This is not a good idea.
With zero interest, (virtually no cost) , tribe holders will get loans and put them aside. letās assume 60% collateral. PCV will be diluted as much as aggregate loan amount, e.g. 0.4PCVā¦ Ceterus Paribus, Tribe value will go down by 40%, which will trigger collateral callā¦ We will end up with lower PCV, same amount of Tribe on hand at lower tribe priceā¦
Debtors will have partial relief (40% of their investment) and no tribes.
An analogy might ease understanding.
A public company buying back its shares at a discount (here it is collateral ratio) will likely to signal its view of its shares true worthā¦ No Management should even think about that
Further iterating on this proposal : if we wanted to use FEI-TRIBE LP tokens instead of pure TRIBE as staking collateral for the loans, it has an interesting effect.
When someone stakes 100$ worth of LP tokens, they contain 50$ worth of circulating FEI.
The underlying 50$ worth of circulating FEI are actually taken out of circulation (as long as the loan is active, collateral is held captive by the protocol), so it effectively increases the collateralization ratio of the remaining circulating FEI (since only 30$ worth of ETH is borrowed & taken out of PCV). Plus, the protocol is secured with an additional 50$ worth of TRIBE (not part of PCV, but part of TVL).
FEIās value shouldnāt vary much (0-5%), but if TRIBE value drops, the number of FEI redeemable by the LP tokens decrease, so if we go down that road, weāll need to carefully think about the liquidation thresholds. My intuition is that we could find a value where there is never less underlying circulating FEI locked as loan collateral than the PCV borrowed, so it would be extra safe for the protocol.
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I really like this idea. Unless someone can lay out any flaws in it, I support it!
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This is an interesting idea! There are a lot of fun questions to think about, one that comes to mind immediately is how exactly we wish for liquidations to be handled.
Simply performing an auto-liquidation on a FEI-TRIBE or DAI-TRIBE uniswap pool or similar leads to possible frontrunning. User run liquidations (ala set protocol or compound) are an option, but they have their downsides too. Probably could talk forever about just liquidations haha
Regardless, I have some extra time later today, ill put something together with some of my own opinions
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Could probably utilise keep3r and assign some jobs for liquidation?
is keep3r fast enough? im worried that it wonāt be. liquidation engine needs to be pretty fast, esp since weāll be doing it on an alt