Increase Redemption Reimbursement Fee for iUSD

Objective

I would like to propose an increase in the CDP Reimbursement Fee to increase the profitability of CDP when redeemed. iUSD is depegged to the downside (0.92) and we should incentivize CDPs to be in the redeemable zone (bellow 185% collateral ratio). When we stabilize the peg to at least 0.95 we can decrease the CDP Reimbursement Fee.

Changes

iUSD Redemption Reimbursement Fee: 4%

7 Likes

I really like the idea - followed the discussion in discord -, but I would also like to adjust the RMR value from 185% to 200% in one step.

200% is still a very good leverage level and combines with the high reimbursement fee it’s going to help to stabilise iUSD even more without significant downside.

6 Likes

Make it 200% and after 1 month could go to 190% or lower if needed to

3 Likes

Interesting. This would make getting redeemed a bit more acceptable, but it’ll also make redeeming less profitable. Do you think this is enough to make users create CDP below RMR?

2 Likes

I like the idea but we have to increase the rmr to 200% or 210%!

2 Likes

I haven’t seen this help iusd get back to peg. if ada continues to increase prices.

1 Like

I have been checking and correct me if I’m wrong but there’s no iUSD to redeem. Which means everyone is overcollaterized.

When ADA price rally’s from here more users will open iUSD CDPs and sell on dexes further lowering the peg.

We might need to increase RMR to 200% temporarily and find a way to increase buying pressure on dexes.

If there are other options we should also be looking into those.

1 Like

Increasing RMR to 200% won’t be effective actually, because CDPs are trying to protect their strategy.

Sometimes we forget that we have a range of 120% to 185% for redemptions. What we need is a new inflow of CDPs, if we start to enable RMR to further values we will only be removing the utility for holding CDPs on higher risks of liquidation.

We should be focusing on how we can make the range of 120% to 185% interesting for CDPs. If we force redemptions to higher ranges we would only be postponing the depeg problem and creating a new problem of overcollateralization.

I do not think that changing redemption fees will help in anything here as long as RMR is not changed as well…

  1. there is no redeemable collateral for the time being, and indeed, except if ADA breaks supports, it is unlikely that it will change
  2. depeg has varied from 5% to 10% since V2, and redemption needs to be attractive for trading opportunities to happen i.e. reducing margin by increasing fees to CDP may not incentives redemption

I am pretty aligned with the comment that the priority is rather to increase iUSD volumes. Today, we have a very narrow amount of CDP holders and even iUSD holders i.e. few big hands, and little use… and I think that peg is first of all a matter of volume and liquidity… so then, how to do that? I do not know, right now, but I would not rush with parameters change… one move, may be a automated adjustment of interest rate e.g. every epoch as a function of depeg… but to be pressured test in simulations…

2 Likes

The RMR zone for iUSD is already higher than the other iAssets, is between 120% and 185%.

If it’s not interesting to be in the RMR zone the CDP owners will increase their collaterals to avoid losing exposure to ADA when redeemed. Increasing RMR is not a solution!

In the other hand you have the possibility to increase the profitability for CDPs to incentivize being in the redeemable zone (increase reimbursement fee to 4%).

Now indigo will have a new utility, instead of buying iUSD in the market and lose to fees, you could create a CDP and wait to be redeemed to profit +4% and buy your iUSD at the same time.