Why does USDC-B exist?

I’m fairly sure I’m missing something here, but why is there a USDC-B with an SF of nearly 50% (to USDC-A’s 2%) and 120% LR (vs 103%)? Why would anyone want that? Why do we need two types of USDC vaults? For that matter, why do we need multiple types of vaults for a given collateral type?

Not trying to be rude. Just confused, is all.

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USDC-B was a second emergency vault in case USDC-A vault filled and we had huge liquidations occuring to provide some DAI liquidity to keepers.

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Ah, this makes sense. But then why not have such a vault for all collateral types? Is that a risk associated specifically with USDC?

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Good question. I think at the time (just after Black Thursday) governance was looking at using whatever stablecoin as a kind of go-to emergency place to deposit collateral that had little pricing risk to mint DAI. We could do this for other types but they are all pretty small - so far. Governance may consider having multiple vault types.

In fact I was working on a post to use multiple USDC-A vaults (1,2,3 maybe a 4) with different LR/DCs to manage the PEG and overall collateral value relative to PEG price management.

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I see. Thanks for answering!

That would be an interesting discussion, I look forward to it!

It’s not so much that the risk is associated with USDC. The risk is that when Vaults are being liquidated, DAI tends to trade high (because vault holders want to save their vaults.) During auctions we want keepers to be able to source DAI as cheaply as possible.

The keepers captial cycle looks a little like this:

Acquire DAI -> bid on vault -> win collateral asset (ETH as an example) at auction -> Acquire more DAI

Now, that last step can be done in a couple of ways.

  1. Keepers can buy DAI on the market (selling the collateral asset they just won.) But they lose value on this trade if DAI is trading at 1.05 (as a consequence they bid lower earlier in the cycle, bad for Maker!)
  2. Keepers can mint DAI from a vault using the collateral asset. But this is probably dangerous, if an asset is being liquidated, it’s because there is some downward market movement.
  3. Keepers can sell the asset they won for USDC, lock that USDC in a USDC-A vault, and then mint DAI. But, USDC-A vaults fill up when DAI is trading at 1.05 (because people short the peg.)
  4. Keepers can sell the asset they won for USDC, lock that USDC in a USDC-B vault, and then mint DAI. USDC-B vaults should always have space because the SF is so punishing for long-term use. Keepers should be able to exit in a short time once the market has calmed down.
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