From my perspective, it is a bit concerning the usage of the mechanisms of the v2 protocol following the approach of killing flies with bazookas.
Yes, it is clear (and really important that the community knows) that v3 is the most straightforward solution. But even if this past event is painful, that doesn’t mean we should boil down to irrationality.
It is important for the community to understand that the issue causing the CRV event is almost not because of CRV itself, it is because of the USDC Liquidation Threshold and Bonus configurations, which have been raised in previous periodic risk governance proposals.
A reaction of generalized freezing cuts that risk obviously, but sounds completely generic, as the main point is, in front any doubt, to cut borrowing of volatile assets.
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CRV has a 61% Liquidation Threshold and an 8% liquidation bonus. That means it can absorb collateral important shocks, being quite healthy liquidity-wise (I think it is clear from yesterday, right?).
In addition, there is no reason to think there could be any problem with infinite minting or similar in CRV, that is clear I assume.
Removing the supply side of CRV makes 0 sense, just shows no confidence in the 61% Liquidation Threshold. -
On GUSD, I don’t really see the rationale, it is supposed to be backed, no? In addition, it is only enabled as a borrowing asset.
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LUSD freezing makes no sense, given what @TokenBrice mentions of his usage as only-borrowing (pretty healthy usage I would say, even if the size is not so big), and checking the fundamentals described HERE
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sUSD is an only-borrowing asset, with a quite strong system of peg control behind it. Not sure which is the rationale, even assuming a price manipulation on the borrowing side, given the tremendous arbitrage that would be open.
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USDP is reserves-backed and, from what I know, regulated/oversight by the NYSDFS (New York State Department of Financial Services). An only-borrowing asset too. If the rationale is its small size, it is an option. In terms of risk, I see 0 reasons. Because by this rule we should freeze USDC too.
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1INCH, 50% liquidation threshold, fairly liquid. Should not be enabled to borrow if so, the supply side doesn’t seem problematic.
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BAT is already not enabled to borrow, fairly liquid on supply side (collateral) risk, depending on what your simulations show @Pauljlei
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DPI, is not enabled to borrow already. And as mentioned multiple times already on the community priced on underlying
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ENJ, should not be enabled to borrow and probably lower the liquidation threshold. then, about the fundamental value of it in the protocol, I question it.
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ENS, should not be enabled to borrow, 60% Liquidation Threshold, which sounds perfectly ok.
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LINK disabling borrowing sounds legit, same for UNI.
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MANA, is probably too high a Liquidation Threshold; disabling borrowing sounds legit, removing the supply side, not sure.
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MKR, is similar case to MANA, but with 1) stronger fundamentals in my opinion (kind of clear) 2) both an important partner and a really big historic size. Removing borrowing makes sense, removing supply does not.
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RAI, agree with freezing, should have been done before.
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SNX borrowing?
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renFIL. Clear freezing, but for different reasons than the market.
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UNI, following others’ approach, disabling borrowing is clear.
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xSUSHI, borrowing is disabled and priced based on SUSHI, so freezing is debatable (there have been good numbers of xSUSHI historically, and still are).
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YFI, borrowing should be disabled, but supply side I’m not fully sure, probably the main issue is having Liquidation Threshold a bit too high, but on this no opinion.
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ZRX, I think freezing is acceptable, as there have been some past price manipulation attempts.
It is not the first time that this happens: some event shows substantial risk in the protocol, and the reaction is to try to throw everything out of the window. This is not really acceptable, because I expect a bit more “surgical precision” (disabling borrowing of every volatile?) from the entities participating in risk on the community, or at least, having though more before increasing the liquidation threshold of stablecoins on a pool like Aave, which only and exclusive use case at the current moment is to basically attack the protocol via really aggressive shortings.
Right now, the community has 2 options:
- Try to act fast and accept the proposed freezing, with the policy “well, it is something”
- Not agreeing with the proposal, but risking no-action adding any risk to the protocol.
Obviously, 2) is kind of a forced decision.