Would be great to be able to burn collateral right from my CDP to help close out my iasset debt.
Example: I have a CDP at 300% collateral ratio with 1 IETH as debt. I may not have any IETH in my wallet. Allow me to burn form my CDP sufficient ADA to cover my IETH debt and close my CDP without the need to purchase more IETH and then burn my CDP to close.
Also if I do have some IASSETS and want to burn it, I should be able to see a MAX burn option in my CDP window when I go to burn. currently there is only the option to select MAX
I am not sure if I understood this correctly. How exactly burning the collateral would work? Because to me it seems like you are just giving ADA to the protocol, but not burning the iAsset you minted (your debt is related to an iAsset). So, you have to burn the iAsset (not ADA) to pay your debt.
Maybe I am missing something, but probably that would be a good discussion for the topic about the “redeeming” mechanism (I know their discussion was always around iUSD, but I am not sure if this would cover the other iAssets too).
This would save me a step. I have extra collateral and no iasset so to be able to burn my debt using my extra collateral ada.
The way it works now is if i dont have any iassets and want to close my cdp i need to withdraw my ada, convert to iasset and then burn it to close my cdp. This is costly and timely. Or i need to swap other ada outside of the cdp for iassrt and then burn it to close the cdp.
I want to be able to burn my collateral to cover my iasset debt right in the burn screen. Becuase i have so much extra collateral i should be able to burn my extra collateral ada to cover my debt.
Lets say from 300% collateral and a small iasset debit. I should be able to burn my Ada down to lets say 150% in order to cover my iasset debit.
Rather than withdrawl ada, convert to iasset and then burn that. So the burn would actually be ada burning my iasset (the transaction would techincally be a swap and burn all in one transaction done in the burn screen using my extra collateral ada to cover my iasset debt).
My extra collateral is being used to burn my iasset debit and my my collateral ratio would be lowered and burn iasset debt all at once.
My extra collateral should be able to be used to burn my iasset debt instead of withdrawing and converting to iasset and then burning the iasset.
But when you pay the debt you are actually burning that iAsset. So you remove it from circulation. As you said, you have the amount in ADA, but not in the iAsset. And to pay your debt, you must return the amount of iAsset you took it. I think having a redeem mechanism for every iAsset would solve this problem.
There is a discussion for introducing such feature for iUSD, I just don’t know if that would apply to iBTC and iETH. Basically, their idea is that you can buy the iUSD from a dex, and redeem the equivalent ADA at the oracle price. So, imagine the price of ADA is 0.25 cents (1 dollar = 4 ADA). For some reason, you see the price at minswap that 1 iUSD is 3.8 ADA (26.something cents). You can then buy enough iUSD for a discount, and burn at Indigo for the real value of 4 ADA, making a profit of 0.2 ADA for each iUSD bought. This will alleviate the selling pressure leading to the downward depeg as we saw a few months ago. But again, this mechanism I mentioned was being discussed for the iUSD. It would be good to know whether will apply to the other iAssets too.
Another option: let’s say your profits are good enough and you decide that want to close your CDP position. You can always max withdraw your collateral (until 110% for iBTC or iETH) and let it the position to liquidate itself. So you don’t need to pay your debt.
yes the max burn might be a better way out, hard to calculate the minuscule differences in spreads and fees for swaps vs withdrawals, mints, burns etc. but that is what calculators are for i guess.
would be nice to have an oracle show me a variety of hypothetical strategies given my stake. very excited to see what you mentioned about iusd
This makes sense to me. The CDP is overcollateralized, so it seem logical that a user with a CDP may wish to reduce the CDP by reducing the collateral against it <PROVIDED the remaining collateral vs debt ratio remains within platform parameters.
I would vote for this as it only adds flexibility to those who take out CDPs. INDY token holders benefit from users taking CDPs, so why not provide them with the best options?
Unfortunately this has fringe cases which it couldn’t work
For example a 111% over collateralized iBTC position.
when user wants to close this position, there is a 2% charge on overall collateral, This fee goes to indy stakes
Dexes might be trading at 110% or higher depending on the exact time of swap and subject to slippage.
Protocol cannot ensure the execution of the swap and burn.
The best option for you would be to buy the iasset yourself and burn it yourself so that any slippage or excess is borne by the debtor themselves
What he seems to be requesting is a user-executed partial liquidation.
The iAsset would be taken from the SP as in a normal liquidation event.
Thank you Solitude for the feedback, I agree with you
It would really only benefit CDPs with a ratio of over, lets say, 10% of being liquidated given the multiple transactions taking place at once.
- A withdrawal of the ADA from the CDP
- A swap of that ADA to Iasset
- The burn the Iasset within the CDP
- Option to close the CDP if above 110% threshold after the above is complete
Perhaps a DEV can write up a fast and simple way to go about it.
Closing fees can still apply too so it wouldnt make sense for a CDP that is very close to being liquidated to do this. At that point its too late and you might as well just withdraw max ADA and allow the CDP to be liquidated
A majority of the CDPs are above a ratio where it makes sense. They can use extra collateralized ADA within their CDP to burn the Iasset that is being borrowed in the CDP and potentially close the CDP in doing so.
Or CDPs with a healthy collateral ratio could even stay well above the 110% ratio after using collateral ADA to burn iasset
You could basically achieve the same result by pulling all of your additional collateral and allowing the CDP to be liquidated.
If premium on dex is ~8%+, which it is a lot of the time, you would actually save ADA by allowing your position to be liquidated.
IE: You have a $100 ADA CDP worth of ieth and have collateral of $200 ADA.
You can spend $110 ADA (assuming 10% premium) worth of ieth on a dex
Then you use that ieth to close out your position but also have your position reduced by 2%
So you are left with 88 ADA
If you reduced your collateral to the bare minimum of 10% you would have 90 ADA
This also doesn’t included trading fees, transferring asset costs, etc… So just something to stew on
Note if you can get the iasset for less than 8% premium from a dex then it could be worth while to close out the CDP in the traditional manner.