[Not Pass] BIP#16: Adjusting the repayment ratio of NFTs in auctions

BIP: #16

Title: Adjusting the repayment ratio of NFTs in auctions

Idea(BRC): https://discord.com/channels/897709643948761148/1043769810439372831

BIP by: BoredBros#9996

Created: 2022-12-7

Status: Community Review | Vote Pending | No Pass
BIP Editor: NFTLZ.ETH#0717(**@**defiandnft)

Updated:
Snapshot: Snapshot

Background

Under the current liquidation auction mechanism of the protocol, when NFT enters into liquidation auction, the Borrower has the following rights:

  • The borrower will have a liquidation protection period to repay the loan.
  • If the borrower repays 50% of the debt within 24 hours, he/she will pay a fine of a maximum(5% of the debt, 0.2 ETH) to the first bidder.
  • If the collateral is sold in auction for greater than the loan amount, the excess will belong to the borrower.

”If the borrower repays 50% of the debt within 24 hours” ,The purpose of this entry is to protect NFT holders. Within 24 hours, the liquidation auction process can be suspended by paying 50% of the debt in order to retain ownership of the NFT.

Summary

For NFTs in auctions, adjust the option to “repay 50% of the debt” to one of the following options:

  • Repay 20% of the debt
  • Repay 30% of the debt
  • Repay 40% of the debt
  • No adjustment

Motivation

Proposer “BoredBros#9996” thinks :

  • The need to pay 50% of the debt in order to suspend the auction is an unnecessary penalty on the borrower.
  • Lower repayment rates will better protect borrowers and make liquidation auctions easier to stop.

Risk Analysis

The proposer has not analyzed the risks and the BIP Editor will collect suggestions from community members here.

Adjusting the repay ratio of NFTs in auctions has little impact to the stability of the Protocol as which is mainly depending on the Liquidation Threshold (80% currently).

Test Case

Case1: Alice’s NFT is in auction, Alice’s debt is 50 ETH.

Current Repay Ratio is 50%: Alice repays 25ETH and the auction stops

Adjusting Repay Ratio to 20%: Alice repays 10ETH and the auction stops

Poll

  • Repay 20% of the debt
  • Repay 30% of the debt
  • Repay 40% of the debt
  • No adjustment

0 voters

as a benddao user, I think 20% will be fine

2 Likes

When the market going to crash, the liquidity drain so fast. So if we make it 50% mean BendDAO user need to extract more ETH when the market liquidity is still there, which is a more protection for BendDAO borrower and BendDAO protocol.

I support to not change it especially LTV changed to 60% and 50% for BAYC & MAYC.