Recent Liquidations & building goodwill

Yes it is if my math is not wrong.

It will be a long time before we see an emergency like this for a number of reasons. The penalty fee was way too high, the collateral got locked early on making it impossible to pay down debt, massive reverse rebalancing giving forced loans bringing the liq price up in the crash (not a great combo), people having to sell other assets at the bottom from elsewhere at a loss to cover their debt and still getting liquidated. So many factors. They were basically trapped no matter what they did. @particleX proposal is the only fair solution for this emergency the more and more I think about it. Let the emergency fund be used for the emergency.

The question we need to ask ourselves is if the emergency fund is not used for this emergency, then what is it going be used for? It will stay in the fund and not help out the people it really should help out. You won’t find a bigger emergency in a while as there were so many factors leading people to lose everything. For the most part, the money of the liquidated is what the emergency fund consists of, so it should really go to them to cover for their crisis at this platform.

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My suggestion is as follows. The liquidated parties will be reimbursed up to 50% of their holdings before the crash. The way I propose is this:
Community members are asked to donate what they feel like, and are given a one week window.
The DAO then matches the resulting final tally 1:1, until we reach 50% of what was liquidated.
In case community members donate more than half of that 50%, the DAO will pay out less. In the reverse case, the DAO will pick up the slack.
Personally, I feel this will test whether the community is on board, a kind of put your money where your mouth is, and it will foster community spirit, since it involves the community in a search and rescue.

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Hi Arch. I completely agree with your points and created a new topic with some suggestions:

Sorry if it’s written a little poorly. Perhaps someone can word things better or come up with a better structure. I just think it’s completely unfair if liquidated users came out better than people who managed their debt and suffered a massive loss from liquidating their assets and very low prices

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Overall, people will not profit from @particleX proposal. They wouldn’t choose this outcome before the liquidation event. If we keep looking for a bigger emergency to spend the emergency fund on, we won’t find it.

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Title: bnUSD Support Appreciation Proposal

Eligibility to claim sICX: ALL borrowers between Jan20th and Jan 24th 2022

Amount of sICX to use: 30% of Emergency Reserve fund and 5% of the BALN from the DAO fund (EDIT: Change BALN allocation to 15% of BALN in emergncy fund for easier distribution)

First let me describe the mechanics:
Across the volatility period, every debt position evaluated every hour/few hours and summed, and the full appreciation amount divded fully between them pro-rata.

Yes this means people holding their position fully through the period get more share than liquidated accounts.
As a modifier in light of the topic at hand, if an account is liquidated their score counts 1.5x.

Key points:

  • Whatever conditions were true for any parties liquidated, were true for parties not liqudiated, except non-liquidated parties were under those conditions longer. If any argument can be made about the borrower parameters being flawed, and that’s not what I’m saying, but if any arguments can be made, non-liquidated parties were under them for longer, and kept bnUSD stable for longer.
  • Amount is not related to liquidations, all borrowers pitched in, and this is 100% a goodwill measure, Balanced values its minters for their service in stabilising bnUSD.
  • In accordance with it being a goodwill measure, the DAO should chip in, and via BALN representing the belief that people which stabilised their risk across that volatility, and are still in today, are longer term members of the community.
  • Some parties might get more than they lost, many will get less. This is about appreciation of services rendered to Balanced.

Very happy to tweak values but the pillars I feel are important

  • This is not a refund/compensation/return
  • This is an appreciation of bnUSD stabilisers that helped Balanced through a rough spot, and gave it space to improve.
  • Some amount of BALN from the DAO seems appropriate.

Disclosure: I have maintained a borrower position through the entire proposed period.

I believe this is a more comprehensive and equitable way of fostering goodwill.

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Simon,

While i dont think last days event should be classified as an emergency at a protocol level. And reimbursement of any funds is mandatory, required or even a good idea to begin with. Your take is the most sensible i have seen to date.

While from a technical standpoint i strongly feel the best course of action would be to do nothing. I do sympathise that nobody had anticipated the effects of the protocol working as intended, and it could potentially leave a bad taste for alot of borrowers. Maybe even going as far as denting the Balanced userbase (something we can all agree on, isn’t what we want to achieve).

A proposal to redirect part of the Emergency fund towards a goodwill gesture for borrowers, which leaves the emergency fund strong enough to function as intended in an actual emergency as stated in its goals.
In that goodwill gesture, all borrowers should be considered, not just those who have been liquidated.

@Andy’s post: Liquidation Fee Discussion - #144 by Andy appears to share the same spirit…

A proposal that takes those things into account… That i could get behind.

Cheers for the input!

Maybe you should be the one to put it forward in proposal format as put forward by @particleX here: Liquidation Fee Discussion - #119 by particleX

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100% in agreement here :+1:

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@benny_options could we open a second locked topic, where the actual proposals can be copied to. So its easyer to read up for people who haven’t followed the entire discussion?

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Hi Uglyrage. Thanks for the reply and I couldn’t agree more.

I agree that the reimbursement to users who got liquidated shouldn’t be mandatory. It would be a good will gesture and is being done to maintain a good user base.

I would have been fine seeing no funds refunded to anyone but I do think refunding people who were liquidated would be a good step for the future of Balanced.

I’m on the same wavelength as you. Although I don’t think it’s mandatory that people who got liquidated should receive refunds, if they are refunded I think it only makes sense that borrowers be considered too. It should be no one gets refunded or else everyone is accounted for.

I unfortunately can’t put forward a proposal as I had to liquidate all my BALN to avoid being liquidated. I hope to get it back with time but I took quite a big hit with the amount I needed to sell off.

Hopefully someone else can move this forward.

I agree with the statement that all borrowers should be appricieted.

However I dont fully agree with this statement.

The liquidation fee was ofcourse only applicable on those liquidated. I would suggest to put out 2 proposals to vote on. Im at work now on my phone now but ill put them in the format tonight (unless someone is first)

Proposal 1: return the liquidated sicx in the emergency fund to the liquidated people. Making like it never happened. The liquidated borrowers lost the liquidator fees but get back around 25%

Proposal 2: distribute 5% of the DAO baln to all borrowers. If we want we could set the date/time on that on strategic timeframe causing the borrowers that stayed with us till the end the people that can claim. I will think about a good timeframe later today

The 5% is just coppied from above so I have no particular reason to set it on 5%

EDIT: after consideration I would do it in one text proposal but still both events. Because if seperate it would be unfair if only proposal 2 passes.

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This is not really true, people not liquidated knew they would lose all of it at 67% LVT, which is what led to whatever actions they took to prevent it. All conditions are identical for all borrowers. The threat of that liquidation fee no doubt factored heavily into the choices of borrowers keeping their positions afloat.

The implication of 15% liquidation fee is either a lower liquidation ratio, or getting collateral returned, both would factor differently in the actions a person takes to keep their position open.

The thinking that the people not liquidated got off with zero reprecussions from the effective liqudiation fee of 33% is directly the part of all this that is most harmful to the health of Balanced, and the thing I oppose the most from other proposals.

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I like this proposal alot! I deleted mine because this is much better.

Maybe we could exclude the Collateral of Optimus. Optimus managed the rebalancing extremely well and did not suffer any meaningful losses.

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Hi all. I disagree with this proposal and have put my thoughts here:

I unfortunately had to sell off all my BALN in order to bring down my debt and hence can’t put forward a vote.

Would be great if you and other users could have a read and provide your input on whether all borrowers should be taken into account. Thanks!

I’m 100% in agreement with everything you’ve said here. I created a post elsewhere (Liquidation event refund to account for both parties - #4 by Simon) in a similar vein but I hadn’t seen your post. Sorry for the confusion. I’m new to the forum and am just seeing now that I posted that in the wrong section.

Your post is a much better idea. Thanks for putting this together @arch

I would sell my large remaining bags if nothing happened. I am big on Icon, I would likely buy a load more net quarter!

A lock could be good idea, but no one wants a lock through a bear market?

Mine wasn’t. but it was pushed well over

This proposal (or perhaps a variation of it) makes the most sense to me so far. I think if refunds are being done (which shouldn’t be mandatory and is a goodwill gesture) that all borrowers should be accounted for.

Those who maintained the bnUSD peg and paid off their debt accordingly also suffered losses

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I like this proposal because it accounts for the liquidated people’s collateral the best way, that they get back their fair share. The amount people get back should be dependent on their collateral. Those who were liquidated got affected the most. They were left with nothing.

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Wrong, they were left with their loan. Your loan is not liquidated, the collateral is.