Allow algorithmic adjustment up to 650%

I propose that we implement an algorithmic MCR that caps out at 650%, overriding the current 150% MCR. The reason for 650% as a cap is that most liquidity tapers off around that point, and an algorithmic MCR should have access up to the full liquidity of the system to restore the peg. This situation contrasts with the security assurances provided in the foundation’s whitepaper/prospectus. The primary responsibility of the protocol should be safeguarding synthetic asset holders rather than CDP (Collateralized Debt Position) owners, especially given the prolonged deviation from the peg.

Here’s the algorithm I propose:

  1. Initiate the MCR at 150% MCR
  2. Calculate the average trading price of iUSD every 24 hours. This calculation should mainly consider iUSD trades against ADA on major Cardano DEXs. Convert ADA to USD using the same oracles employed in the iUSD liquidation mechanism, and apply volume weighting to the iUSD trades.
  3. If the average daily price of iUSD falls below $0.99, increase the MCR by the percentage difference. For example, if the average price is $0.90, the MCR should be raised by 10%. Conversely, if the average exceeds $1.01, reduce the MCR proportionally to the premium at which iUSD traded that day.
  4. This method aims to maintain a more robust peg for iUSD, keeping it within a ±1% range.

This MCR is fair to CDP holders because it is significantly less volatile than the price of ADA is anyway these days, in the past day ada has fluctuated by as much as 18%! Under this proposed MCR mechanism, today’s adjustment would be approximately 9%, significantly less volatile.

With the passing of this proposal, the foundation should manually adjust the MCR each day according to this algorithm, not leaving the community to wait 3-4 months for an upgrade.

I hope you can consider my proposal seriously. I believe that, with the community’s support, we can effectively address the recent challenges faced.

Thanks,
Micah

7 Likes

This is critical to the future! Let’s back this proposal

No. Users want stability and predictability. This is just chaos in a system.

10 Likes

Agreed, looks like an over engineered desperate tentative to fix peg issue, which will complexify protocol usage and may bring its bunch of manipulation…

1 Like

I find this proposal appealing, but to ensure greater stability and prevent abrupt changes, the adjustment of the MRC could be carried out by epoch, with a 130%, 140%, or 150%, which is the current collateral. That 130% would act as a base, and for every 1% that falls below the PEG, it could increase by 2% at the end of the epoch in the three DEXs with the most liquidity. If the PEG in Minswap loses 10% at the end of the epoch, the MRC would be at 150%, with a 130% MRC base. Drastic changes from 130% to 150% also pose a risk to Indigo’s customers, so I believe that if we implement this by epoch, there should also be a staggered increase and decrease of the MRC with a maximum of 10% per epoch. This would allow the market to stabilize and provide those who request a CDP the quick and anticipated opportunity to promptly pay off their debts.

In the case of being above the PEG, it is most advisable not to reduce the base, as it could significantly impact the stability pools and the loss of collateral could become dangerous. I disagree with reducing the MRC below 130%.

This strikes me as a conflict of interest

3 Likes

This is not the way! I´ll bail out from Indigo as soon as possible if this comes to voting!

1 Like

This reminds me of environmentalists who rejoice that GDP has fallen because it means less environmental damage.

The solution is not suicide.

If you remove almost all CDPs (which you would certainly do if you make MRC unpredictable) you will repeg but lose the relevance of the protocol. You don’t even seem to understand that every time I withdraw ada from the pool I pay 2 percent fees. If one is levered this is closer to 6 or 8%. Then to put it back and remove it again would be another 6 to 8 plus trading fees, transaction fees etc. It also totally kills trading strategies.

So yes you would stabilize things… and lose 90% of the users. I know this isn’t an official team suggestion but come on, this is just absurd.

3 Likes

I’m a CDP holder and I have printed iUSD back in the day when it was a $1 and went long ADA with 100% of what I minted. I expect to pay 2% ADA when I cash out. I have a very safe and healthy long term collateral position. I’m NOT a trader. For my own circumstance I would 100% back this proposal. If I were a trader operating on thin margins I would hate this proposal.

2 Likes

No. This is not the way!!!

Guys, HIGHER MCR IS NOT A SOLUTION TO iUSD DEPEG!!! how many times this needs to be repeated? People will adjust their CPD positions and continue printing iUSD to buy staff (i.e. keep on creating sell pressure). Did not the recent increase to 130% teach you anything? The only mechanism to manage de-peg is to create buy pressure. INDY could buy back iUSD below $1 to keep in the treasury / stabilisation fund so every time someone opens CDP, this stabilisation fund is the priority issuer of iUSD (instead of minting brand new) and only once it is depleted you mint brand new iUSD.

2 Likes

He’s the one building Butane. This is not a serious proposal

That could be achieved by changing the oracle price of iUSD to reflect the price of iUSD on Cardano DEXes instead of USDT, USDC, TUSD.

I’m not sure what to think of this yet. Is iUSD still a synthetic asset afterwards?

Even if he is developing another protocol, the proposal can still be serious ?!