I agree that the rules should be as simple as possible, but no simpler. The current rules of the game are simple, I give them that, but they aren’t working if Indigo’s goal is to create stable assets. As such, some additional complexity is needed. Many users of Indigo also use Liqwid (Lenfi, and others). I don’t think that too many people would argue that Liqwid is too complex. They too charge a variable interest rate. The interest that they charge also effects the users “collateralization ratio” (they refer to a “health factor”, but it’s all the same). From an individual’s standpoint, their user experience should be quite similar in the sense that you deposit collateral, borrow debt, and might want to check up every now an then to see what the health of your loan is. The specific rate curve and other details are more things they would just “feel out” to understand, but if they really want the details they can look into it (much in the same way that a baseball player doesn’t actively think about the velocity of the ball or the forces acting in all directions that cause it to spin, etc.).
Have you modelled CDP owner rewards and losses and how they may behave in different market scenarii?
Some basic modeling is on my to-do list, which is why I haven’t proposed any specific values yet for the parameters (such as the interest rate curve). The point of me putting this out there right now was to try and get feedback as to what values others feel might be reasonable and if they had their own models or justification for such values.
The reason people short at those prices is they believe the discount will simply stay the same and they have good reason to. It is not that they anticipate to pay 10 to 15%. Man that is ignorant.
That’s not necessarily true. They might get lucky and be among the first close their positions when the market turns around, but most don’t care about getting 10-15% less because they think ADA will gain (and has) far more than that 10-15% during the duration of the short. It’s the cost of doing business.
I would vote no if it effects current CDP holders. I would close out all my CDP positions and leave Indigo were this plan (or variation) voted in. Apart from being a serious disadvantage for my own personal circumstances my main objection is ‘loss of confidence’ in the projects wider community and leadership. Speaking for myself, this tinkering with the cost of current CDP positions for those of us that invested according to the current rules will be irreparably damaged.
As long as it is not imposed on current holders it may not meet much resistance. Current confidence with the Indigo protocol has already been damaged imo when the introduction of the 150% MCR failed. Many in the community highlighted this likely failure and yet it was still voted in by the majority of the community with the support of the team. It appeared to only harm a small minority of those that had positions on but more importantly, it has put up a huge red flag that no position is even marginally safe. I have (what I thought) was a very healthy collaterally backed long-term loan with a 2% ADA cost. I no longer feel these funds are truly safe from being meddled with down the road.
I personally recognised there was a risk that the current iteration of Indigo could be risky for investment and unforeseen anomalies such as the current issue and may need attention. However, I draw the line on the current proposal as a step too far.
I strongly advise no for this proposal if it affects current holders of CDPs. Imo it is also unnecessarily complicated and not grounded with any actual rigorous data or use-cases to support its objective thesis.
What are you even babbling about? You really have no idea about finance at all. There is no specific moment where sentiment will change or won’t change. It is not about luck. If I close a position others will open even at a higher price. 1 dollar ada for some is a high and for some is a low. It is about the market equilibrium and no one has any reason to believe this equilibrium will change.
You think some proposal will change it. The market at least for the moment doesn’t believe it clearly.
I Just say one thing, iUSD is DEBT! at some point you will have to return that debt, Relax if iUSD iBTC iETH have a high current impact price, that is called ARBITRATION OPPORTUNITY. and is temporary. iUSD is more than OVER COLLATERALIZED. go to see and analyze in this link synthetic EACHof INDYGO and audit the collaterals, you will be surprised. each this synthetic are VERY COLLATERALIZED, that is to say, it is very very very very safe.
Thanks for sharing further insights… I understand the reasoning and the willing, but I do not feel confortable at all about it for some theoretical and practical reasons yet… here some challenges:
what if iUSD depegs above ? Negative interest rates ? Proposal seems to care more about depegging below while both are of equal importance for a stablecoin… iUSD is depegged below in all dexes for the timebeing, but would it be in case of sustained ADA bearish trend ?
what will set the reference for depeg? My understanding is that iUSD is not depegged in indigo protocol while minting it, it is in Dexes with various influencing parameters inc. liquidity, not at the same rate… we may even have some cases where iUSD may depeg below and above in 2 different dexes…
why iUSD needs to be so stable for the timebeing as it can not be redeemed for fiat and do not have any usage yet ? (as far as I know)… I have not thought about it so much but I feel that depeg is more related to a tight liquidity across dexes rather than the CDP mechanism itself… as for other algostablecoins we may expect better peg while getting broader liquidity ?
(assuming that I well understood, as I do not remember that iUSD rate in indigo protocol itself has depegged) linking variable rate to iUSD depeg at dexes may link the fate of CDP to other dex protocols and related liquidity which does not make sense to me… I.e what if the dominant dex get an exploit with a flash panicking liquidity leakage ?
if there is a willing to pressure the CDP detention overtime (debt is a money measure of time which is not reflected by 2% closure fees), have you rather thought about predictible and progressive increase of fees for a given CDP over time? Or even a burning mechanism for iUSD?
Not my preference because of current liquidity (moreover, I see that cexplorer only show 500 holders), but I try to bring ideas…
I appreciate your efforts and your answers to community reactions, I try myself to think about it and be constructive…
Negative interest rates are feasible, but this proposal would just set the interest to 0%. With interest going to the DAO there will be a fund to pull from and the DAO could decide on the specific implementation for addressing an upward depeg.
The reference would be an oracle, which usually takes the median value (but could also be some weighted average). In your example, the median value would be the lower of the 2 that are depegged above. In this case, it doesn’t really matter that much because if it’s near peg (X DEX below Y above) then the interest is going to be negligible anyhow as the interest rate depends on the depeg.
iUSD should be stable for a number of reasons. Many want to see these synthetic assets as “stablecoins” because they want to use them as a store of value. Having them stable increases their adoption rate (Liqwid initially didn’t want to allow iUSD as collateral) as well as allows them to be used in composable smart contracts by other protocols.
This is the job of the oracles (to determine an appropriate price and throw out or downgrade data from DEXs that may have gone “bad”). Also, these rates are just that, rates, so it takes time for their effects to accumulate among CDP owners. If oracles failed and/or all DEXs went haywire and the interest rate skyrocketed, it would still take many days or months for CDP owners to accrue a significant financial burden due to said interest.
v2 details that were just announced include a 0.5% fee on minting CDPs. This is an up front cost that effectively makes holding a CDP for a shorter term more expensive (per unit time).
Thanks for your thoughtful and constructive questions, I hope my answers seem rational/justified.
They don’t care about the fact that it is safe. They want it to be a true stablecoin and they want to use centralized controls to make it so. I can agree it will never be a true stablecoin with this decentralized construct
