I think LVT changes wont change much in supply of bnUSD so are probably not worth the churn. Unfortunately personally I think the best fix to rebalancing is more reblancing, since I don’t see that as a problem. As it gets more, the people that dislike it will close out, and this will reduce bnUSD oversupply. But I understand it is not a popular opinion.
I think having the element of having some sort of flow where at some level some amount of rebalancing always happens is a good way to keep things pegged until bnUSD naturally becomes big enough to reduce.
If noone wants to close and people infinitely rebalance, the drag from origination will eventually make that stop too.
I am not convinced people hating rebalancing is a good enough reason to ‘fix’ it. All of this disscussion is about bnUSD supply, if rebalancing was as bad as claimed, the supply would not be too much.
Additionally there is no real benefit to having ‘more and more’ borrowers/collateral/TVL in collateral. More TVL in LPs is positive because it improves the trading costs for traders, which encourages trade. At some point a larger and larger collateral from minting bnUSD has no effect, we only need enough collateral to peg the bnUSD in existance now. When will we need more? when we need more bnUSD ie. when demand on bnUSD increases. At that time the collateral TVL will naturally increase without us doing anything.
Setting the peg tight will make bnUSD desirable, cause large rebalancing, if people exit, the borrower rewards will naturally increase which combined with a lower orgination will let people come back in, for the ones that want to. This will reduce bnUSD supply, and reduce rebalancing. If at that time, the collateral backing bnUSD becomes not enough, we can then increase borrower rewards.
One thing I would love and have no idea how to figure out, is how much collateral do we need to support pegging how much bnUSD. But theres so many factors, and one of them is ‘how much rebalancing is acceptable’
But just like ‘setting loan LVT to 25%’ will make a bunch of people close positions. Telling people ‘you are about to get rebalanced a whole bunch’ will also close positions. Why the former is better than the latter I don’t know. The best bonus is the first parties to leave will be those that are causing the msot rebalancing, by constantly working against it.
EDIT: Lastly I think limiting LTV, especially to so low is quite restrictive to growth. As I mentioned total LVT is sitting at about 17% now. Perhaps the old system where lower LVTs got borrower rewards, but higher did not can let the platform grow past 25% if there is unancipated demand on bnUSD. I know everyone can only see the reblancing in one direction, but it needs to work in the other direction too. I don’t like essentially proclaiming there is no way for the platform to grow without another vote bringing it back up