I strongly encourage all who have voted Yes to consider moving to a No vote to pull Point #3 out and into its own proposal.
Voted No: Overall
This proposal should be three or at least two based on the feedback. I would Vote Yes on one and Maybe 2, but not on 3 as it stands.
Point 1: Yes - This seems to be unanimous in the discord, original temp check, and proposal. It will allow for a more natural withdrawal flow, it would be great if the UI can show how many slots are in use.
Point 2: No- This is a bit excessive; if the rates must be pushed up, it should be at lower levels, 1.5x the current rate. Most of these Stables have seen an inflow of Supply and an increase in Liquidity over the past month. These three Stablecoins are seeing low repayment due to the low number of borrowers less opportunity for repayment bc fewer loans taken out… 10 for Dai, 25 for USDC, and 50 for USDT, compared to 284 for DJED and 226 for IUSD. The stables with more borrowers have lower rates. Increasing rates for loan repayment will decrease the supply rate; fewer loans will push down Supply APR. If one large repayment happens, the supply rate will decrease drastically. While it is not fast, the utilization rate has been reducing 0.5-2% a week. If stable rates drop to below 10-15% we will be back in a similar position.
Point 3: No - This one should be a stand-alone proposal that needs to be fleshed out more. It seems to have the most unfavorable feedback and should not ride behind the other two points. The timing for an Origination fee should occur, if at all, when the protocol has more TVL. It would help to list out what other DEFi protocols charge, I did not have much success finding DeFi origination fees. Not all banks charge an Origination fee, and a lot of Banks also waive this fee when the competition is heavy and or/ banks also cap the fee amount. If any fee is implemented, turning it on and off(waive) should be possible when competition is high. A high fee will turn off short term borrowers and drive them elsewhere; long term borrowers will probably be indifferent. This will also affect Liquidators overall performance and ROI.
Aave origination fee is 0.0000001% seems excessive to have a Liqwid fee be one million times higher. maybe. Looking at interoperability and comparing the last two bull runs and the advances that continue to occur, advancements will continue to reduce the cost of bridging your assets off of Cardano and placing them into other DeFI protocols unless Cardano has higher rates.
Proposals can have multiple related actions in them, specifically when they are all related and originate from the same initial discussions. This is a normal proposal practice to include multiple related actions in a single vote. That said given the points raised in this thread it makes sense to have this loan origination fee as a separate proposal with multiple options similar to what @AliD just mentioned below.
"Yes a separate vote can be held on introduction of the loan origination fee that includes multiple option, for example:
can be any variation of split and % as well this is just an example."
You are taking the current Aave origination fee, how do you know their loan origination fee was not higher when they initially launched it? Introduction of loan origination fee comes down to more properly pricing the risk Liqwid as a protocol endures to serve as Cardano’s main liquidity source for borrowers. The risk is specific to Aave v2 pooled lending protocols and the risk is enhanced due to Cardano limitations (specifically no fee market and during periods of high chain load).
Liqwid as a protocol carries some inherent liability in the oracle and liquidation engines that protect lender deposits and protect the protocol from unhealthy loans causing bad debt. This risk and liability grows as Liqwid TVL grows. This is an idiosyncratic risk specific to Aave v2 style liquidity pool protocols which is made worse given Cardano network limitations (especially during increased chain load). Most protocols that allow users to create collateralized debt positions charge a % fee on the borrowed amount usually in the range of 1-2.5%. This is true for both DeFi protocols and banks in TradFi.
If the origination fee will come in will you at least allow the community to vote on how it should be split? and the initial amount it will be? providing different options to vote on.
**I am unaware of the original rate. However, Aave Forum confirms that 0.0000001% has been under discussion since October 2020. The additional understanding of WHY having an origination fee is important. The Proposal to improve Liqwid protocol , and this current proposal only indicates that other protocols do it, so Liqwid should too. However with the information that this is to reduce risk is more relatable. Examples of what this additional revenue would help protect are far better than Aada, Aave, other defi, and TradFi do it.
After researching some, the internet query was not helpful, so I went to the protocol sites and searched the documents. Compound and Forks do not seem to have Fees, but pretty much everyone else does, with the average fee being 0.5%. Supporting links share more about why/how that protocol uses the fees. The more modest the fee the better. IMO.
I think the OG Fee can garner more support if we can flush out the reasoning on why we should do this. One example @Hizairi mentioned this as another reason in chat on Discord**
Loan origination fee would be paid up-front. Its proceeds would be split 50%-50% between the LQ stakers and the Liqwid Treasury
After this fee is paid, the loan is opened. Over time, interests are generated, and once the loan is repaid, these interests are split as such: 80% for suppliers, 20% is the net margin (split between market reserves, DAO treasury and LQ stakers).
And there would be no interest for the suppliers without the LQ holders in the first place, because no lending platform would exist without LQ holders financing it.
The answer to your question is quite simple in reality.
Based on your own reasoning outlined above, suppliers should also receive a portion of the origination fee. However, you are advocating for the opposite. I’m not suggesting that LQ stakers shouldn’t benefit. Additionally, you haven’t addressed my previous question.
I think a few more days of community input makes sense and would put us at over 2 weeks of community analysis into the proposal details. So early next week sometime to go onchain.
Lenders/suppliers earn 80% of the interest generated and for most of year 1 on mainnet nearly all LQ market emissions have gone to lenders. LQ stakers take on real risk to secure the protocol via Safety Pool and they should be paid for this risk.
Hey Florian,
I’m trying my best to understand the implications of this important vote. Rightly or wrongly, I do trust both you and DC have the best interest of the LQ holders in mind. Therefore I am wanting to delegate my significant stake of Lq to you for this vote. I have not delegated my Lq before, so am I correct in thinking that I just need to copy your delegation key posted above and delegate to that key on the staking page of the Liqwid App? And sign the transaction? Is that all I have to do to delegate my vote to you?
