I agree with the sentiments offered by @boyeatzworld @SathFenrir, one in that a collateral ratio of 400% is undesirable, and two that percentage of emissions should be raised.
I think we can accomplish yields high enough to reduce the repayment rate on ETH loans and apply a 200% collateralization ratio if we spend more time in an initial bootstrapping phase. Here are my suggestions:
- Introduce a bootstrapping phase where users may purchase alETH for ETH but not take out alETH loans for some predetermined period of time.
- Maintain a debt cap of 2000 up until V2.
- When alETH borrowing does start, provide early access to use of alETH borrowing to those who have held ALCX for some considerable length of time. In the future when the debt cap is raised, consider prioritizing ALCX holders first then as well.
- Target emissions of 8% for the alETH/ETH pool, taking 2% from alUSD, 3% from SLP, and 3% from ALCX
By targeting an emission rate of 8% on the alETH/ETH staking pool, we are creating what is likely the highest yield on ETH in DeFi. If we begin by not allowing alETH loans at all but allowing alETH purchases there will be plenty of incentive to purchase alETH to join the pool for high yields, and give us a nice initial pool of ETH for vault yields.
Knocking 3% off of the SLP yield may seem like a lot, but people that are in the SLP pool are people that want ETH exposure, so I think there's some overlap in set of people that are currently staking in the ALCX/ETH pool and those that would stake in the alETH/ETH pool. I'm optimistic that the 3% reduction will be easily offset by users moving from the ALCX/ETH staking pool to the alETH/ETH pool.
Maintaining a debt cap of 2000 alETH until V2, in addition to a white list that prioritizes ALCX holders and long term supporters has two benefits. For one, allowing less people to become borrowers of alETH in the beginning creates a larger demand for LPing in the alETH/ETH pool to earn a yield on their ETH while they wait for the debt cap to increase. Additionally, prioritizing current ALCX holders creates a precedent that ALCX holders will be considered first class citizens going forward, especially in a scenario where future debt increases also prioritize holders. I think this is super powerful because it gives us the ability to in part fufill the purpose of the ALCX staking pool (curbing sell pressure) without having to rely on emissions, and in this case should allow us the flexibility of taking 3% from single ALCX yields.
Finally, it is my belief that we should still allow a collateralization ratio of 200% for alETH borrowing. Although the repayment rate may be slow to start, If the bootstrapping phase is long enough, I'm optimistic we would see yields raise over time and debt repayment time lower to something more reasonable. If nothing else, the negative aspect of having a long repayment rate will easily be offset in the beginning, by being one of the privileged few who are able to borrow off their ETH in the first place.