Changes to the DPX-ETH-USDC market on Silo Arbitrum

Change DPX oracle from Chainlink to DIA

Chainlink is likely deprecating DPX/USD price feed soon. We have asked the DIA team to deploy an oracle for DPX/USD. The oracle is being prepared at the moment. Once the price feed is deployed, we will replace DPX’s Chainlink price feed with DIA.

IMPORTANT

Silo Finance uses 3rd-party oracles that can report erroneous values resulting in the loss of funds and liquidations. We cannot prevent oracle malfunctions and do not compensate for lost funds. Use at your own risk.

Adjust risk parameters for DPX

Logic

Risk parameters in the DPX-ETH-USDC.e are set too high given DPX liquidity. For example, DPX’s LTV/LT are currently set to 70% and 80% respectively. Suppose a DPX collateral needs to be liquidated to repay a USDC loan. With a tight profit liquidation margin of 20% (100% minus 80% LT), the liquidation would create a buy pressure for USDC, resulting in a Price impact that would reduce the liquidator’s profit margin and render the liquidation unprofitable in adverse market conditions.

Similarly, LTV and LT for ETH and USDC in the market are set too high. Suppose USDC/ETH collateral needs to be liquidated to repay a DPX loan. With a tight profit liquidation margin of 10% (100% minus 90% LT for USDC.e), the liquidation would create a buy pressure for DPX, 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 DPX, USDC.e and ETH as follows:

  • Reduce DPX maxLTV from 70% → 55%
  • Reduce DPX LT from 80% → 65%
  • Reduce USDC maxLTV from 80% → 55%
  • Reduce USDC LT from 90% → 65%
  • Reduce ETH maxLTV from 75% → 55%
  • Reduce ETH LT from 85% → 65%

Impact

The change impacts the following users:

  • Wallets depositing $DPX and borrowing $USDC, $ETH or both.
  • Wallets depositing $USDC, $ETH, or both, and borrowing DPX.

The change will NOT impact the following users:

  • $DPX depositors with no loans
  • $USDC depositors with no loans
  • $ETH depositors with no loans

Given the impact, 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 and projected Health Factor.

Positions reach the liquidation point at 0% HF.

Talk to us

If you have any questions, reply to the thread.