I feel it’s quite generous. The DAO emergency fund would be covering just under a third of the refund (roughly 586,000 sICX), using previously held sICX.
I’m not saying I’m against this proposal. Just that it covers the fee paid to liquidators as well, in an effort to make the liquidated whole again ~ that’s the part that I feel is generous.
There are discussions happening:
If it would come to a vote I would vote yes on this but as previously stated by Awaxjago this would be very generous. Its bassicaly a full refund and will take aditional sicx from the fund to cover. Perhaps a proposal to devide and give back all the sicx added to the security fund between the 20th and 24th of january would have a better chance of succeeding. In that case it would be like it never happened for all other users. It would result in a refund around 25%
I think it is more beneficial to have those ICX back in the ecosystem than collecting dust in the emergency fund. They will inevitably find their way back to BALN and Dapps and add more utility. They are not a productive asset sitting in the emergency fund. I think this is the time to be as generous as we can to help our own. The more we help now the stronger the community will be going forward. There will still be plenty left in the emergency fund.
The argument from those who were liquidated might be that if this had never happened, and they hadn’t been liquidated, like if the liquidation LTV were 85% all along, then they would have retained the upside from continuing to hold all of their collateral. In that sense, they were still forced to sell enough collateral at the bottom to cover all of their debt.
So I don’t think we are letting them off too easily, they are still suffering some from having maybe held too risky a position, but then we are all suffering some and many of us sold a considerable amount of collateral to avoid liquidation.
That’s why I feel this is pretty equitable compromise.
Thank you @particleX, for putting forth a proposal. We all appreciate the effort.
AS A REMINDER TO ALL ON THIS THREAD:
If you want a specific proposal to be voted on, PLEASE DO WHAT @particleX did here
After taking time to read all arguments of every angle and thought through this thoroughly, I believe this is the best proposal for a compromise where all parts can meet. I believe we should go for this and make a vote out of it.
Well thought through solution. I support this idea.
Should add a lock. Maybe most people who get it back will sell it asap.
This sort of proposal is way out of line.
Are we saying that the parties that DID manage to bring their accounts within the parameters they all signed up for, the current borrowers, that right at this moment still would not get back collateral - debt if liquidated, are they are a lesser citizen than parties that did get liquidated?
People talk about the health of platform, should we not prioritise parties still in the ecosystem, that undoubtedly still suffered finanicial loss but had the risk management to deal with their risk?
I am not against a goodwill guesture, but lets examine the language and sentiment shall we? Bold emphasis mine.
it is clear that the system spun out of control with unexpected rebalancing dynamics that hurt most of us, but some more than others.
This will restore those who were liquidated back to the value they held at the time of liquidation.
Those who were liquidated would thus be made whole to the value they held at the time of liquidation
It seems like this level of refund is required. Is it enough?
EDIT: I left out the worst one
Return 1/3 of seized collateral to all borrowers liquidated between Jan 20th and Jan 24th 2022
It also doesn’t miss the chance to take a swipe at Balanced
Balanced will have to go further to incentivize borrowers to take on the risk of a loan going forward, and serious thought needs to be given to other approaches to maintaining the bnUSD peg.
This is what it sounds like it does:
The proposal is lacking:
Hey @arch , I appreciate your feedback as always, but I’d like to point something out that’s extremely important for the future of Balanced.
As it stands, this is the only proposal. I recognize you strongly disagree with this proposal, but if anything else is to go for a vote, a community member must put forth another proposal. I hope to see multiple proposals. Given your strong opinion, it would be great to see one from you as well. I would hate to see only one proposal go up for voting.
We can set a soft deadline on this thread as to when the on-chain vote should take place.
@particleX of course feel free to adjust your proposal as well given feedback from replies on this thread
I agree, my comments were only directed towards the proposal, not ANY or EVERY proposal on this topic.
I would have no issues with writing a proposal myself, however to do that in good faith I would need to have a basis or argument to put forth. As it stands, I’m waiting for a proposal I agree with, not because I agree with it as it matches my thoughts, but because I agree with it because it helps me see the angle.
I can say a reasonable ‘amount’ might be the difference between current liquidation penalties and previous liquidation penalties, in practice applying new rules to old. However I would not be able to articulate the gain from the use of that ‘amount’ - goodwill or magnitude thereof nor potential impact to existing borrowers.
Borrowers who, unlike parties liquidated, continued being rebalanced, and needed even more funds to manage risk.
For me personally there is a very large difference between ‘goodwill has value’ which it invariably does, and ‘this action will generate reasonable goodwill’.
Hey @arch,
I am surprised by your impression of the proposal. I am not among the liquidated and best fit the description you give of the other side since I avoided liquidation by selling 100k+ sICX collateral in the low 0.6 bnUSD range. For some reason I often argue the position of other people and forget to advocate for myself. I’d agree that we don’t want a solution that leans in the direction of rewarding people for having been in some sense careless by overextending themselves.
To the extent that the rebalancing system had an unexpected feedback loop it was an error that negatively affected pretty much everyone who had a loan, but those who were liquidated are currently down the most. The only ones who benefitted were those executing the liquidations and I am experienced enough with human nature to know they aren’t looking for a way to pay it back.
Considering the points you made I’d have to agree the proposed solution may overcompensate a little. What state do you think we could offer to those who were liquidated that would be roughly equivalent to where they would be if they had avoided liquidation? That is what we are looking for, right? If we can settle that then Balanced might offer some other across the board goodwill gesture for all of us participating in borrowing.
I would support this, and I believe this would restore my faith and others’ in the platform.
I back this and would love to see this go to voting by the end of the weekend. We should put this off for a long time. I think all proposals should be in by Friday and put them to a vote by the weekend
The 33% I feel is very fair and reasonable given the circumstances around the liquidations.
We will not have meaningful discourse if that is the point at which we start.
There was no runaway feedback loop, and if there was it certainly was not engineered by some party looking to seek profits from liquidations, if for nothing else, as this thread and your proposal suggest, most of any difference sits in the DAO.
From day 1, and as outlined by the very product of bnUSD, it has always been possible to liquidate the entire collateral. All you need to to sell enough ICX. You can do that today, you can do that during the crash you can do that in the future. The reason thats not profitable is it involves selling a lot ICX at a loss, and holding a ton of the currency you just destabilised.
But what else is like someone selling a crap ton of ICX, thats right, panic in a downturn.
Here I want to expand on some thoughts about how ‘rebalancing is the cause of these liquidations’
Imagine traditional leverage, on a CEX, you deposit ICX, borrow another stable. They actually assess your LTV on the USD value on both sides, however because most stables are very stable, this doesn’t vary much. However in the event USDT went to 1.10, as someone borrowing USDT, hence short USDT, that represents your position worsening, and could be liquidated just from USDT rising.
Any platform that doesn’t do that opens itself to liability and bad debt.
Now lets be 100% frank, bnUSD is not even in the same universe as the big stablecoins, with that kind of sell off and sort of small mcap and isolated enviroment, bnUSD price would have gone haywire. This increase in bnUSD price would be equivilent to the amount purchased via rebalancing.
The reason Balanced doesn’t evaluate your loan on the price of bnUSD is because it knows and itself enforces the value of bnUSD… via rebalancing. However if like now, its not really doing that, the actual risk to the position of the DAO is actually quite high. It LOOKS like the DAO is still currently taking 15% on liquidations, but thats only if bnUSD comes back to 1USD. If for some reason it sits at 1.10 or 1.12 for long periods of time, the ‘fee’ is almost zero, because yes, its not a fee, its a buffer to protect the peg.
There are in fact minor differences, but if the platform was instead evaluating debt via the DEX price of bnUSD instead of doing rebalancing and adding to positions, you would largely end up with the same % of LTV and get liquidated at about the same values.
The other half of what looks like ‘a feedback loop’ is, is plain and simple a long squeeze. When something used as collateral falls (and for a pair, when the price of the thing you borrowed increases) it causes mass buying… of the thing that is increasing in price(bnUSD), Which again, for bnUSD instead of increasing its price, manifests as increasing your position, INSTEAD. This point looks a lot like rebalancing is at fault but again lets remember. Balanced assesses your debt based on the oracle USD price of ICX instead of just the DEX sICX/bnUSD price, it KNOWS it can do this, BECAUSE of rebalancing. If there was no rebalancing, there would be no way to gurantee this relationship, and it would need to assess bnUSD on the price it has, which would impact the borrowers position in the same way, via the high price of bnUSD.
We must, look to even the largest and most successful stable coins, they are NOT 1USD during periods of extreme volatility, so pretending your debt hasnt increased when the stable you borrowed is in scare supply and rising in price is not a solution, and in fact opens the platform to very high risk.
TLDR: If bnUSD was just a small cap stablecoin pegged by USD, the liquidations would have been very likely to happen anyway. The key factors are not rebalancing but
With all due respect, I would like to make a few points.
This does not sound like a swipe at the platform to me, but rather a productive discussion that needs to happen. Whether it needs to be in the proposal or not is of course debatable, but I see no harm in having productive discussions to better the platform. I believe everyone wants to build toward a future were this type of scenario does not occur again. Having this in and of itself also infers that the affected parties will in fact still want to use Balanced and make it the best platform that it can possibly be.
You are correct in the valuation of those who saved their position at this moment, but they still are afforded the option of whether to do that or not. I myself ended with a position of about 90,000 ICX, after putting in 16,000 USD to try to save my position, but it was all for naught. If 1/3 of my position was returned, I would barely get a little over that in valuation. I can honestly say with 100% certainty, that I would rather be in the current position of having 66% LTV but still having 90,000 ICX.
The proposal itself is the act of goodwill. We all know what has been said on the forums and twitter and social media, some of it professional, and some of it far less so. People are hurt, and I believe rightfully so. Some blame the platform and some don’t. Some take responsibility and some don’t. Regardless of this it is the unexpected event that occurred that has created these sentiments. These are real people with real lives and livelihoods at stake, and the event that occured has severely impacted us all. We are hurt, and pleading. The proposal is to fix this hurt. This is goodwill.
First of all I absolutely sympathise with the situation and wouldn’t wish it upon anyone. But something that I think is missing is, someone that still has their position had they started from the same point, wouldn’t have those numbers. They would have put in maybe 20k, 30k,40k retained the position with even more debt and more bought ICX via rebalancing, which fell more, and now would need to close their position to eliminate risk at a currently 7-8% premium on top of that. And they would have done all that… to avoid the exact 33% liquidation penalty we are talking about right now. The non-liquidated people were not immune to that liquidation level, they suffered through it all the same.
No doubt many sold off other assets at a loss for their position.
Something liquidations do is prevent more losses from falling, and of course even within that 4 day period, lets say theres someone that got liquidated at the start, didn’t absorb more rebalancing over those 4 days, and they get this refund. Their position is totally different from someone liquidated at the end, they propped up their position day by day, it fell more, and then just before the new proposals go through, they get liqudiated.
Have you guys actually looked at the data? Most people would’ve gotten liquidated anyways. Over 70% of the addresses liquidated had a liquidation price over 0.60 pre reverse rebalancing.
We’re just promoting over-leveraging and bad borrower habits.
I think we will never agree 100%. That’s why we need to vote on it. Suggestion by @particleX is the best I have seen so far given the overall circumstances. I don’t think it’s too much to give as many suffered a loss anyways (referring to earlier stated arguments) and most of the funds that get refunded is basically the liquidated’s funds plus a little compensation for the error you could say so it’s basically just giving it back to them. That’s how I see it.