for sharing your reasoning.

System surplus is only 350K DAI and isn’t going to cover this. The idea of compensating with MKR directly I think is more appealing because dilution is only going to be small (approx 1% up or down 1%). We totally skip minting MKR - and selling it for DAI when the DAI price is high dropping the MKR/DAI price. Seems better to just compensate with MKR and let everyone decide when and what to exchange for. Who knows some may just keep the MKR and use it in governance.

If the compensation is insanely low I doubt many vault holders will take it. But as a compensation plan group member our job is simply to analyze the problem and present options to governance to choose to handle it and let governance decide.

My vote for all it is worth. is probably going to go to around the 12% mark because the auctions when they came back up averaged about 12% collateral return and I know the model is going to come out low even if I select that so my bias will be probably 12, 15, 18 with probably a 9 as my last choice. I may broad spectrum this from 6-21 depending on number of choices. When I look at the numbers in the 12% range I think offering up 5000-6000 MKR (or .5-.6% dilution) worth 1.3-1.7M DAI to even close 1/2 of these vaults with respect to Black Thursday is worth it just to be done with everything. 1000-2000 (or .3-.6M DAI worth) just seems too low to me.

Would I take 100-300DAI if I had lost like 20-50ETH. Probably barely worth the effort to make the claim and wouldn’t feel really great about it all. But this is my own opinion and I thank you for sharing yours lix. I hope even if others don’t feel confident about sharing any of their view will come out and vote on the next poll. We really need MKR governance to speak with a clear voice here. Whether the compensation chosen is all over the map but still a YES, vs. a clear nothing and NO. Either way I really want to see a decisive level of turn out as I consider laying this to rest one way or another really important for the protocol. We need to get this off our governance plates so we can focus exclusively on improving the system so less liquidations happen or they happen more efficiently, as well as deal with longer term growth, PEG, collateral onboarding, creating payment mechanics for decentralized workers etc.

I think it will be really cool and an important step if we can onboard some Real World Assets that could grow the system dramatically in reasonably secure risk controlled ways. We definitely need to hit 1B DAI sooner than later, but we also need to consider adding at least a minimum stability fee so the protocol makes some DAI on the outstanding…

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Why Maker is not integrating with Kyber, Bancor and similar for more efficient liquidations?
I mean Kyber calls it self literally liquidity network…

Kyber did work just fine on Black Thursday. If the KEEPERS do a bad job, than Kyber and others could step in.

Or is there interest for keeping the liquidations inefficient?

Perhaps something to ask in the following thread.

I can meet you at 12%. I realize I have bias towards taking the “axe the moonbois” approach.

It is a bummer, can’t argue with that. I hate to see anybody lose money like they did. They went margin long then it dropped 50%. They signed those transactions, and nobody made them do it. They shouldn’t get much back because they did indeed get completely and utterly rekt like we’ve never seen before.

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Finally some honesty. :rofl: :rofl: :rofl:

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Not your loss, not your pain.
We all come here for a better future of Defi, right?
A lot of us had lost our savings during the crash. I agree that people have to understand the risk, but there are definitely faults on the Maker side.
If Maker holders’ are taking a condescending tone and are ignorant of the pain, they would lose the support from the community.

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FWIW, it might be best to have a call dedicated to just this (maybe after or another day?). This subject should be resolved but doing so on the governance calls (while important) I am concerned would pull focus away from the current peg situation which needs governance’s full and on-going attention.


@Kukkio please stop implying that there was some sort of conspiracy going on. The Maker Protocol also lost a large amount of capital as a result of Black Thursday. I can say with complete confidence that if we’d known the zero-bid issue was likely to occur we would have tried to prevent it.

@lix and @kukkio I appreciate the discussion so far, and that you’re both sharing your thoughts. But I feel like we’ve passed the point of usefulness. Please stop winding each other up.


I’ll speak to @monet-supply and see if he wants to organise something. We’ll have an update in the main call anyway, but perhaps we can push discussion to a different meeting.

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As a new voice in this conversation, I want to say that I do think any compensation should be based on price at liquidation. Compensating in mkr makes a lot of sense to me, and I’m actually kind of surprised it was not brought up until fairly recently. It avoids auctions, it gives vault owners who feel they have been hurt by the protocol a say via in governance. It also doesn’t necessarily drop the price of mkr because holders get to decide what they want to do with the tokens, and if they want to hold or sell.

It’s not a perfect stand in for eth, but the process for the protocol purchasing eth seems very inefficient. I get that mkr holders want to compensate in dai based on prices at liquidation. But I do feel this is probably inappropriate compensation. If compensation is to be done at all, imo it should be done in the asset that is most like ether. I think mkr is this most sensible asset to choose for this role.

disclaimer: I am not an mkr holder, I was not liquidated during black Thursday, and I do not run keepers


Why not compensate with ETH? Is it really hard? Do you guys got MKRs after liquidation?

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I would like to add that MKR as compensation is great by me.

I understand that ETH could be too complicated and also we all got into this space because we all liked Maker at one point at least. Much better than DAI at least.

Liquidation price should be used too. MKR value amount should be derived from time of liquidation. The recent bull run should not be an excuse to compensate fewer tokens at the same DAI value.

I believe this would remove any problem with lost gains during bull run too. MKR holders also wouldn’t lose any more MKR than they would have done if this was decided a day after the event.

My liquidation price was barely above the lowest price of black Thursday and I believe this would add a level of fairness to those liquidated at $150, compared to those liquidated at $100

Thanks as ever to those helping push this forward.


MAKER advertises, that after a liquidation the vault gets the leftover COLLATERAL (not DAI) minus 13% liquidation penalty back. There is not mentioned, that the price at the time of liquidation usually differs significantly from market price.

When a first time MAKER user looks at this, he makes some calculations in his head ------ “OK that is fine with me.” If KEEPERS are 100% efficient than the calculation is:

In the MAKER FAQ or Oasis app is not mentioned, that a user has to calculate the INSANE inefficiency of KEEPERS as well.


I would prefer a statistical analysis for an optimal compromise.

Do you even have something like a lawyer in your team?

Sooner or later MAKER could cause some damage to some resourceful person.

The MAKER community can look at this matter as a defense of the TRUST LAYER.

Just like in traditional banks. TRUST is the most important thing in business. For many vault users the COLLATERAL represents a major part of their savings.

Even to consider a 0% vote - that is like laughing at corpses on a batlefield.

No serious person or organisation will use MAKER, if it makes money with incomplete or false customer information.

Even YouTuber’s are reducing their prais for MAKER. They are waiting for MAKER to show some responsibility.

If MAKER looses TRUST, than DAI will be replaced with a diffrent token.

The TRUST in DAI and liquidity of DAI is the only driving force behind MAKER. MAKER rises and falls with the TRUST in DAI.

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