Proposal for Adjusting RMR and Enable Redemption for iUSD

Proposal for Adjusting RMR and Enable Redemption for iUSD

Motivation:

With the recent launch of Indigo protocol V2, we now have the means to redeem iAssets as long as there are CDPs below the RMR(Redemption Margin Ratio) Parameter. However, as of now (4 May 2024), RMR has been set the same as the Liquidation Ratio, which effectively disables redemption and makes it impossible to arbitrage iAssets from Dexes.

Adjustment Proposal

Given that iUSD is “only” at ~10% depeg at the moment, I suggest we set RMR to 185%. I propose 185% so that we can at least have a case where redemption can happen. I suggest everyone consider decreasing this value later in case there are many CDPs below a certain value (e.g. 150%)

Summary:

Parameter Name Parameter Value
Redemption Margin Ratio (RMR) 185%

This proposal aims to enable redemption, allowing users to arbitrage iUSD from the open market against CDPs with CR under 185%, with the intention of decreasing it if the peg stabilises. This will hopefully help with the depeg the iUSD has been suffering from for the past few months.

14 Likes

Agree with that number, let’s start with it then see how it goes.

2 Likes

I’d rather begin with a lower value. Why? We need to exercise caution with the RMR value. We’ve already seen a significant decline in CDPs due to interest rate fluctuations. The stability pools have experienced a loss of around 30-50% in deposits.

Let’s initiate with 150% - the MR value - as a starting point. It’s a prudent beginning. We can afford to take our time and not rush into anything. Allowing the market time to assess these adjustments will enable us to make gradual, informed changes.

4 Likes

My concern with 150% is that it might not be enough to protect the peg short term. But seeing how we have touched the soft peg (0.97-0.98) a few times just from the interest, I don’t mind starting low and slow and increasing it later if needed( hopefully not though). I’ll update it to 150%, but I implore everyone to consider increasing it later if the peg doesn’t move.

1 Like

I would probably recommend setting it slightly below the MR, say 140-145%. That way it give a little bit of leeway from being immediately redeemed if someone chooses to mint at the MR.

I do like the idea of enabling the RMR in rare cases so that users and the team can “test it out” in a live environment to start getting comfortable with it, discussing it, and working out any pain points that might show up.

3 Likes

I disagree. Even if their CR falls slightly below 150%, they can’t be redeemed against much anyway. I think setting them all to the same value as MR is a good starting point. We can adjust later depending on how many CDPs are under MR.

3 Likes

That’s fine, it’s splitting hairs at that point anyhow.

I know that I have suggested to set the RMR to 150%, but after talking to a bunch of people this might be to conservative.

I have to change my mind and would suggest to switch to 185% (MR+35%).

The peg is most important and people won’t be liquidated, it’s only a redemption to the RMR value.

1 Like

150% is to conservative. 185% as originally purposed is a better starting point.
We can adjust accordingly after the intital dust settles

1 Like

I’m not sure how to proceed here. I changed my mind multiple times and updated this proposal because the temp check polls haven’t started. now that people have voted, should I just changed this proposal again or should someone else make a new one with another param? or should I make a poll with multiple RMR option?

Create a brand new poll with all suggested RMR %. Whatever wins, you can edit this proposal to that number and then we send it to the chain to finalize.
That’s what I would do.

1 Like

Okay thanks, I will do just that.

1 Like

Thank you for the feedback, everyone. Since some of you shared concerns about how 150% might be too low, I decided to make another poll where you can poll on what you believe is the ideal value for iUSD RMR.

Poll: Proposal for Adjusting RMR and Enable Redemption for iUSD (150% or 185%)

I will update this proposal to whatever value wins the poll.

2 Likes

i think if the RMR is higher,185 % the interest can be adjusted at 10-15%

1 Like

This might be a very good next step within a few weeks or months after the initial activation of RMR.
If my expectations are met by RMR and current interest, it might make sense to increase RMR even further but reduce interest rates.

1 Like

my concern is there are few tools within indigo for protecting cdp owners from the various thresholds

is the intent is for me to mint iusd and hold it in a stability pool to support the system? Or to have my iusd handy so i can burn it to protect my cdp? and not sell iusd for more ada and then deposit and mint and sell the iasset over and over.

i need to keep a specific rmr too? ok

then why dont i have tools to set limit orders to burn the iusd for my cdp while im staking iassets in a stability pool, or allow for a limit order to burn my iusd at a certain ratio to prevent myself from falling below the thresholds? or keep ada handy in a limit order to deposit if i my ratio becomes too low

until these tools are there then we shouldn’t be putting investors in a new environment unequip.

the stakes are becoming tighter and its costing us money in interest and there is no progress on tooling for cdp owners to protect themselves?

now i need to be over collateralized and it does waste my resources. I have a lot less incentive for me to use the protocol. but alot of incentive to own indy and vote against the cdp owners and people who use the protocol

also is it backwards to have the rmr above the maintenance ratio? why would i mint the max amount and hit that maintenance ratio on a max mint when it would put me below rmr?

i fear none of these changes will matter as whales will come in anyway. The whales are long ada. they see ada $3 and Iusd at .33 ADA.

They will keep a high collateral ratio but still put sell pressure on iusd and make their return when ada spikes.

yes these measures prevent and one whale from going hard on minting, selling and depositing over and over.

but it absolutely does not prevent the pod of whales from each taking a small bite out of iusd and the result is the same.