Credit Line Extension to ALCX, CVX, wBTC, FXS, CRV, 1INCH, SUSHI, YFI, BAT, SNX, RAI, BADGER, MKR

Proposal Discussion
1

Date: 16 February 2023

Author: Chutoro

Reviewed by: Tenzent, Aiham

This is a proposal to extend the following credit lines:

  • ALCX - 150k
  • CVX - 150k
  • WBTC - 150k
  • FXS - 150k
  • CRV - 150k
  • 1INCH - 150k
  • SUSHI - 150k
  • YFI - 150k
  • BAT - 150k
  • SNX - 150k
  • RAI - 150k
  • BADGER - 150k
  • MKR - 150k

The assessment of on-chain liquidity can be viewed here.

This is from Sheet 1/Explanation from the above spreadsheet
This framework aims to test whether each token has sufficient on-chain liquidity to receive a 150k $XAI credit line.

  1. $XAI limit multiplied by each assets liquidation threshold to determine $ value of asset to be liquidated
  2. Amount from 1. divided by spot price of asset to determine number of assets to be sold assuming 1 account borrows 100% of credit line and is liquidated
  3. Sale of 2. simulated on Matchaswap for $ETH - if slippage < liquidation fee asset is deemed safe for 150k $XAI credit line (can be extended further pending future proposal)
  4. Assets that failed 3. had 2. re-run against a 150k $XAI credit line - if slippage < liquidation fee asset is deemed safe for 150k $XAI credit line (regular review of on-chain liquidity recommended)

Refer to:
Framework for calculations
Sale Simulations for Matchaswap liquidation simulation

References:

Risk assessment framework

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2

I have done some liquidation simulation and concluded that ALCX should not have a credit line due to the lack of fallback liquidation pool - second line of defense in our liquidation system.

I question the viability of the BAT market and recommend we do more research about before we extend any credit line to it.

UNI silo is coming soon and should be included in my opinion.

UPDATE:

  • I suggest we remove BADGER/SUSHI for now - need to do more testing.
  • BAL should have a credit line.
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