Liquidation event refund to account for both parties

Hi. I haven’t posted in here before but created an account after seeing all the discussion around refunding people who have been liquidated.

I agree that it would be good in good faith. However, I strongly disagree that current borrowers shouldn’t be taken into account too.

I wasn’t personally liquidated but had to liquidate almost every asset I had, at their lowest prices, in order to lower my loan size. I hence suffered a huge loss and assisted in maintaining the peg.

If liquidated users are fully reimbursed then I think this is extremely unfair on anyone who managed their loans and paid off their debt by any means. It essentially means that we would all have been better off getting liquidated on purpose as we are worse off for paying back our debt at low prices.

I hence propose that all the funds are returned to people who were liquidated but 25% of the total funds are distributed amongst people who had loans open at the time of liquidation based off the size of their loan at the time. I actually think 75% is more than generous. I of course know the extent of the rebalancing couldn’t have been anticipated, but people should still know how rebalancing works and that there were risks involved. I don’t think people should be rewarded more than those who took effective actions and maintained the peg. Please feel free to suggest if the percentage to borrowers should even be increased from the below.

So taking 100% of the liquidated funds:

  • 75% to users who were liquidated
  • 25% to borrowers who maintained the peg during the same period

While I am here; a second option (although I would be less of a fan of this) may be to return the liquidated parties their full amounts and then cover the remaining 25% from the emergency DAO fund. I would classify this as an emergency as it was definitely unexpected. There is a very large DAO fund at the moment and hence I don’t think covering the 25% of borrowers would make a significant dent. There weren’t a huge amount of borrowers when all these events kicked off.

Option 2 would hence be:

  • 100% of funds returned to liquidated parties
  • 25% of funds returned to borrowers (from the emergency DAO fund - %age open for debate)

For option 2 the 25% would need to be calculated differently than Option 1. Perhaps it could be 25% of the average loan size of each borrower during the period of rebalancings.

Sorry in advance if this is poorly written. It’s my first post and just the first ideas that popped into my head. There may be better options or ways the above can be restructured.

EDIT: I would put up a proposal on this but I no longer have any BALN as I had no choice but to sell all my BALN (including every crypto I own) in order to keep up with the rebalancing. If I’d known I’d be given back all my funds I would have just let myself get liquidated.

Second EDIT: Sorry all! I just realized I posted this to the wrong part of the forum and that @arch has already put up a similar (just better proposal). I completely agree with @arch 's post and hence will continue discussion there. Sorry again for the confusion, just new to the forum!

I agree with you on this. I would approve option 1 over the other proposal of refunding 100% back to the liquidated.

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Anyone interested in this please also consider my take on it here

It is similar in scope but more evenly spread IMO


Sorry arch! I’m new to the forum and hence didn’t see this!! I also didn’t realize my post is in the wrong section of the forum.

Yep, your post is far better than mine and I 100% agree with all it’s content. Thanks so much for taking the time. I’ll comment over there now

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