Follow Up to Proposal #35 - threshold reduction
Democracy
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This proposal accounts for the threshold adjustment mentioned in the original discussion post here: https://interlay.subsquare.io/post/12

The initial proposal includes the reduction of token emissions but not the threshold reductions: https://interlay.subsquare.io/democracy/proposal/35

This proposal is to change the secure threshold levels as follows:

Current values DOT <> IBTC
liquidation: 150%
premium-redeem: 200%
secure (min. when minting): 260%

Proposed new values DOT <> IBTC
liquidation: 125%
premium-redeem: 140%
secure (min. when minting): 155%

This change reduces the capital requirements of Vaults by ~40%.

For more information on the meaning of individual thresholds, see Vault collateral thresholds.

Request for the TC:
Please upgrade this proposal to referendum manually, as this should have gone together with the token reduction proposal.

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Metadata
Proposer
Hash
Delay
02022-12-06 09:07:48
End
02022-12-06 09:07:12
Threshold
Call
Table
Json
callIndex0x0302
sectionutility
methodbatchAll
args
calls
0
callIndex0x3d09
sectionvaultRegistry
methodsetSecureCollateralThreshold
args
currencyPair
collateral
tokenDOT
wrapped
tokenIBTC
threshold1550000000000000000
1
callIndex0x3d0a
sectionvaultRegistry
methodsetPremiumRedeemThreshold
args
currencyPair
collateral
tokenDOT
wrapped
tokenIBTC
threshold1400000000000000000
2
callIndex0x3d0b
sectionvaultRegistry
methodsetLiquidationCollateralThreshold
args
currencyPair
collateral
tokenDOT
wrapped
tokenIBTC
threshold1250000000000000000
TimelineLatest activity undefined
2022-11-28 11:22:48
Proposed
Index
#36
2022-11-28 11:41:24
FastTracked
2022-11-28 11:41:24
Started
referendumIndex
34
voteThreshold
SuperMajorityAgainst
2022-12-06 09:07:12
Passed
referendumIndex
34
2022-12-06 09:07:48
Executed
result
ok
Comments

Hello,

I'm am against this proposal, at least until the new formula for capacity-based rewards has passed AND bridge capacity or iBTC liquidity is an issue.

Please let me explain why:

  1. If you take a snapshot of Interlay 1 sec before and 1 sec after this proposal would pass, the APR of any vault would be the exact same, but bridge capacity is increased.
    => Contrarily to what is explained, this proposal will have no impact on APR for vaults, rather just increase the vaults (i.e. bridge) capacity. This effect is not useful currently as it is explained that most minted iBTC basically do nothing.

  2. Instead, this will initiate a 0 value-add race to self-minting for vaults to try to increase their share of BTC in custody and increase their APR, to the detriment of vaults that will not be willing to play this race.

The only scenario where APR somehow increases is if vaults mostly remove the newly freed collateral, which I believe is not going to happen as the whole point of this it to have it used as collateral to insure BTC

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I am in favor of it in the long term, but currently against it.
Polkadot tokens are highly inflated tokens for the time being, and I think they are likely to fall in price in the current declining market.
Reducing the liquidation percentage could create uncertainty for iBTC in the event of further price declines in the DOT.

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