Proposal #36
Tech. Comm. #0x0eae
Follow Up to Proposal #35 - threshold reduction
2 Comments
Executed

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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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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