Proposal
Adjust risk parameters for crvUSD in Silo Llama to ensure markets’ solvency.
Rest assured, the change will only go into effect after we have informed current borrowers and they have acknowledged the proposal.
Logic
Risk parameters for crvUSD are currently set to 85% Loan-to-Value (LTV) and 90% Liquidation Threshold (LT). Suppose a crvUSD collateral needs to be liquidated to repay a CRV loan. With a tight profit liquidation margin of 10% (100% minus 90% LT), the liquidation would create a buy pressure for CRV, resulting in a Price impact that would reduce the liquidator’s profit margin and render the liquidation unprofitable in adverse market conditions.
Change
To reduce the risk of insolvency due to failed liquidations, we propose decreasing the maxLTV and LT for crvUSD as follows:
1- Reduce LTV/LT for crvUSD in CRV-crvUSD market
- Reduce maxLTV from 85% → 50%
- Reduce LT from 90% → 80%
2- Reduce LTV/LT for crvUSD in YFI-crvUSD market
- Change LTV from 85% → 55%
- Change LT from 90% → 70%
3- Reduce LTV/LT for crvUSD in LINK-crvUSD market
- Change LTV from 85% → 65%
- Change LT from 90% → 75%
With a conservative liquidation threshold (LT), liquidators will have up a higher margin to liquidate insolvent positions.
Impact
The change only impacts wallets borrowing $CRV, $LINK, and $YFI.
The change will NOT impact the following users:
- $crvUSD depositors without loans
- $crvUSD borrowers
- $CRV depositors
- $LINK depositors
- $LINK depositors
Impact on wallets borrowing $CRV/$YFI/$LINK
Given current positions, reducing LT will not result in any liquidation. The change will reduce the Health Factor (HF) of wallets borrowing $CRV. We will ask all borrowers to examine their positions before the proposal goes into effect.
The spreadsheet below lists all standing positions along with the current HF (column G) and projected Health Factor (column I).
Positions reach the liquidation point at 0% HF.
Talk to us
If you have any questions, reply to the thread. You can also DM core team on TG: aiham_eth and Discord aiham.eth
If you wish to communicate via Etherscan, you can send a message to tg: Aiham.eth at eth1:0x1fF60e85852Ac73cd05B69A8B6641fc24A3FC011