AIP #1 - MIM Replenishes for PLP Cauldrons

Governance Proposals Voted Proposals
103

This is a great way to bring synergies to the frog nation eco system

104

I have a concern about the proposal. With optimized v3 positions, the narrower ranges result in magnified IL. By leveraging the PLP, the already magnified volatility will be more impactful. While the PLPs as a whole may be profitable (weā€™re waiting on analytics for this) the magnified IL could lead to massive short-term fluctuations in value and large amounts of liquidations which is not a good look for either protocol.

Has there been any analysis on the magnitude of these short term fluctuations and whether allowing leverage on that would be a good idea? Maybe we should stick to more stable coin PLPs to start and ease into the more volatile assets.

105

Similarly to how leveraging individual assets, leverage is dangerous if used inaccurately in PLPs. Considering the pools proposed are highly liquid, or stable pools. The liquidations donā€™t pose a risk in terms of cascades.

UX will mention that leveraging the PLPs is dangerous, this is key. Popsicle does not want to screw people over.

There isnt really a risk for the individual protocols. For Abra as said the pools are very liquid so liquidating wont be a problem, for Popsicle its only a risk if the users donā€™t fully understand the risks.

3 Likes
106

:frog: interesting, very interesting.

107

Please elaborate on why

1 Like
108

I think this gets back to my original concern where as an automated code base is managing a position that can be liquidated by both market forced and its own actions such as collateral management. Even if it was the best code ever written eventually it could get liquidated.

  1. Are there any additional risks to MIM de-peg given the machine controlling the position is acting as fast, if not faster, then the liquidation bot?
  2. Not sure if it matters as its not our protocol, but wouldnā€™t a liquidation event be devastating for everyone in the LP?
    ā€“ It seems as if your saying each LP is isolated so this might not be a concern to begin with unless the federal reserve comes around with some massive amount of funds.
  3. Would it make more sense to make special cauldrons for PLPs to ensure these positions are secured?
    ā€“ Example: max leverage 2x, special dedicated bot(s) designed for soft liquidation (e.g. taking only break even amount), lowered maximum CDP like 60%, etc.
1 Like
109

I would like to delegate my locked sSpell thru convex to votium so I can collect bribes for which cauldrons are to be replenished with more MIM. Thanks for listening.

1 Like
110

AIP #1 has passed! Check the voting results here.

1 Like