8 or 9% seems like the sweet spot. I’ll vote in favor
2 Likes
While redemption is not desirable from a borrower standpoint, it helps me to remember that redemption is a symptom rather than a cause. Trying to stop or discourage redemptions is like giving someone ibuprofen for a broken leg. What we need to be doing (if anything) is addressing the root cause, which is an oversupply of DLLR relative to demand.
We have very limited tools given Zero’s design, but raising the origination fee is one way to regulate the supply of DLLR. The other way is to let 'er rip and punish lower-CR borrowers for the excess supply. The problem is that that doesn’t penalize higher-CR borrowers. At least increasing the origination fee spreads the disincentive to mint new DLLR across the board.
You’re probably aware of all that. I’m just writing for everyone here.
3 Likes
why wouldn’t incentives curves work on mynt?
people would withdraw DOC instead of ZERO from DLLR.
why not incentivize DOC deposits?
- also the ‘perpetuals interest stable’ is in much need to be added.
1 Like
Wouldn’t raising redemption fee help? I know it increases the DLLR peg gap, but how much? Is $0.99 not acceptable?
I don’t know a lot about how much redemption fees increase gap, but anything to discourage redemptions would be of benefit to LOC’s, no?
1 Like
Raising the redemption fee may reduce the pain, but the broken leg is still there. The broken leg is too much DLLR supply relative to demand. As you said, If you discourage redemptions by raising the fee, it will reduce the peg floor. One percent may not sound like much, but that’s a lot for something that’s supposed to represent a dollar.
In my opinion, raising the redemption fee may not even reduce redemptions that much. It just delays redemptions until the peg falls a little further. Once the new peg floor is reached, redemptions will resume at the same rate at which DLLR is minted and dumped on the AMM.
3 Likes
new tx data after fixing typo
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decode input
[
[
"0xf8B04A36c36d5DbD1a9Fe7B74897c609d6A17aa2"
],
[
"0"
],
[
"setBorrowingFeeFloor(uint256)"
],
[
"0x000000000000000000000000000000000000000000000000011c37937e080000"
],
"SIP-0075: Reduce Zero Origination Fee\nhttps://forum.sovryn.com/t/sip-0075-reduce-zero-origination-fee\nReduce Zero Origination Fee Floor to 8%\n---\n\n ## Summary\n\n If approved, this proposal will reduce ZUSD origination fee floor in the Sovryn Zero protocol from 13% to 8%.\n\n ## Background\n\n Six months ago, the origination fee floor of Zero Protocol was raised to 99% with SIP-0066.\n Essentially, Bitocracy paused the minting of ZUSD by setting extremely high fees to maintain the DLLR peg.\n Two months ago, Zero was \"reopened\" by setting the origination fee to 13% with SIP-0071. This fee was deliberately set quite high in order to cautiously ramp up the system again and achieve the assumed balance between supply and demand for $DLLR.\n\n Since then several key observations were made:\n • The total supply of ZUSD decreased from approximately 6.69 million (start SIP-0066) to 4.58 million (start SIP-0071) to 3.85 million (now).\n • Numbers of LoC’s declined from 150 (start SIP-0066) to 88 (start SIP-0071) to 83 (now).\n • The total collateral ratio increased from around 372% (SIP-0066) to 530% (SIP-0071) to 604% (now).\n • From SIP-0066 to SIP-0071 (8/23-12/23), Zero fee revenue was 15k USD. Since SIP-0071 (01/24) (total Zero fee revenue is 34k USD).\n\n ## Motivation\n\n Despite reopening Zero, we can still see a decline in the metrics shown above.\n Large parts of the excess ZUSD supply has been removed.\n The current 10% interest rate of DLLR lending pool also indicates strong demand.\n Therefore, we believe it is a good time to make Zero more accessible and to increase protocol revenue.\n Individual users should make sure they understand the system and specifically, redemptions.\n If significantly more redemptions occur than expected, Sovryn can also use the increased revenue as a safety mechanism to incentivize the holding of $DLLR via $SOV rewards.\n\n ## Proposed changes\n\n If approved, the origination fee will fluctuate between 8% and 100%.\n The following change will be made to the Zero Protocol base parameters:\n\n - Updating \"BORROWING_FEE_FLOOR\" from 13% to 8% by calling `setBorrowingFeeFloor(uint256)`\n on the `0xf8B04A36c36d5DbD1a9Fe7B74897c609d6A17aa2` contract\n with the encoded data `0x000000000000000000000000000000000000000000000000011c37937e080000`.\n\n ## License\n\n Copyright and related rights waived via [CC0](https://creativecommons.org/publicdomain/zero/1.0/).\n\n "
]
1 Like
This is the bit of insight that I needed. That makes a lot of sense. OK, let’s not touch the redemption fee.
The situation regarding oversupply of DLLR has improved a great deal, not just because of the balance curves in Babelfish, but also because of the market, because of Sovryn growing in users, and because of $SOV doing well. More could be done to publicize use of DLLR (e.g., pointing to the 27% APR on DLLR/rBTC pool) but that only makes sense when Zero is open and people are not getting hit by high origination fees.
Going to 8% as the next step is totally fine, if some don’t want to be risky. Fully understand, and will vote yes! But please let’s not monitor the effects for too long; if nothing dire is happening within the first two weeks, let’s quickly start talking about lowering further.
1 Like
So, things seem to be going fine. Should we start up the discussion for the next reduction in the origination fee?
3 Likes
5% seems like the logical next step. With the current BTC pum, demand for loans ins increasing. TCR is considerably higher than Liquity’s at the moment 840% vs 600% (see analytics https://dune.com/liquity/liquity) in great part due to BTC price.
2 Likes
I would be in favor of going as low as 2%.
Things look very healthy; I don’t see a good argument for going this slowly and step-wise.
Constant changes are no good; people will be on the fence waiting for the next reduction. Just reduce it to a level low enough that we can keep it there for as long as no issues arise. Just let it be clear that if any issues emerge and things look less healthy, origination fees could go up again, through a quick SIP if need be. Let’s lower enough so that we can close this chapter and this discussion, and invest attention to other matters in the forum; with a an indefinite low origination fee, the sov quad can finally campaign the shit out of Zero.
5 Likes
Yes! Let’s give it a try
We need to get Zero out in the space
1 Like
I like 3-4%. If you add in babelfish swap fees plus redemption fees it puts you in that 5-6% total borrowing costs which is around us treasuries yield.
@capitalist42 I think go for it @Sacro
4 Likes