• AIP

  • AIP - 13 alUSD Cap Increases

Despite several weeks of turbulent markets and a sharp reduction in the alUSD reward weight, the alUSD peg has held incredibly well. It is clear that there is the demand to raise the cap and to give the people what they want, more alUSD.

The team is confident we can handle a large increase to the debt ceiling, however, we don't want to do it all at once. Therefore, for AIP 13, we propose that we have the clearance to raise the debt ceiling from 125m to 200m over the course of three steps. Initially, we will raise it from 125 to 150m. We will raise it to 175, and again to 200 if the peg is stable and market conditions permit.

Approving this governance action will allow the team to conduct three debt cap raises up to 200m alUSD. The core team will proceed with the utmost caution upon each successive debt cap raise and will prioritize the peg and system stability over anything else.

Rejecting this governance action indicates that you are in favor of an alternative proposal and or reject this proposal.

This will be on snapshot: link incoming.

More of a curiosity than a requirement, but are there any definable metrics that would trigger a yea/nay/delay on each individual increase? Or is it more of a "gut feel" kinda thing based on the devs experience watching the peg over the last few months? Ie say we increase to 175m, peg drops to 99c. Is that OK? 98c, OK? Maybe as long as peg doesn't make a new ATL it's OK? Just want to know if there is a way to quantify what's acceptable or not. Again, more just curiosity - plan to vote yes regardless.

    ov3rkoalafied

    Love the idea to raise the cap as the peg has withstood a good amount of time and price volatility of alcx. I am also curious regarding the metrics but will vote yes either way.

        Thelionshire

        The metrics would be the actual peg, the balance of alusd in the various pools, and the trajectory of the transmuter's balance. If those all look healthy, then we will proceed with the next raise. We certainly won't have as long as a wait as we currently have had. Albeit part of why the delay happened was that we were being sidetracked with the aftermath of the alETH incident.

        Only wanted authorization to do this so we can remove some friction for a little while.

          Definitely in favor. The primary reason anyone would use the protocol is to get a loan without taking on the liquidation risk. When we are up against the debt ceiling, the protocol cannot fulfill its primary use case. Do we foresee a time when the debt ceiling can be removed entirely? Personally, I don't understand why alUSD would be subject to losing it's peg when it is backed 2-1 by DAI. If the peg did slip users could deposit to the transducer to arbitrage. If they acquired alUSD via loan, they can return it and get their collateral back. Users with DAI collateral and no alUSD could buy it at a discount and pay back their loans. Seems like market dynamics would quickly take care of any peg issues that may arise.

            asymrisk Consider the scenario where alUSD starts losing peg. Say you put in 4k and took out a loan for 2k, and were lucky and sold your alUSD for DAI before peg start slipping. So now you say "hey, I'll arb it back up, pay my debt for cheap!". Well, your debt has been automatically paid down some amount by the system, let's say $100, so you no longer need to buy 2k alUSD - just $1900. Other users are in similar scenarios, or they still have alUSD and therefore have more alUSD than debt - so even they need to sell alUSD. So enter the transmuter - great! Except the transmuter takes time to repay, and that kinda sucks. If we ever enter a situation where people truly have to "wait" for their alUSD to be worth $1, then that should be an actual emergency. Not because we increased the cap too fast.

              Write a Reply...