CDP Indigo Dynamic Rate Proposal 110% -250%

[juanCardano]

This is a solution to the previous proposal that I developed:

User Protection, Limits iAsset 200% or 250%

Given the circumstances of the bear market and the inexperience of many investors, the leveraged and other things, I propose something to protect all users and also the INDIGO coins. Currently, the limit to request iAsset and be liquidated is 110% Liquidity can be maintained, but here are the changes that I suggest. 1-To request iAsset the minimum requirement must be 200% or 250%, the same as Djed recommends, but instead of 400% it would be 200-250% with indigo, increasing the liquidity of Ca…

Misunderstood with my proposal"Limits iAsset 200% or 250%"

They can read the discussion at the following link, but first read what I will put here https://forum.indigoprotocol.io/t/user-protection-limits-iasset-200-or-250/12709 “Before continuing, I’m not sure if it was due to the Google translator or what, but you misunderstood my proposal, and now I understand why there were attacks. Therefore, I had to use AI to explain it better to you. I clarify that I don’t have the intention of attacking the protocol, I just want to propose and discuss somethin…

My previous proposal to limit synthetic token creation to 200% or 250% for responsible leverage was met with criticism, so today I propose something different that fits with those who think that self-leveraging is risky. Instead of limiting the creation of these CDPs, I propose the opposite. Similar protocols like JustStables have a 150% liquidation and minimum synthetic creation of 150%. Therefore, Indigo can do something truly different by reducing fees for Minting as the collateral moves away from 110%. For example, if I request a collateral of 200% to 250%, I would pay a 0.5% fee as a reward for those who have their reserves in the stability pool. If I request synthetic tokens using my collateral below 200% to 175%, I would pay a 2.5% fee. If the collateral is between 120% and 110% and I request synthetic tokens, the fee would be 10%. Burning would have no fees at any time, which would be an incentive for those who delegate their synthetic tokens to the stability pool. This way, we avoid excessive self-leveraging but it will always be available for those who want to do it. The limits would be determined by the users and how willing they are to leverage by paying a fee. However, I would request Indigo to reduce the minimum collateral from 120% to 110%. This proposal is open to discussion, improvement, and rejection, but ultimately it’s a solution that balances risk and reward for those interested in responsible leverage and improves confidence for those looking to invest like myself in the Indigo protocol.

Option 1

Option 2

Option 3

(If you have a better option than the ones I put, add it.)

These fees would be collected at ADA, prior to the application for synthetics.

I will put as last 2 examples based on option 3:

1 iUSD= 1USD
1 ADA= 1USD

Proposal for CDP Deposit and Withdrawal Fees

The fees would be collected in ADA, prior to the application for synthetics.

Here are 2 examples based on option 3:

1 iUSD = 1USD
1 ADA = 1USD

1- Depositing 10 ADA to request a collateral of 190% in iUSD would be 5.26 iUSD. The contract tells me to pay a fee of 0.25% with respect to the 5.26 iUSD. I pay 0.0131 ADA (that fee is used to pay those who have the synthetics in the stability pool).

2-(From the previous example) I already have my collateral of 190%, but I want to ask for more and I leave it at 130%. The previous debt is calculated and added with the new debt and gives us 7,692 iUSD. This would charge us a new fee that would exclude the one we have already made. The fee to be paid is 2.5% 0.1923 ADA, and if we add the previously incurred debt we will have paid a total of 0.2054 ADA.

If we do not take into account the debt already deposited, we would be cheating and paying less in fees, therefore, it would be more economical to make a single debt, whether it is big or small, it will depend on the investor. The burning of synthetics would not have any fees. If you have a better proposal, please comment. Again, this is a proposal and can be modified or rejected.

Note: Both deposit and withdrawal fees can be charged in Indigo or ADA tokens. If Indigo is used, the token will have a better value.

Note: Burning synthetic tokens and adding more collateral in ADA have no additional fees in this proposal, the fees are only for minting synthetic tokens or withdrawing collateral to increase leverage risk.

Conclusion

I make a completely different proposal from my previous proposal to limit the creation of synthetic tokens to 200% or 250% for responsible leverage, which was criticized. Instead of limiting the creation of these CDPs, I propose the opposite: reduce or increase fees for minting or withdrawing collateral as the collateral itself moves away from or closer to 110%. If a user requests synthetic tokens with collateral of 200% to 250%, they would pay a minimum or zero fee. If the collateral is approaching 110%, the loan would have a much higher fee. The fees would be directed to the stability pool for the requested synthetic tokens, and there would be no fees at any time for the burning of synthetic tokens, which would be an added incentive for those who delegate their synthetic tokens to the stability pool. This approach balances risk and reward for those interested in responsible leverage and improves the confidence of those seeking to invest in the Indigo protocol.

[juanCardano]

I did not mention it, but if the user does not have the funds to leverage, for example in option 1, he wants to have 130% of iUSD with 10,000 ADA and he does not have 2,307 ADA (HE WILL NOT BE ABLE TO LEVERAGE) but if he could, he would have to pay those 2,307 iUSD to the Stability Pool. In case you cannot leverage due to lack of funds in ADA, you would have to reduce your indebtedness to 150% or lower. and if you definitely do not have the funds, but want to deposit everything, you would have to have collateral in excess of 250%.

If the market drops and the collateral is below 110%, you will be liquidated.

[solitude]

I understand where you are going.
However, this will complicates the protocol too much imo.

As we saw a great bump in rewards due to liquidations where 10% of overall CDP positions intentionally liquidate their position.
Will also have to look and see if there is any worthy ideas that allow such liquidations while not stressing the overall system.

[Lourde]

I can say this proposal does some what put this in a more advanced / complicated category than needed at this stage (opinion only) I will have to do more research on leveraging either way.

[BJeezzle]

I disagree with this proposal.

Besides overcomplicating the fees structure of the protocol as mentioned above, it also takes advantage of inexperienced and irresponsible protocol users by making them pay 40x or 60x what a responsible user pays - minting with 110% CR costs 40 to 60 times what it costs to mint with 250% CR.

This is almost immoral. Besides becoming the first people that will be liquidated by the protocol, we’re exploiting them as much as we can before that happens.
One could say it’s basically stealing from the poor and giving it to the rich.

[juanCardano]

@BJeezzle

Besides overcomplicating the fees structure of the protocol as mentioned above, it also takes advantage of inexperienced and irresponsible protocol users by making them pay 40x or 60x what a responsible user pays - minting with 110% CR costs 40 to 60 times what it costs to mint with 250% CR.

Hi BJeezzle, I invite you to look at Option 2 and 3, or propose

And I ask you, what is the annual interest rate that your country charges for taking a loan annually, for example, to buy a house, or a computer, and how many years. (If at 15 years it is less than 30% with compound interest).

And finally how much you pay in lending protocols to order DAI, USDT, USDC, BTC, ADA… again with compound interest.

The rate in lending is not fixed.

I have seen that they have paid up to 60% or more annually when liquidity is reaching 90% saturation in lending, forcing fast users to pay their debt.

And the fee is unique in my proposal, and is paid before asking for the CDP or every time you want to increase the debt, I also proposed that they were fees in INDY, forcing users to buy INDY to leverage below 250% or 200% and to give more value to the currency, if what you want is not to pay or have INDY tokens I proposed that having collateral above 250% does not pay fees of any kind in option 1 or 2, and in option 3 would be from 200%, I also said that we could discuss it and if you have a better proposal you can put it here. This would make the protocol healthier and would also be more profitable for those who have funds in the stability pool.

And the difficulty of implementing this proposal goes to the developers of the protocol.
Now if your question is if it is confusing when you ask for the CDP. Well it wouldn’t be, we would see what we have to pay clearly before asking for the CDP, in percentages. The developers have to implement a warning and alert when you ask for a CDP, just like when we see that our collateral is at x% for example it tells me that I have a collateral of 267%.

When you do the transaction in your wallet it tells you what balances it is subtracting as well.

In option 3, it would be almost the same fees you pay in a DEX AMM when doing a SWAP.

The fees would again be rewards to the stability pool.

[juanCardano]

Other examples.
Option 2 withdraw ADA
Option 1 Mint iUSD
Option 3 Mint iUSD

NOTE: Deposit and Burn NO FEES

Option 1 withdraw ADA
Option 3 Mint iUSD
Option 2 Mint iUSD

[jrm512]

So you are proposing to completely remove the mechanism to distribute ada to governance stakers? I agree with the sentiment that you are chasing solution for an issue that doesn’t really exist. This fee structure disincentivizes some use cases for the indigo platform. There are many ways a dapp like this could be structured. Indigo has been pretty transparent about their structure from the get go. If you disagree with some of the core mechanisms, it almost seems like it would be better to create your own protocol or find one that more aligns with your values. If you think it is too risky you should educate rather than force limits on people who may know how to leverage it to their advantage.

[AxeTheSavage]

Dynamic fees in general are good for any economy.

[crypt]

I also think that this would disincentivice people from using the protocol.

At the moment if someone borrows too much and gets liquidated they loose 10% or 20% depending on the iAsset. This is better for the users, because it is a risk and not something that neccesarily happens.

I think the Idea to protect people from overleveraging is very valuable and important. Maybe there are other ways,apart from fees to achieve this?

[juanCardano]

Please take a good look at the proposals, the images and analyze them.

The obtained rewards can be used for farmin in some DEX, or to create new CDP selling INDY (if you want), whatever you can imagine with your imagination.

Thank you

[juanCardano]

[solitude]

As far as I understand, (I have hard time understanding ur diagrams most of the time)
you are proposing INDY fee for mint below certain CR upwards of 10-40%

Irregardless of the amount, this is akin to brokering fee.
This will likely hinder with the hard peg designed around MCR for smaller iAssets eg ieth/ibtc.

Question would be what would this solve?
No doubt things can and should be improve.

It should be either looking at avoid/mitigate the situation or settling the aftermath.
I would be thinking of encouraging healthy liquidations, restraining destructive liquidations, balancing distribution of iAssets minted across defi vs % in SP.

Secondly, trying to replicate DJED in just CR isn’t a good objective given the functions is very much different, one is design for synth with liquidations while the other is designed with over collateralization stable coin without liquidations.

My concern revolve around peg/stability pool. maybe we should do open topic in discussion rather than temp check.