BIP#9 Adjusting Liquidation Threshold, Auction Period, and Interest Base Rate & UI Improvement

We are sorry that we underestimated how illiquid NFTs could be in a bear market when setting the initial parameters. In the past several days, we got tons of feedback and suggestions from the community (BIP#8 Changing Lending Parameters). After a comprehensive review and discussion, it’s time to make a proposal to help ETH depositors to build confidence. To achieve that, we would like to do the following for the community to review:

Protocol short-term parameter improvement (It will be effective after 24 hours of voting in the Snapshot):

  • Adjust the Liquidation Threshold to 70% as follows:
    • update to 85% August 30th, 12 pm UTC
    • update to 80% September 6th, 12 pm UTC
    • update to 75% September 13th, 12 pm UTC
    • update to 70% September 20th, 12 pm UTC
  • Adjust the Auction Period to 4 hours
    The 48-hour window is designed to protect NFT holders to avoid liquidation without waking up and losing their PFP. But right now we have TWAP protection of Oracle on-chain which means floor price attack would be very difficult. So we would like to reduce the period from 48 hours to 4 hours to improve liquidity for auctions.
  • Remove the first bid limitation of 95% of floor price
    It will limit the aution competitors.
  • Adjust Interest Interest Base Rate to 20%
    It would help more ETH depositors earn more interest and prompt more NFT holders to repay ETH.
  • Make a proposal about if the bad debts happened, how to deal with it
    BendDAO community can vote to decide how to use the revenue and BendDAO treasury to cover the bad debts if it happens. We will make a discussion in the forum and a proposal for it soon.

UI improvement in new 24 hours:

  • Display how many floating bad debts in ETH of BendDAO auction page
    It is very important to provide more transparent information about what the situation is now. Even 100 ETH floating bad debts can make the 15,000 ETH depositors get panic if someone FUD. Transparency is the key to trust.
  • Display how much interests total on the homepage
    Right now users feel confusing about ETH borrowed > ETH reversed, the difference is due to the interest total generated for veBend holders and ETH depositors.

Protocol improvements in the future:

  • Support offers for collateral in BendDAO
  • Reach as many exchanges as possible to list collateral
  • Trying to support downpayment for auctions
    BendDAO is what we build to try to provide more liquidity for NFTs, and we will move on.

The vote snapshot for vebend is here: Snapshot

2 Likes

中文翻译 供参考

我们很抱歉,在设置初始参数时低估了NFT在熊市中的流动性有多糟糕。在过去的几天里,我们从社区得到了大量的反馈和建议(BIP#8改变借贷参数https://governance.benddao.xyz/t/bip-7-changing-lending-parameters/107)。 经过反思和讨论,现在提出这个提案以帮助 ETH 存款人重建信心。

以下为具体方案:

协议短期参数改进(将在快照中投票24小时后生效)

  • 将清算阈值调整为70%,具体执行如下 (北京时间):
    更新至85% 8月30日 下午8点
    更新为80% 9月6日 下午8点
    更新为75% 9月13日 下午8点
    更新为70% 9月20日 下午8点

  • 将拍卖期调整为4小时
    48小时窗口的设计是为了保护NFT持有人避免清算,而不至于醒来后失去他们的PFP。但现在我们有TWAP保护的链上Oracle,这意味着地板价格攻击将非常困难。所以我们希望将时间从48小时减少到4小时,以提高拍卖的流动性。

  • 取消第一个出价为底价的95%的限制
    出价者更好竞价。

  • 将利息基准利率调整为20%
    这将有助于更多的ETH储户获得更多的利息,并促使更多的NFT持有人偿还ETH。

  • 提出关于如果发生坏账,如何处理的建议
    BendDAO社区可以投票决定如何使用收入和BendDAO国库来支付坏账,如果它发生。我们将在论坛上进行讨论并很快提出建议。

在24小时内改进用户界面

  • 显示BendDAO拍卖页面的ETH浮动坏账的数量
    提供更多关于现在情况的透明信息是非常重要的。即使是100个ETH的浮动坏账也会让15000个ETH的储户感到恐慌,如果有人FUD。透明度是信任的关键。

  • 在主页上显示利息总额
    现在用户对借入的ETH>转出的ETH感到困惑,这种差异是由于veBend持有人和ETH储户产生的利息总额。

未来协议层面的改进

  • 支持 BendDAO 中的抵押品报价(Offer)
  • 尽可能多地接触交易所,支持抵押物挂单(Collateral Listing)
  • 试图支持拍卖的首期付款

BendDAO 的出现是为了给 NFT 提供更多的流动性,我们将继续前进。

veBend 的投票链接: Snapshot

I think the auction time period should drop to 24 hours, this gives everyone in every timezone an equal shot, and the 20 percent reduction in liquidation threshold should easily allow for this

1 Like

I agree with this opinion

1 Like

清算阈值调整的同时,出价的金额应该也同步调整了吧。
如清算触发调整为70%时,出价的金额是否也调整为地板价的70%且大于债务?
还是说出价只需要大于债务即可。

24h is too long for the current situation imo. We have an on-going crisis here – I’d rather overfit for protecting the protocol than for making the UX good.

2 Likes

For now, agree this.

Thanks for writing this up @codeincoffee and I’m glad our previous proposal could serve as a good starting point.

I think these are good measures and address the right problems. On top of them, I’d expand the proposal with the following:

  1. The DAO should consult with parties specialized in risk to do a thorough analysis and subsequently build a more sophisticated system that fully accommodates for existent and future risks. This can be arranged and discussed at a later date, but it might be a good idea for the DAO to engage in something like this and mentioning the possibility of doing so in this proposal could be worth it.

  2. At the end of the proposal, some changes that would likely require modifications to the smart contracts are mentioned (such as supporting collateral offers). It’s probably a good idea for the DAO to review potential improvements to liquidation system too. Some ideas include the following:

    • Allowing offers that are greater than the debt but not necessarily greater than 95% of the floor.
    • Modifications to the way the surplus coming from a liquidation of an NFT at an excess is distributed (i.e., following from a previous post in this forum)
    • Pivoting away from an English auction system (thank you Yaron) and borrowing some ideas from MakerDAO’s system design.
  3. I’m not completely sure how deposits are tokenized. If they are with transferrable tokens, the DAO could step up to offer current depositors the option of selling their positions to the DAO at a discount, potentially funded with money from the treasury or from OTC buyers or other parties. This would allow a way for depositors to exit their positions and alleviate stress coming from community members with their ETH stuck in the protocol.

Overall, I think the proposal is already a step in the right direction. I think it could be further expanded with some ideas too.

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when the market is going to the deep, floor price can change a lot in 24 hours, that would make aution liquidity worse.

Agree with the proposal, a higher threshold make bids more risk / reward attractive, while the 4hr make stuff faster to manage…looking fwd the debt management proposal for the DAO

As I expressed to the BendDAO team via Telegram, I believe the current proposal on Snapshot should not pass.

Following the overwhelmingly negative response from the community (especially to the point about lowering the liquidation threshold) and the real risk of liquidating people that signed up under different terms, I think that the current proposal should not go through and that instead a draft proposal should be brought up that addresses the new points raised by the community. This can be done in the span of a few hours.

I believe that some changes could be implemented soon which would alleviate the situation without sacrificing the borrowers (i.e., check out here and here). On top of these ideas, an arrangement should be pursued with OTC buyers where they could commit to buying distressed assets from the protocol for the next several weeks. This is realistically one of the best shots at reducing the risk of bad debt (by off-loading assets that are pending liquidation) and decreasing the utilization rate (consequently freeing up capital for depositors to withdraw, if they want, and bringing the APRs down, helping with the debt spiral currently on-going).

All in all, I believe that the community should be put first and that many fair points were raised that the current proposal does not address. I don’t think this has to be some sort of Pyrrhic victory where the protocol reduces its own risk at the cost of losing its community of borrowers.

My suggestion is that the next step could be to discuss the establishment of a liquidation fund or the introduction of a third party professional liquidator to handle the liquidation.
Put the risk to a professional person or institution, benddao should not come to handle these risks, but can provide a platform to handle the risk, but the risk should not be borne by benddao.

我的建议是:接下来可以讨论,建立清算基金或者引入第三方专业清算人,来处理清算的问题。
将风险交由专业的人或机构处理,benddao不应该来处理这些风险,但是可以提供处理风险的平台,但是风险不应该由benddao承担。

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Wouldn’t the 4hr window be too short?
Will there be changes to the TWAP time interval in this proposal ?

As of now I believe there are no real “bad debt” to the protocol, as shown on BendDAO’s website. I also think we should leave to the market to decide when and how to liquidate an asset. So if someone wants to liquidate, he/she should go thru auction on BendDAO itself, instead of doing so with OTC trades. I believe that is fundamentally against the DeFi spirit.

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The point is that you can negotiate OTC with people that can buy the collateral directly from the website. What do you meant this is “against the DeFi spirit”?

Secondly, the protocol doesn’t have bad debt right now because the floor went up. However, the protocol currently has 219 ETH in debt from loans that are pending liquidation and have not had any bids (source). If the floor drops, this could well create bad debt because the price at which you auction the collateral may not be enough to cover all the debt.

the 4 hours window can be voted to be longer in the future I think.

there is not float bad debt in benddao, why do we need otc to buy they out? if they want the assets, they can come to bid them?

the world is knowing benddao, I think they will come to join the auctions.

We would like to make a new proposal to let the community do more votes on the parameters.

think you are right, we can make it from 48hours to 24hours, and let the community to vote whether make to 12hours or 4hours later.