Feature Request: Use Flashloans to Migrate Positions from Deprecated Cauldrons

[Demosthenes]

The isolated nature of Abracadabra’s cauldrons is clearly a positive when it comes to risk mitigation. But one downside I’ve noticed is that it adds UX friction when cauldrons need to be updated, either due to necessary changes to the cauldron contracts themselves or changes implemented to the underlying collateral contracts upstream.

When changes occur, cauldrons are deprecated and users are no longer able to borrow $MIM using those cauldrons. Meanwhile, their deposited collateral remains in the cauldron unless they repay their existing $MIM loan. Doing this may not always be possible for users depending on the size of their outstanding debt obligation and their reasoning for taking out the debt position to begin with. And if the change originated with the upstream ibToken contracts (i.e. a yearn vault change), users may be left with deposits in cauldrons that no longer accrue in value over time the way they expected when they first made their deposit.

Consider a real world example:

Bob deposits $200K yvUSDC into the yvUSDC Cauldron and borrows $160K $MIM, establishing a debt position with an 80% LTV ratio. Bob then off-ramps his $MIM to fiat and uses the money toward a house. This is a great move for Bob. Bob has never been a homeowner before. And now, instead of losing his $200K entirely as the sunk cost of home ownership and paying interest on a mortgage to the bank, Bob still has his $200K USDC, which is earning him anywhere from 4-9% APR. Functionally, Bob is getting paid to own a house. Go Bob!

But then Yearn decides to upgrade their yvUSDC vault and all depositors are required to withdraw their capital from the old vault and deposit it into the new vault. Eventually, the old vault is deprecated and is no longer serviced. No more yield. Meanwhile, the corresponding yvUSDC Cauldron is also deprecated.

Bob can’t migrate his vault tokens to the new Yearn Vault because they’re locked up in the cauldron, which means his collateral will no longer accrue value over the course of his loan. Meanwhile, the capital Bob would need to repay the loan and withdraw his collateral from the cauldron is locked up in his house. Even if a new cauldron is deployed for Bob’s collateral, Bob can’t access it. He is stuck in the deprecated cauldron.

What was a freedom-generating Web3 maneuver for Bob has now turned into an albatross around his neck.

As a solution for Bob’s woes, I am wondering if flashloans could be used to empower users to migrate capital from deprecated cauldrons into their like-kind active cauldrons instead? Abracadabra already uses flashloans to let users delever their positions using their deposited collateral to reduce their debt positions.

Would it not be possible to utilize the same strategy to simultaneously repay the $MIM loan in a deprecated cauldron, withdraw the underlying collateral, redeposit the collateral into a like-kind active cauldron, and then borrow against it to repay the flashloan debt owed?

How much of a dev lift would this require? Would it be a straightforward endeavor or brutally difficult?

DeFi is an ever evolving ecosystem. It’s likely that Abracadabra will continue to add to its graveyard of deprecated cauldrons in the future, if only due to the fact that the protocols backing the underlying ibToken collateral will continue to adapt to the changing demands of the market. To me, this feature seems like an obvious value-add for users and a way to eliminate what will certainly be a growing source of UX friction in the future.

What does everyone else think?

Disclaimer: I don’t know if this is feasible and will defer to those who are more technically informed than myself.