I agree that 1.5% should be the ceiling and still think it would be a better solution to introduce an interest rate of 1%-2.5% p.a. The larger you make the origination fee, the more you deter short-term lenders. Although I understand that that may be the intention in order disincentivize people from retiring bnUSD. Anyway, I still think its better to introduce an interest rate.
ultimately we need to agree as a community what it is we want to acheive, and what is the long term goal for Balanced. Once we have determined that, it will be easier to make these smaller decisions as we have a clear longer term goal to work towards.
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@Vasque this prompted me to create a āmeta-governanceā category, so Iām moving this over to that thread as a starting point
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Iām not seeing the incentive to raise the loan origination fee. If I understand the argument, the entire purpose is to attempt generate more network fees by charging more for loan origination. But, is charging more for a loan the right solution to try to generate more fees? Will this make us more competitive on the open market?
Or is the argument about the borrowers earning BALN rewards and they should have a higher fee just to get a loan since they are also rewarded for said loan? If this is true, I think it would be better to conditionally charge an interest rate on bnUSD that isnāt used by the borrower. Meaning, if people simply take out a loan and hold the bnUSD and earn BALN, then they should also have an interest rate charged on top of the loan origination.
That would both encourage the use of the borrowed bnUSD and increase network fees via increased swaps. Or, of course, for those that just hold the bnUSD, fees would be generated on the bnUSD that is just sitting there doing nothing.
If MakerDAO is currently charging 2% APR, or just 0.167% per month, I donāt think increasing our loan origination fee to 1.15% would make us competitive on the open market especially for short term borrowers. Unless, of course, we are saying that we arenāt competing for short term loans, or we are saying that attempting to get some ETH converts isnāt an objective.
Just trying to figure out the problem weāre trying to solve.
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I agree with most points and with figuring out the goal.
However I think a flat origination model will never compete with time based interest for short duration. Just like 1.15% is not competative with 2% apr, neither is 1% neither is 0.5%. On the flipside, taking into account rewards, NET interest rate is competitive, and rapidly approaches negative as you hold the loan.
This is why I think a comprehensive evaluation of orignation is hard without also considering rewards. And this is still complicated, since rewards are based on total loan book. Under the current model, the more loans get taken, the worse future loan terms get (by a tiny bit).
Hey scott the issue i am running into is if i have an existing collateral balance that i can borrow against and my collateral appreciates it seems a bit costly to increase my loan. Is there something here or am i just cheap ? i think maybe itās because i am only increasing my loan in small amounts but realize its still the same %
Hey @poopster just to address your comment quickly - the amount of collateral, or whether you already have a loan or not, is not relevant to the fee you pay. The fee is just 1% of the borrowed amount, no matter how much collateral you have. If you borrow 100 bnUSD, you pay a 1 bnUSD fee. Right now weāre voting on raising the fee to 1.15%, so you would be 1.15 bnUSD to borrow 100 bnUSD, regardless of collateral amounts
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