0xTediousNovember 22, 2022, 11:15pm
Suggestion: Auction for liquidated CORE / CoreDAO / rLP / ?
Main area of impact: Fees and Treasury.
Background and crude introductionary reflection:
cLend currently has a 20% interest rate on both CORE and CoreDAO, so it is safe to assume that if and when rLP gets added as possible collateral, the 20% interest will apply to that token as well, and any other treasury-backed token in the future.
I mentioned in «Thoughts around the CoreVerse treasury» my interpretation of how the ecosystem is structured makes it so that when a lender gets liquidated, the ecosystem/treasury loses out on the income of the repayment of that 20% in accrued interest. When that happens, the other individual investors holding the same token type that got liquidated get an increase in value on their holding, as their relative % ownership of the DAO-controlled treasury increases.
The question is, which of the benefits is the best when all things are considered?
I personally think the best thing is ensuring income to the ecosystem, and my suggestion is as follows:
Hold an auction for liquidated tokens where the minimum price for bidders is the original loan value on cLend, so that the loan portion of the token in cLend can be restored, in addition to the accrued interests owed to ensure income to the ecosystem, and on top of that you could either have a minimum percentage premium, that also goes to the ecosystem/treasury, or you could leave that up to the market where the bidders will decide on what it is worth.
You could also distribute a portion of the premium as payment to stakers to further incentivize staking.
I, for one, would most definitely bid on said tokens if they ultimately got sold at a discount compared to market prices, so I think in reality, they would be sold to just below market price, and it gets arbitraged somewhat out.
I do not think the volume on this would be such a volume that it breaks any other parts of the ecosystem. And I think, as a whole, this will benefit the ecosystem.
WTwizardNovember 23, 2022, 12:27am2
Nice write-up and thanks for the sharing the idea. The auction idea will make a lot more sense once the system gets up and running further. May not be difficult to have a ‘lien auction’ on the loan and users can bid on the debt to acquire it.
Keeping revenue in the ecosystem is usually a good idea. Especially with Core token supply being so insanely small to begin with, it would be best to sell the loan and keep supply the same.
iamcapoteNovember 23, 2022, 6:38pm3
I like this idea. putting here MakerDAOs technical info & discussions for their auction liquidation mechanisms. which could be used as an example of such a mechanism
The Auctions of the Maker Protocol
Also curves new stablecoin which has its own liquidation mechanisms with their LLAMMA
EDIT: Found this from dForce