This framework’s current version including documentation on metrics and the spreadsheet including the model used to analyze market data can be found here: Liqwid Risk Framework
The proposal to support AGIX as a collateral asset across all Liqwid v1 markets can be seen here:
great to see the creation of this framework to be followed for the addition of CNT’s to Liqwid. 100% voting in support of this
- I don’t understand the reasoning for including CEX volume, does the liquidation bot utilize any?
- These threshholds seem arbitrarily high considering the market size of existing assets on Liqwid.
I’m in favor of a framework but this is too stringent as is.
To respond to both your points:
- The liquidation bot only queries/interacts with the Liqwid liquidation contract functions. The seized collateral is sent directly to a liquidator’s wallet when they complete a partial or full liquidation. The liquidator can configure the bot to either receive them direct as qTokens or redeem them into their underlying asset. The bot does not interface with any DEX or CEX, the liquidation bot operator chooses where to sell the seized collateral. That said Liqwid has a few larger liquidators who almost always send seized collateral to CEXs when they liquidate large amounts. So yes, including CEX volume is very reasonable here considering most liquidators have access and the volume/liquidity profiles on CEXs are almost always significantly better than on Cardano DEXs (this is the exact case for the 2 largest CNTs by marketcap listed on exchanges AGIX/WMT and for multiple others).
- This is the start of a community developed framework and those figures will be adjusted, this feels like a reasonable starting place and AGIX also meets it with ease.
Even if we reduce the circulating marketcap threshold by 50% ($50m) and the 24 daily trading volume across DEX/CEXs by 80% ($1m) we still only have WMT barely making the cut.
The entire point of having a liquidity threshold is to protect the protocol and it’s lenders from excessive risk during mass liquidations in a market downturn. ADA price crash 20% in the span of ~30 minutes a few months ago, this pushed a lot of Liqwid’s large ADA backed loans into liquidation, the protocol must always be prepared for this event by appropriately pricing the risk of each collateral type. If this can happen to ADA with a ~$8.8b MarketCap and 24h volume of ~$150-200m it can happen to any CNT. The reality is Cardano DeFi/DAO tokens are significantly less liquid than ADA and as such require a prudent threshold for setting liquidity criteria.
You bring up a great point of having a tiered system. I think this makes a lot of sense and can help define requirements for any CNT, as you mentioned.
Basically go from a single threshold to many with varying degrees and resulting parameters with the goal of achieving a model similar to the Minswap farm tiers is great.
Thank you, the reasoning being that a tiered framework would give predetermined parameters defined by liquidity.
In doing so, the tiered model is ‘easy to follow’ for the proposers of CNTs and also sets expectations early on.
It also creates the least amount of future work for the team regarding the addition of CNT’s as it removes the need to analyse each individual token and its parameters by the core team