Increase bSTBL collateral factor to 90% for minting baoUSD

Concepts
1

Summary

Increase bSTBL collateral factor to 90% to increase capital efficiency of baoUSD

Background

bSTBL is stable and reliable collateral but its collateral factor for minting baoUSD is 75%. The risk is minimal for large price movements due to the underlying assets being chosen for their stability and safety by the community. The collateral factor could be set to 90%, which leaves a 10% margin for liquidators to collect as a liquidation fee.

Goals

  • Increase the usage of bSTBL as collateral for baoUSD
  • increase baoUSD capital efficiency

Proposed Solution

  • Use the setcollateralfactor function on the Bao Markets controller for bdbSTBL (0xE0a55c00E6510F4F7df9af78b116B7f8E705cA8F, bao deposited bSTBL) to 90%

Risks

  • increasing the collateral factor from 75% to 90% increases the risk of bad debt from an underlying asset losing its peg
2

The current collateral factor for bSTBL is 75%. Each underlying asset is chosen specifically because of its low risk of depegging, guardians felt that 90% would be a safe collateral factor for this reason.

Something like 85% would provide more of a buffer so that liquidations can be safely handled if an underlying asset depegged, but reduce capital efficiency.

  • 90% is just right
  • 90% is too high - I would prefer something between 75% and 90%
  • Keep it at 75%

0 voters

3