Moving some sICX and BALN from the Emergency Reserve to the DAO Fund


The Emergency Reserve Fund was put in place to handle for edge cases, but right now I’d say it’s accumulating a bit more funding than necessary. Here is the purpose statement from the WP

In extreme circumstances where the value of bad debt of a particular pegged asset is greater than the value of the forced liquidation pool, an emergency reserve fund will be made available for outside traders to be compensated for paying off bad debt. 5% of Balance Tokens mined on a daily basis are sent to the emergency reserve fund, along with leftover collateral from liquidations.

At time of writing, bnUSD has over 5.5x value backing it ( There’s ~100M in collateral for loans and ~17M bnUSD of debt.

Having said that, the Emergency Reserve Fund could be triggered even for just small positions without a catastrophic scenario. It comes up when somebody is liquidated, but their collateral becomes worth less than their debt before liquidation bots can payoff the bad debt.


Imagine Bob has $10 of debt and $18 of collateral. Then ICX price immediately falls by 50%. Maybe Bob is the only guy liquidated, but his collateral is only worth $9 and isn’t enough to payoff his bad debt of $10. In order to get this extra $1, we would use the Emergency Reserve Fund.


The Emergency Reserve Fund balance can be found here* using the getBalances API (API #2). At time of writing, it’s holding:

sICX: 742,901
BALN: 676,641

The sICX is earned from liquidations, as excess ICX from liquidated positions is sent to the emergency reserve based on the current design.

I’d like to propose we move a decent chunk of sICX and BALN to the DAO Fund simply for better tracking of the funds held by Balanced. I don’t want to anchor the discussion to a specific value, so I’ll just open it up to suggestions of amounts to get things started.

In the end, all of it is controlled by the DAO, but better to have it ready to allocate to other initiatives, such as the Stability Fund, rather than sitting in the Emergency Fund where it’s more difficult to allocate to other projects/initiatives.

*Note - to interpret the numbers from the smart contract API, you need to convert from hexadecimal to decimal using this converter, then divide the number by 10^18

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I think that makes a lot of sense. I have some questions:

  1. Would it be possible to come up with a metric for a value spread we’d like to see in the fund?
    For example, 15% to 25% of this value (or set of values, or relationship of values).

  2. What tokens would be relevant in the use cases for the fund?

  3. Does having BALN in there just mean we will need to sell it to execute any use case?
    Triggering these use cases means stuff is going sideways, right? If we have to sell a whole bunch of BALN, crashing the price (potentially further, being a turbulent time), because we moved the sICX to the stability fund, then that would probably be a bad decision.

  • Would it be a useful to hold bnUSD in the fund?

Personally I think the Emergency Reserve Fund can hold a minimal amount of sICX. If we’re in a dire situation where we see BALN start to be taken from the Emergency Reserve, we can put up a vote and have plenty of sICX available for the ER in 5 days. Not sure if that answers this question tho

Not sure I understand this question either lol. When you say “the fund”, which are you speaking about? The ER Fund is specifically for the scenarios in my OP, and the DAO Fund can be used for just about anything.

My example shows a situation where just one position went sideways. If there were only BALN in the ER Fund, $1 of BALN would be sold for 1 bnUSD to recoup and payoff the bad debt incurred by Bob.

Yes, bnUSD could work. Essentially the bnUSD held in the ER Fund would be used to payoff any bad debt. So in my example, 1 bnUSD would be burned from the ER Fund to recoup the losses from Bob’s bad debt.

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I would personally prefer the Emergency Fund to stay what it is. We don’t know what the future will bring, trade volumes drop significantly on Balanced over last days, for example. Also it is Balanced token taken away from the supply, which increases value of the remaining tokens. Using the Emergency fund will simply dillute even more our share of Balanced.

I think you misunderstand the proposal. I am proposing to move from Emergency Reserve to the DAO Fund, and I’m only proposing to move a portion of it