Purpose
This proposal aims to change the DJED oracle from a fixed price (1 DJED = $1) to a floating price.
Motivation
Over the last 10 months since DJED’s launch on February 2, 2023, its price has consistently traded well above the $1 average (with an average price of $1.028167 and a volume-weighted price average of 1.02242 during the period of February 2, 2023, to October 5, 2023. Source: Price chart and trading data of Coingecko).
This price disparity has allowed DJED borrowers on Liqwid to access the token at a cheaper value than its market price, leading to inefficiencies. Conversely, when a DJED loan defaulted, liquidators had to buy DJED at the market price (average $1.02) and repaid the debt at the fixed rate of 1 DJED = $1, resulting in a reduction in their net margin.
This proposal is the final output of the initial discussion on Liquidation Parameter Updates that started in early June following Cardano network congestion during a period of increased market volatility.
Proposal
Therefore, this proposal seeks to change the DJED oracle’s pricing mechanism from a fixed exchange rate of 1 DJED = $1 to a floating exchange rate determined by the market.
If this proposal is implemented, borrowers will no longer be able to profit from arbitrage between Liqwid and the broader market, and liquidators will be able to perform liquidations at prevailing market prices.
The trade-off is that both suppliers and borrowers will need to consider DJED’s uncapped price fluctuations.
Steps to Implement
If this proposal passes, the Liqwid core team will proceed to update the DJED price oracle mechanism from its current $1 hardcoded oracle price to its floating price.
If this proposal passes the oracle update will be implemented 24 hours following the end of the Active Voting phase once the locking period has ended.
Do you support the oracle change of DJED on Liqwid?
- Yes, I support the proposal of a floating price for DJED.
- No, I do not support the proposal of a floating price for DJED.
Yes, I support the proposal for a floating exchange rate for DJED
No, I do not support the proposal for a floating exchange rate for DJED