Summary
This proposal recommends disabling iUSD as collateral while removing its supply cap, allowing iUSD to scale primarily as a debt asset.
Current usage strongly supports this configuration. Across the 58 positions shown on the Liqwid app:
- 47 positions (~81%) use iUSD as the borrowed/debt asset.
- Only 9 positions (~16%) show a positive iUSD collateral balance, with another 2 showing effectively zero iUSD collateral.
- Significant iUSD debt positions include approximately 57.5k, 19.0k, 12.4k, and 3.7k iUSD, generally backed by assets such as ADA, DJED, NIGHT, IAG, MIN, USDM, and LQ.
This demonstrates that iUSD’s primary lending-market utility is clearly debt-side rather than collateral-side.
At the same time, enabling iUSD as collateral introduces unnecessary liquidation risk. Given iUSD’s relatively limited secondary-market liquidity, liquidators may struggle to absorb and unwind large iUSD collateral positions during stressed conditions without significant slippage, increasing the risk of unsuccessful liquidations or bad debt.
Proposed Changes
- Set iUSD collateral eligibility / LTV to 0%
- Keep iUSD borrowable
- Remove the iUSD supply cap
- Leave other debt-side risk parameters unchanged
This aligns iUSD’s parameters with demonstrated usage: remove a lightly used and liquidity-sensitive collateral function while allowing its much more widely used debt utility to scale.
- I support this temperature check
- I reject this temperature check