Here you can vote to adjust iUSD MCR to 150%, followed by a gradual rollback to 130% over 40 days.
- YES.
- NO.
0
voters
12 Likes
Your idea is great, but it’s not about the best idea, it’s about the best solution that can be implemented now. Developing something like this would take months. Indigo has tools to change MCR by on chain voting.
5 Likes
Can you explain why increasing the MCR to 150% would fix the problem? Would it stop people from selling iUSD for less than $1?
9 Likes
The Role of MCR in iAsset Price Stability
- Supply and Demand Dynamics: A higher MCR increases the cost of minting iUSD, reducing its supply. This decrease in supply, paired with increased buying pressure, can elevate iUSD’s price towards its peg.
- Incentivizing Stability Pool Participation: Increasing the MCR also enhances the margin of arbitrage value for Stability Pool stakers, creating incentives for users to buy existing iUSD supply and stake it, further aiding in price stabilization.
- Adjusting Liquidation Thresholds: The adjustment in MCR modifies the thresholds at which CDPs become eligible for liquidation, prompting users to manage their positions more conservatively, which can indirectly support the price of iUSD.
5 Likes
Fully in support of this. Glad to see the community stepping up where Indigo Labs has failed us. The protocol was designed from day one to have MCR increased during depegging to the downside, and MCR decreased during depegging to the upside. Unfortunately, Indigo Labs went completely against the design of their own protocol and started arbitrarily setting MCR without any mathematical reasoning.
MCR should’ve been increased already. MCR should be increased during ADA appreciation, and decreased during ADA depreciation. Indigo Labs has the tools already to stabilize the peg, yet they’ve severely failed us community members by their inaction.
We should also take this opportunity to highlight that the current Indigo Labs leadership team isn’t adequately equipped. They are missing key personnel on the team who deeply understand how the protocol works. If you look at the turnover in the past year you can see there are problems within the company. I hope that Indigo Labs makes the necessary hires to strengthen their team, or else competitors will dominate Indigo in the future.
In the meantime, this proposal absolutely needs to pass for the stability of the protocol. It is disgraceful that Indigo Labs has allowed this depegging to last for so long when an easy solution was available. They would’ve known to take action if they actually read the Indigo paper. Because of their inaction, we as a community now must take drastic action to fix the problem. Had Indigo Labs acted earlier, then a more gradual increase could’ve occurred.
4 Likes
Labs has long considered the MCR increase but as you can see from the early community conversations around this action, it was contentious at a minimum. There are more market dynamics at play that were considered in the decision weeks ago to not pursue MCR increase by Labs whether it was a lever to pull or not. The situation has clearly not resolved itself organically and now yes MCR increase even if disruptive or not should be pursued. Labs focus has been on redemption mechanism etc outlined in V2 while leaving the DAO to debate and ideate the decisive moves for Indigo re depeg. That’s how decentralization works, not Labs solely taking the reigns on every parameter update or change needing to be made. Community action is equally healthy and critical for the protocol’s longevity. That said, Labs does agree with the MCR increase at this stage.
10 Likes
I see no reason to believe this proposal will solve the problem. I do believe it will create uncertainty from borrowers regarding the conditions of the collateralized debt positions. If I’m not mistaken, this will be the second time that the purported solution to iUSD depeg was to increase the liquidation risk of borrowers subsequent to them having taken a position. This does not inspire confidence. Once is an anomaly. Twice may be the start of a habit.
In which case, Pandora’s Box will have been opened.
12 Likes
Thank you for your insightful feedback on the proposal. I understand your concerns and would like to address them:
- In DeFi and synthetic assets, dynamic adjustments like modifying the MCR are often crucial for maintaining stability in response to market conditions. This approach isn’t unique to our protocol but is a common strategy in DeFi to manage risk and ensure stability.
- The adjustment to the MCR is communicated transparently, and the gradual rollback plan adds a level of predictability. Such adjustments are essential in managing a dynamic ecosystem like ours and are aimed at enhancing the long-term viability of iUSD.
- The intent of the proposal is not to ‘squeeze out’ participants but to stabilize iUSD and align it with its peg. It’s about finding a balance between maintaining immediate stability and ensuring the protocol’s health. Habitual adjustments are a concern, and we aim to develop mechanisms to avoid frequent and drastic changes.
- While market volatility is a normal aspect of trading, excessive volatility in a stablecoin can undermine its utility. Although the market might correct itself over time, this proposal aims to mitigate the risks associated with prolonged depegging.
- Incentivizing the holding of iUSD is indeed a strategy worth considering. However, it might not be enough to quickly address the current depegging issue. The MCR adjustment should be seen as one part of a broader strategy.
- A YES vote supports taking immediate, necessary action to stabilize iUSD, crucial for the ecosystem’s health. It reflects a commitment to the long-term stability and benefit of all participants in the Indigo Protocol.
I hope this clarifies the rationale behind the proposed adjustment and why a YES vote is important for the protocol’s stability and long-term success.
4 Likes
I appreciate your insights and would like to address your concerns:
- Supply and Demand: Indeed, these are crucial factors for any asset’s valuation. However, strategic interventions like adjusting the MCR are sometimes necessary to correct market imbalances, especially during significant deviations from the peg.
- DEX Liquidity: Low liquidity is a challenge, but it’s often a symptom of deeper issues such as lack of market confidence. MCR adjustments can help restore stability and, in turn, improve liquidity.
- Impact on Confidence: While increasing the MCR might raise concerns about confidence, allowing iUSD to continue trading off its peg poses a greater risk. Restoring the peg is essential for long-term confidence in the protocol’s stability.
- Synthetic Shortage: A temporary reduction in synthetics availability due to higher MCR is a trade-off for stabilizing iUSD. This approach is aimed at preventing prolonged devaluation, which would be more damaging in the long run.
- Timing of Implementation: Ideally, such measures would have been best at the protocol’s inception. However, given the current situation, action is necessary now to prevent further devaluation and potential long-term damage.
- High Collateralization: High collateralization is indeed a strength. Yet, it doesn’t automatically resolve a depegging issue, which is why proactive measures like MCR adjustments are required.
In summary, a YES vote on this proposal represents a tough but necessary decision to stabilize iUSD in the short term, crucial for the long-term viability of the Indigo Protocol. This decision is about ensuring the stability and trust in the protocol, which ultimately benefits all users, including those accumulating iUSD.
5 Likes
I agree with Juan’s comment - this will reduce the supply and may help in the short term for two reasons: there will be people caught off guard because they don’t follow announcements from indigo closely and will be liquidated. If this does go through, there should be at least a 2 week to 1 month grace period where the CDP owner will not be able to mint additional iUSD and will see a warning that they will be liquidated if they don’t increase their collateral ratio by the cutoff date.
I do think doing something like liquity’s recovery mode could could be useful - if the total system wide average below a certain threshold, then increase the MCR on the affected asset to 150%, otherwise leave them at 110%.
The redemption feature in V2 will help protect iusd on the downside. If the MCR is moved back to 110%, that will help it track better on the upside. iUSD is not a stablecoin it is a synthetic asset whose performance is supposed to resemble the underlying asset - the US dollar. Expectations need to be set a bit different - it will not peg like how tether or USDC do.
5 Likes
I understand the rationale.
I also think it’s cutting off the nose to spite the face. I believe this is an overreaction that could have been solved in other ways without potentially sacrificing customers or confidence. I think the confidence lost as a result of the apparent willingness to dramatically change the borrowing conditions is a bigger issue than the temporary devaluation of iUSD against USD.
I am not new to crypto or defi or any of it and I can’t recall participating in a protocol where the terms were arbitrarily changed as is being suggested here. You say that the intention isn’t to squeeze people out, but I often say that intentions don’t matter nearly as much as consequences. And liquidating low hanging fruit is precisely what this will do.
For the record, this change doesn’t impact me personally, but a blind man could see that people will think twice about minting iUSD if they suspect that their positions could potentially be jeopardized simply because some can’t stomach free markets.
6 Likes
You and I have long had disagreements in the past so I don’t see that changing any time soon.
The question isn’t about what could’ve been done in the past. The question is what to do today.
Indigo Labs has responsibility in this. EC’s answer above is in the right direction but still unsatisfactory. This situation should never have been allowed to happen if they delivered on their promises. They can blame the community all they want, but we all know that Indigo is currently centralized. EC’s comment about decentralization doesn’t match reality.
That said, we can put these disagreements aside for now and work towards the common goal of stabilizing the Indigo Protocol. Again, the question is not what should be done in a few months time, but what should be done TODAY. That action must be to increase MCR drastically. It will have an immediate effect on price stabilization.
3 Likes
The point that’s being missed is that Indigo was designed to have MCR adjusted regularly. In its whole existence, MCR has been adjusted only once. MCR should not be at 120% in the current market condition.
This proposal is spot on because it takes into account how Indigo was designed. Absolutely we can work towards adding new mechanisms for price stabilization in the future, but the future isn’t today. For today, we have to work within the bounds of how the protocol actually works.
3 Likes
Thanks for your reply Robert. I do want to clarify here that I was not at all punting to community here or blaming them. Not one bit. I was emphasizing that labs focus was geared towards the long term solutions, such as RMR, while we observed the community’s conversation and action around the depeg. We’ve been constant on comms about this and active in ideation as well with the working groups and community. That’s a healthy approach in my view and we’re happy to see decisive short term action being taken by DAO members while we keep efforts on development of long term solutions.
2 Likes
are you aware that adjusting the MCR is an integral part of the Indigo protocol’s design, as outlined in its whitepaper (page 22)? this flexibility is built into the system to ensure we can respond effectively to market fluctuations and maintain the stability of iUSD
1 Like
If Indigo Protocol is comfortable with the idea of liquidating customers in order to stabilize its apparently (un)stable coin, then that is their prerogative, but no one should be surprised when there is contention about it.
5 Likes
Agreed. This is a point I am having difficult taking seriously as well. The disagreement I appreciate. Gaslighting is just obnoxious.
I can’t accept in good faith that a man takes a position at 120%, which then gets changed to 150%, and the institution hides behind, “This is normal!”
4 Likes
this might drive people to withdraw their current cdp to the max and let the rest liquidate. this would not incentives people to necessarily buy more iusd. and whales can still come in and cause iusd to go down, even with a 150% threshold…
also changing the thresholds for people after they signed up for certain expectations is messed up. if parameters keep changing after people initially agree on certain terms then people will lose trust in Indigo protocol.
why not increase the iusd benefits and reward to incentivize iusd holders. or atleast leave existing cdps at their current threshold and any new deposits or new cdps would have to deal with the 150% threshold.
think this has good intentions but will ultimately hurt indigos userbase and trust for the protocol. no one wants these major changes after they signed the transaction
4 Likes
No one is saying it’s normal. The situation should never have occurred if actions were taken when they were supposed to be taken. Indigo is now in damage control due to inaction.
So you can all sit around and wait while competitors are actively building a more robust protocol, or you can take action now and fix the protocol so that trust can be rebuilt. Because right now, nobody in their right mind will use iUSD as a stablecoin. The only use for Indigo currently is as a leveraged betting system.
Do the action now to fix the protocol in the short term. Do your long term fix too, that’s great, but that doesn’t mean do nothing until then.
3 Likes
This is the first acknowledgement I’ve seen that this is damage control as a result of a perceived flaw in the design of iUSD. I find that explanation far more palatable than the notion that we who are reticent to implement this change are unreasonable for doing so or that we didn’t read the white paper or some such gaslighting nonsense.
I don’t personally see how the downside iUSD depeg is a crisis. I think the blow to consumer confidence will certainly develop into a crisis once people understand that their future positions could potentially be liquidated through no fault of their own anytime iUSD does something the project managers don’t prefer.
We should be clear that this measure will penalize some people expressly for holding iUSD, which means others will be less inclined to mint and hold iUSD in the future. Positive reinforcement is superior to negative reinforcement every time. Incentivizing holding iUSD is a far healthier way to ensure that iUSD stays closer to the genuine article than penalizing holders could ever be.
I think free markets are a wonderful thing and tend to work themselves out in time. I, for one, have been happily accruing iUSD at these prices and plan to continue to do so.
Just my two lovelaces.
9 Likes