Collateral Factors

Should we increase collateral factors 5-10% in comparison to our competitors to make Percent more attractive?

For example increasing collateral factor for USDC from 75% to 85% totally makes sense, in my view. No need for a complicated risk model to back this line of thinking…

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Although I am a big proponent of this idea, in the specific case of ETH and Stablecoins I do not think that we should go over 80%. At 85%, if you borrow YFI as much as you can you only need a 18% jump in price to be better off not repaying your loan. A mitigating solution could be to have different collateral rations depending on the asset you borrow. Clearly, If you are providing stablecoins and borrowing stablecoins even a ratio of 95% is not risky.

In general I propose a general rule of thumb of:
-Stablecoins, BTC and ETH 78% (just to beat out the competition)
-Chainlink 65% (same reason)
-Defi blue chips (YFI, SNX) 50%
-Speculative tokens (YFV) 35% provided that they have an incentivized liquidity pool that would make liquidation not too risky

As mentioned on discard having our own flashloan boat in charge of liquidating undercollaterized loans would provide a lot of security to the platform. But even without it , I m sure a lot of devs will set up their own bots.

At the moment I do not see anywhere to access the collateral ratio directly on the platform, It is probably the most important parameter for a loan and should be displayed somewhere. It would be great also to have an accessible ressource which explains clearly liquidations and their parameters.

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Thanks for starting this @Vaspou. I am in agreement with @brisket on the idea of wanting to be slightly more competitive than other markets, while still being a bit conservative. The numbers here make sense @PercentFinance:

"In general I propose a general rule of thumb of:

-Stablecoins, BTC and ETH 78% (just to beat out the competition)
-Chainlink 65% (same reason)
-Defi blue chips (YFI, SNX) 50%
-Speculative tokens (YFV) 35% provided that they have an incentivized liquidity pool that would make liquidation not too risky"

I am also inclined towards being slightly more competitive than others, as this particular start.
These risk parameters could be reviewed when we mature as product and our TVL increases over time.

In lines with this, we have the liquidation threshold, which for Aave is displayed below?

What are the thoughts on this, are we keeping same distance between Loan-to-value and Liq. value?

Asset Collateral factor Liquidation Threshold Distance
DAI 75 80 5
USDC 80 85 5
ETH 75 80 5
LINK 65 70 5
SNX 15 40 25
wBTC 60 65 5
YFI 40 65 25

Good question! Don’t know where to look it up in the contracts. @PercentFinance can you please chime in?

I like those. For the reasons mentioned above I wouldn’t go all the way to 85 for USDC though, I also think we can go to 50 on SNX. The SNX dump following the Kucoin hack showed that there is real liquidity in the coin now.

If we follow up with those numbers we need to make sure that there are some liquidator bots running on the platform.