As we’re all aware, there were many liquidations recently as a result of the recent market crash combined with high demand for bnUSD triggering large amounts of reverse rebalancing.
There are three votes in progress to try to mitigate future problems, all with a 1 day voting period.
1.) BIP17: Increase Lock LTV to 35%
2.) BIP18: Increase Liquidation LTV to 85%
3.) BIP19: Increase Rebalance Threshold to 8%
As for how to handle those that were liquidated prior to these changes, the DAO has options. Here is the current liquidation policy from the whitepaper
If a borrower drops below theliquidation ratioof 150% (above 66.67% LTV), the borrower will permanently lose access to their remaining collateral.
The reward for triggering a forced liquidation will be 0.67% of the collateral
The bonus for retiring bnUSD against the forced liquidation pool will be up to 10% of the bnUSD retired
Anything leftover from this process is swept to the Emergency Reserve Fund. I propose that the DAO review how much sICX was sent to the Emergency Reserve Fund and use that to return some sICX to liquidated borrowers, pro-rata, based on their liquidated amount.
There are more options that the community can consider. The DAO Fund can be used if necessary, along with additional sICX that was held in the emergency reserve from prior liquidations. I am open to all suggestions and ideas that the DAO can handle, I am simply offering this proposal as a starting point.
I am extremely glad that there is a quick response/reaction to this. Most people had/have their life savings in this platform and the unexpected rebalancing hit some users hard. Will definitely be voting “Yes” for this.
I’m not exactly sure of all the math so don’t want to specifically state it, but pretty much, the users collateral is sold to payoff their debt entirely, then there’s a bonus to the person that liquidated the account and paid the bad debt, then the rest is held by Balanced. That amount held by Balanced, the DAO can decide what to do with
I dont understand why there is no information on the UI that basically the penalty fee is 34%. Beeing liquidated doesnt mean that the penalty fee is 34%. I would have taken far more caution if I would have known this.
If it is somehow technical possible i would prefer the solution of retrospecitvely adjusting the liquidation ratio to 85% so all liquidation below get reversed and they have the same conditions like the other users with the new three proposals. Liquidations above get the penalty fee of 15%. Ideally everyone gets at least a chance to stop liquidation and the UI needs to be changed to warn that there is a 15% penalty fee.
So the only solution is getting back a certain amount of ICX? Obviously all the excess icx that wasnt needed to repay the loan should be given back. Everything else would be just wrong.
I want to epmhasize again: This istn about the risk of liquidations, but that the collateral was not only used to repay the loan but 34% was just kept as a penalty fee. Nowhere on the UI does it state that there is a penalty fee of this amount.
Would this require a separate vote, after BIP 18, and after things settle down and the numbers are all known as well?
I’m going to use an example to help clarify what happens and could happen
Could it potentially look something like this:
Hitchcock has 1000 ICX collateral and a 500 bnUSD loan.
The price of ICX drops to $0.74, and his position is liquidated.
Pays off the debt, returning 500 bnUSD for 676 ICX
Recieves 6.7 ICX reward (from collateral?)
Recieves up to 50 bnUSD (67.6 ICX value) bonus (from collateral?)
This leaves a minimum of about 250 ICX to be moved to emergency reserve fund.
As the proposal is a 18% increase to liquidation LTV. Does it make sense that the refund would be 18% of the collateral liquidated, in Hitchcocks case, potentially 180 ICX would be refunded from the emergency fund?
Indeed that’s how we’d do it. People can scrape the blockchain to find the data of all liquidated accounts, and how much. We’ll get a total amount of sICX liquidations and the pro-rata portion of each account. Then we can look at the emergency reserve fund balance, along with the Balance of the DAO Fund, and decide how much to return to each user, pro-rata.
I still think that reverse rebalance is a huge mistake on loan taking parts for people who like to do stuff on edge of their comfort zone, i myself only have followed on sideline about balanced tech and how it works but.
Exampl. Me who set threshold near 0.10 icx price before getting liquidated which imo. is considered to be pretty safe bet, but now things is getting out of hand with extra load and nearing that magical 0.4 usd icx price before getting rekt*. Do you still think that this was “too much” risk taken on loan ??
This is a good move for Balanced. I’ve been in Icon since 2018 and have always been an avid supporter. I had my life savings in this, and along with plans for my wife and two small children and our house, but this is simply devastating and caught me completely off guard, even for crypto. I knew my liquidation level, but feel that absolutely nobody knew how severe reverse rebalancing would be. I even paid $16,000 toward my loan, but due to the exponential reverse-rebalancing, was too little and too late.
As it stands now, many investors will be gone forever, keeping away a steady flow of capital, and Balanced would be seen very negatively (who would want to take any loan out ever if reverse-rebalancing is so severe that it can turn a small loan into a giant one?) I feel that rectifying this absurd anomaly is very much justified, and would look very positive for Balanced, drawing in even more users to the ecosystem.
Not only the system is taking more loan than i would like to manage, but things is clearly getting seriously out of hand. Though when design balanced system, there were grey areas about icx price dropping so drastically, which should had been taken into considerate since we are in crypto space and things may drop 90% out of no where.
Thank you for opening up such a sensitivity case from you and sorry to hear that system hit you that badly. When you already have plant to counter measure it until you realize that it wasn’t something you could had done to prevent it. No matter what other people think about rebalance system in this state, but 100% imo, that system is TOO flawed to be used in crypto space at current state. Even though we all knew that we were first adopters and alpha testers but still, there is a real money on the line which many of us still are deeply depend on…
Thank you for your kind words, friend. You’re right about us being alpha testers. I’m glad they’re making changes to improve the system, after the fact. I agree with you 100% about rebalancing as it stands now. My personal situation aside, I know that people want to see Balanced flourish, I just hope that voters will see that leaving things as is would leave a bad taste in everyone’s mouth.