Recent Liquidations & building goodwill

Proposal Discussion WIP: DFP
#83

From reading replies on here, telegram and twitter. I think the best solution from reading everyone’s feed back is do the full refund BUT also put the loan amount back to where it was. So with the new 67% LTV and 85% liquidation ratios people can decide to pay off the loan and do what they feel is best. Because if these ratios were in place 48 prior we wouldn’t even be having this conversation and probably could have prevented 80% of the liquidations.

This would also build trust in the community as with such a small user base it would negatively effectively balance with all of these users walking away. The best way to grow is with positive word of mouth. And admitting the system was able to with stand what happens but changes were made and allowing those people get get the funds back to make appropriate decisions with a better working system is the right thing to do. Some people may not agree with it but at the end of the day that is the right and moral thing to do.

At the end of the day if you keep losing users then balanced fails then that looks bad on ALL of Icon. So this decision just doesn’t effect balanced it can reflect on all of Icon.

4 Likes
#84

To add, i do understand the difficulty of compensating because this is not the first time. So also keep that in mind everyone. This was the first time this affected a large number of users, but not the first time people got liquidated. All in all, I trust in the leadership of balanced. Scott and team have been working their asses off to push BIP’s to mitigate the risk of more liquidations.

1 Like
#85

In my opinion Scott is the most important person in the Icon community. He is a champion for the people. I can’t say this enough. His hard work is unbelievable.

4 Likes
#86

This makes sense to me and seems fair

2 Likes
#87

I think this would be a fair shout. It’s all very well changing now but the damage is done and icx ecosystem needs all of us staying

4 Likes
#88

I have already posted my thought on another post about the refund, besides fees of 21%.

I wanted to give people in this post an idea of what has happened in the event between that very short 24-30 hrs time frame.

Starting with, I have my collateral fully locked with 110,000 bnUSD loans.
The market starts to drop, my Liq. Price is at around ~$0.71.

I sold some of my LP to lower my Liq. Pirce to ~0.62.

After 2-3hrs, I came back, and sees that I got added with some loan from rebalancing,
and Liq. Price goes to ~0.645.

What happened next is getting worst, the price of $ICX seems to drop more, I sold all my LP to lower the Liq. Pirce to ~0.435.

By the time ICX keeps dropping, my total loan is only 45,000 bnUSD, I have nothing to sell, which also I think I am safe with 0.4~0.5 Liq Price.

But the crazy part starts.

1 Account over 1M ICX has been Liq., and snowballed the rebalancing to less and fewer borrowers by % of their loan because more and more people are out of the line of rebalancing due to Liq.

Meanwhile, everyone is selling to bnUSD (which is normal for downtrend).

However, Rebalancing is adding 1,500 bnUSD per 15-30 mins to my loan, and my Liq. Pirce keeps rising. When the market price of ICX bottom at 0.612, my Liq. Pirce is at 0.589.

110,000 bnUSD loan repay to 45,000 bnUSD.
rebalance added 30,000 bnUSD in 12 hrs, another 15,000 bnUSD after we bottomed, totally time around 24-30 hrs, total loan rebalance added is 45,812bnUSD.
My Loan is doubled after I repay them, almost got hit on the Liq.

3 Likes
#89

Here is an example of how it works

If you had $100 worth of ICX as collateral, and 68 bnUSD debt, this is what happens when liquidated

All of your collateral is taken
$68 worth is used to repay your debt
$11 worth is used to pay the person that liquidated you
$21 is still remaining and held by Balanced

People can set up a bot to notify the protocol that someone is below Liq. Price.
Without the notification, the Balance Protocol won’t auto Liq. people.

The people who setup a bot will be rewarded 11% of the amount.
The DAO emergency fund will be holding 21%
68% just used to repay the debt.

These are before BIP 17,18,19,20,21.
After BIP vote, it’s just % changes.

1 Like
#90

I know. The problem is what the UI shows user. There is no penalty fee displayed.
On top of that the drastic proposals are proof that the protocol with its rebalancing was malfunctioning and malicious towards its users. Of course there are also people who profited by setting up bots to liquidate but this is just a further sign that it was malfunctioning.
The fact that all collateral gets liquidated instead of only liquidating only a portion in order to be not undercollateralized just shows how poor the liquidation mechanism is. The slick ui is suggesting to users that this is a sophisticated protocol, which cannot be further from the truth which such a liquidation mechanism. This is further disturbing when you consider how attractive the dao it makes to borrow (only one time fee, continous baln rewards and you even can keep staking rewards). All those benefits are clearly stated on the ui where the above mentioned things are not!

4 Likes
#91

In none of the votes did it state fix this malicious and malfunctioning mechanism.

I voted for the proposals to help people manage their positions by adjusting parameters.

I don’t believe that rebalancing was malfunctioning or malicious. It was doing what it was intending to do, keep the peg within the threshold.

3 Likes
#92

Alone the proposal of changing the peg to 1,1 is such a drastic measure that it speaks for itself.

You are right it. It balanced and did what it was supposed to do. But the consequence was that in a short periode of time people got addad a huge amount of debt and even if they check daily their position (the need for this would be ridicilous) they werent able to sell their collateral because it was locked while still continuing to add more debt. Getting new funds into baln is very hard since the infrastructure in icon is still so poor. I personally need to get fiat money to a CEX (Binance or crypto.com), buy ICX, transfer to baln. This takes over a week!

4 Likes
#93

They were all drastic measures, but that doesn’t equal malicious and malfunctioning.

If you want to, you can totally continue to frame any vote or change that tries to help people who are in hard positions as an admission of failure/responsibility/malice on the part of the DAO and Balanced towards the people in those positions.

However, I personally would find it increasingly difficult to support those votes/changes if they are just being thrown back in our faces as admissions of failure/responsibility/malice.

I want to see balanced continue evolve, grow, and benefit all users.

I want to support refunding the penalty difference.

Me wanting to support those things doesn’t equate to the protocol, in its current or previous states, as being malicious.

2 Likes
#94

Same. I don’t like how some try to put the blame on the platform.

People just ape into a platform because they see high APY and don’t read the documentation and don’t consider black swan events. Of course they get rekt at some point.

#95

Right, it didn’t fail, but I don’t think anyone including the founders ever expected the rebalancing to go that aggressive. That comment is also one persons opinion, not the majority.

#96

This is a bad take…I understand many people are emotional right now, but some of these statements arent right.

#97

Changing the peg of a stable coin to 1,1 is just crazy. Doing this in an emergency vote within only 1 day also speaks for itself. This should undoubtedly show that the house was on fire. Not because of overleverage but because of the mechanics of the protocol.

3 Likes
#98

I totally agree the house was on fire.

I disagree that the mechanics of the protocol was the ignition.

Many users were over leveraged heading into the airdrop snapshot.

During that time we saw how the risk of a position can quickly change due to rebalancing.

In the following 3 weeks some took steps to adjust their positions, even if it was at a loss. Some of those people made plans that worked, some of those people made plans that didn’t work.

I realize I might not change your mind on this. I’m just stating how I see it.

1 Like
#99

Obviously you are unaware of how much the rebalancing increased the loans within a short periode of time. That the protocol is increasing loans that are locked is unacceptable and has to be displayed as warning in bold letters on the ui.

2 Likes
#100

I think the mechanics were drastically under realized that a positive rebalance of that magnitude would ever run positions that were conservative into a forced liquidation. I do think its worth reimbursing the liquidation fee for this reason to maintain community and goodwill. By not reimbursing the DAO takes this one time “fee”, but ultimately looses a large piece of the community. By reimbursing the liquidation fee I think it would maintain the community. I think for Balanced to truly grow and succeed that growing the community is the most important aspect. I think reimbursing the liquidation fee would have a higher net positive impact on the DAO overall vs simply keeping it. A few people complaining with bad takes on the message boards are the minority, not the full picture.

2 Likes
#101

Right! Many people had a low liquidation price (for example in the 30 cent range which is not over leveraged) and got struck by forced loans which brought up the liquidation price just when the market crashed. And our collateral is locked so we can’t sell out. What an excellent scam! Why do I get furious? Because many of us have been in Icon for several years, then trusted that Balanced was a BANK and left our savings there and got liquidated because of system failure. Much of the DAO fund is now the liquidated people’s money (penalty fees) and should be returned asap!

3 Likes
#102

Let me also add that there is nothing really fixed so far. Not only is the change of the peg no good advertising for a stable coin but also the missing information about the liquidation penalty and the agressive rebalancing has to to be added to the ui. Finally we dont even know if the protocol is stable enough right now. We will see if bitcoin dumps further…