MIP104: Stability Scope
Stability Scope Edit that includes edits to the formula for the Base Rate in 3.1, decreases the DSR Spread to 0.5% in 3.2, and modifies the ALM Tiers in 7.1.1
0: The Stability Scope
The Stability Scope covers the management of the Dai Stablecoin. The Dai Stablecoin must be a permissionless and useful currency available to anyone. Its stability and risk must be managed to generate as much value for MakerDAO and public good as possible.
1: Scope Improvement
1.1: The Stability Advisory Council
The Stability Advisory Council is a group of Ecosystem Actors that have been approved by Maker Governance to carry out advisory work related to improving the content of the Stability Scope Artifact.
1.1.1: Stability Advisory Council Membership Management
Members of the Advisory Council are directly approved by Maker Governance through a governance poll, and must fulfill specific criteria.
1.1.1.1
The Stability Facilitators must ensure that potential Advisory Council Members can apply to be approved by Maker Governance, using an open process with clear instructions.
1.1.1.2
Advisory Council Members must be Ecosystem Actors that are not involved in any business activity that could result in a conflict of interest, either directly or indirectly. They must also have relevant skills for providing professional expert input on the content that the Stability Scope is covering.
1.1.1.3
The Stability Facilitators must periodically, when it is relevant, review the Advisory Council Applications, and if they find applications that are suitable, bring them to a vote through an MKR governance poll. Approved Advisory Council Members are added to 1.1.1.5.1A.
1.1.1.4
The Stability Facilitators may, if they deem it necessary, trigger a vote to remove an Advisory Council Member. If an Advisory Council Member has not done any paid work for the Scope for at least 1 year, then the Stability Facilitators can choose to remove them at will, if they deem it necessary.
1.1.1.5
The current approved Stability Advisory Council Members are recorded in 1.1.1.5.1A.
1.1.1.5.1A
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Current list of Advisory Council Members:
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1.1.2: Stability Advisory Council Projects and Funding
The Advisory Council is paid on a project basis to do specific work that improves all or specific parts of the Scope Framework.
1.1.2.1
Each Quarter, if they deem it necessary, the Stability Facilitators must solicit proposals and find one or more suitable Advisory Council Member to perform a project that will result in output that can be used to improve the Scope Artifact. This work output will be presented to the AVC Subcommittee Meetings as input for their Aligned Scope Proposals. As many AVCs as possible should be supported this way, prioritized by the Stability Facilitators.
1.1.2.2
In case an ambiguous, uncertain or challenging situation arises related to the Scope Framework, the Stability Facilitators may publicly notify the Advisory Council Members to submit proposals for projects that aim to reactively specify the language of the Scope Framework to take into account the specific situation. The Stability Facilitators can then directly propose the change to the Scope Framework in a weekly governance poll.
1.1.2.3
The Advisory Council may produce work output that is not directly compatible with the formatting of the Scope Artifact. In this case the Stability Facilitators must either transcribe it themselves, or hire an Ecosystem Actor to perform the transcription. This role does not require pre approval by Maker Governance.
1.1.3
The Stability Facilitators may produce advisory input on the content of the Scope Artifacts themselves, as long as it is focused on improving process and governance content. They are prohibited from providing unilateral input on expert subject matter content.
1.1.4
The Stability Facilitators have a budget available to pay for Advisory Council Projects per quarter. All spending must be limited to only what is deemed necessary and with a high probability of producing clearly measurable value, and this must transparently be accounted for in a forum post at least a week before any transaction occurs. The budget is contained in 1.1.4.1B.
1.1.4.1B
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Advisory Council project budget:
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1.2: Stability Scope DAO Toolkit Integration
The Stability Scope DAO Toolkit module must be built to give a full and accessible overview of all data and processes relevant to the Stability Scope.
2: Dai Stablecoin Reference Asset
This Article must be strengthened to ensure balanced and appropriate funding of proactive research into future reference assets.
3: Core Stability Parameters
Before the launch of AllocatorDAO Vaults, the Core Stability parameters are fixed to help bootstrap the system.
3.1: The Base Rate
The Base Rate is regularly updated by the Stability Facilitator to approximate ((Yield Collateral Yield Benchmark - 0.7%) * 0.78 + Stability Collateral Yield Benchmark * 0.12). The up to date Base Rate is contained in 3.1.1A. Whenever an update to the Base Rate occurs, the Stability Facilitator must trigger an executive vote to update the on-chain Stability Fees of the AllocatorDAO Vaults
3.1.1A
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The Base Rate is:
3.79%
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3.2: The Dai Savings Rate
The Dai Savings Rate is regularly updated to be equal to (Base rate - 0.5%). The up to date Dai Savings Rate is contained in 3.2.1A. Whenever an update to the Dai Savings Rate occurs, the Stability Facilitators must trigger an executive vote to update the on-chain Dai Savings Rate.
3.2.1A
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The Dai Savings Rate is:
3.19%
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3.2.2:
Enhanced Dai Savings Rate
The Enhanced Dai Savings Rate is a system to temporarily increase the effective DSR available to users in the early bootstrapping stage when DSR utilization is low. The EDSR is determined based on the DSR and the DSR utilization rate, and decreases over time as the utilization increases, until it eventually disappears when utilization gets high enough. EDSR is a one-time, one-way temporary mechanism, which means that the EDSR can only decrease over time, it cannot increase again even if DSR utilization goes down.
Other parameters and mechanisms that are dependent on the DSR, such as certain stability fees, are not affected by the EDSR, but only by the underlying DSR. This means it is possible that stability fees can be lower than the EDSR when it is in effect.
When NewGovToken and SubDAO farming comes into effect, DSR utilization will count both DSR use and NewGovToken and SubDAO farming use.
3.2.2.1:
EDSR upper limit:
The EDSR cannot exceed 8%. If the EDSR formula outputs a number above 8%, the actual effective EDSR implemented in the protocol will be 8% instead.
3.2.2.2:
EDSR utilization-based multipliers.
Each of the following EDSR multiplier tiers are triggered based on the utilization rate. When first adopted, the EDSR begins at tier 1. If at any point in time the DSR utilization stays above the level needed to trigger the movement to a new tier for a continuous period of more than 24 hours, the tier is changed, and a manual DSR adjustment must be included in the next executive vote.
3.2.2.2.1:
EDSR tier 1
Multiplier: 3x DSR
Utilization: 0-20%
3.2.2.2.2:
EDSR tier 2
Multiplier: 1.75x DSR
Utilization: 20-35%
3.2.2.2.3:
EDSR tier 3
Multiplier: 1.3x DSR
Utilization: 35-50%
3.2.2.3:
EDSR ends permanently once DSR utilization crosses above 50% for a continous period of more than 24 hours.
3.2.2.4:
The Stability Facilitators can at any time use the weekly governance cycle to disable the EDSR permanently, if there are indications that it is not cost-effectively achieving its objectives.
3.3: Dai Savings Rate and Base Rate Changes in Demand Shocks
The Stability Facilitators can use the urgent governance cycle to propose non-standard changes to the Dai Savings Rate and the Base Rate in case of risks to the peg stability of Dai. Once the risks have subsided, the Dai Savings Rate and Base Rate must be reverted to their ordinary values, according to 3.1.1A and 3.2.1A.
4: AllocatorDAO Vaults
Before the launch of SubDAOs, AllocatorDAO Vaults function in a bootstrapping mode. They are controlled by AllocatorDAO Advisors, which are special Ecosystem Actors with the ability to advise the Stability Facilitators
4.1: AllocatorDAO Vaults Stability Fee
The AllocatorDAO Vaults have a Stability Fee equal to the Base Rate specified in 3.1.1A.
4.2: AllocatorDAO Advisors
The Stability Facilitator can use the weekly governance cycle to propose to onboard AllocatorDAO Advisors and set up a new AllocatorDAO Vault, based on AllocatorDAO Advisor Proposals made on the Maker Forum. The AllocatorDAO Advisor will be tasked with publishing advice related to the use of their AllocatorDAO vault. The current active AllocatorDAO Advisers and their individual Debt Ceiling Limits are specified in 4.2.2A, and must be updated by the Stability Facilitators when applicable.
4.2.1
The AllocatorDAO Vaults share a total debt ceiling limit equivalent to the Dai Supply, minus all legacy collateral. Each AllocatorDAO Vault has an individual debt ceiling limit of its proportional amount of the total debt ceiling limit.
4.2.2A
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Current active AllocatorDAO Advisors:
N/A
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5: Legal Recourse Assets
Legal Resource Assets are assets used as collateral for the Dai Stablecoin that are enforced through legal recourse by Arranged Structures. They have unique risks that must be safeguarded against.
5.1: Arrangers
Arrangers are Ecosystem Actors that specialize in sourcing, negotiating, structuring of, and reporting on, Legal Recourse Assets and maintaining and monitoring the underlying Arranged Structures used by the Maker Protocol. They must never be able to operate or influence the arranged legal and operational structure’s asset operations in a way that can cause any significant harm or losses to Dai’s stability, after the structures have been built and assets allocated hereto. Arrangers are approved directly by MKR voters, and all LRA collateral exposure must be structured by an approved Arranger.
5.1.1: Active Arranger Management
Arrangers are onboarded or offboarded based on a governance poll by MKR voters, that is initiated by the Stability Facilitators if they deem it necessary. The active state of current approved Arrangers is maintained in 5.1.1.1A.
5.1.1.1A
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List of current active Arrangers:
Monetalis
Blocktower
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5.1.2: Arranger Standard Fees
Arrangers may charge a maximum reporting fee of 15 basis points per year on top of other fees charged by the structure and the Asset Manager. The fee is calculated based on the Debt Ceiling of the Arranger Vault, and may be charged up front for the following quarter at the first day of the month preceding each quarter. For stablecoin Arranger services, Arrangers may charge up to 5 basis points. The fee is applied to the total amount of stablecoins that Maker has exposure to, that the arranger is providing Arranger services for. Arrangers may also charge a one-time structuring fee when initially setting up an Arranged Structure.
5.1.3: Arranger Concentration Risk Management
The Stability Facilitators must take action to search and propose onboarding of additional Arrangers when it is economically feasible to do so, in order to help reduce the concentration risk to individual Arrangers. Strict limits to the amount of assets that each Arranger services for must be developed and implemented in this section over time.
5.1.4: Arranger Reports and Stress Tests
Arrangers must publish quarterly reporting on each Arranged Structure they have arranged, and must alongside the reporting publish stress test analysis that shows how the structures would perform based on historical financial crisis scenarios and other example scenarios. The Stability Facilitators must periodically fund independent Ecosystem Actors to review and verify the quality and the results of the stress tests. Should an independent review produce an unfavorable result, the Responsible Facilitators must propose a governance poll for warning, temporarily deactivating, or permanently offboarding the Arranger and/or the Asset Managers connected to the discovered issue.
5.2: Legal Recourse Asset Budget
The Stability Facilitators have a budget available to pay costs related to stress test review, legal research and first time setup of legal structures for arrangers, and other expenses relevant to Legal Recourse Assets. Arrangers that are supported this way must publish all research and conclusions related to the Arranged Structure, to help other arrangers replicate the work and strengthen the Maker Arranger ecosystem. The Legal Recourse Asset Budget is specified in 5.2.1B.
5.2.1B
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The Legal Recourse Asset budget is:
Up to 1,000,000 DAI available per year.
The full amount is immediately available at the start of the calendar year, and parts of it can be paid out through executive vote bundling when requested by the Stability Facilitators.
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6: AllocatorDAO Effective Junior Capital
The Stability Facilitators and Stability Advisory Council Members must research and develop a framework for determining adequate multipliers for the different sources of AllocatorDAO Effective Junior Capital.
7: AllocatorDAO Collateral and Market Requirements
AllocatorDAO Advisory teams are subject to requirements for how they deploy Dai generated from their AllocatorDAO Vault.
7.1: AllocatorDAO Capitalization Requirements
AllocatorDAOs will have Capitalization Requirements of their Effective Junior Capital based on what kind of exposure they have from their AllocatorDAO Vaults. Before the launch of SubDAOs, AllocatorDAO Advisory Teams can use this framework to deploy collateral that has no Effective Junior Capital Requirement.
7.1.1: ALM Capitalization Requirements
7.1.1.1: ALM Tier 1 Collateral
7.1.1.1.1
No slippage is allowed for ALM Tier 1 Collateral.
7.1.1.1.2
ALM Tier 1 Collateral must be able to instantly convert to Cash Stablecoins within 30 minutes with no slippage.
7.1.1.1.3
ALM Tier 1 Collateral or higher can be used for 100% of the AllocatorDAOs collateral portfolio with no Effective Junior Capital requirement.
7.1.1.1.4
There are no additional Effective Junior Capital Requirements.
7.1.1.2: ALM Tier 2 Collateral
7.1.1.2.1
ALM Tier 2 Collateral must be able to convert to Cash Stablecoins within at most 2 weeks with expected slippage and realized loss of at most 1%.
7.1.1.2.2
ALM Tier 2 Collateral must be able to convert to Cash Stablecoins within at most 6 months with no slippage.
7.1.1.2.3
ALM Tier 2 Collateral or higher can be used for 78% of the AllocatorDAOs collateral portfolio with no Effective Junior Capital requirement.
7.1.1.2.3.1
The Arranged Structures holding ALM Tier 2 Collateral must have standing instructions to immediately convert to Dai and repay the necessary amount of ALM Tier 2 Collateral to bring total exposure to ALM Tier 2 Collateral or higher to 78%, whenever the total exposure of the Dai Collateral Portfolio to collateral of ALM Tier 2 or higher exceeds 82%. The necessary amount is split proportionally between all Arranged Structures holding ALM Tier 2 Collateral based on their relative holdings of ALM Tier 2 Collateral.
7.1.1.2.4
If the exposure limit is exceeded, the excess ALM Tier 2 Collateral has an additional 5% Effective Junior Capital Requirement.
7.1.1.3: ALM Tier 3 Collateral.
7.1.1.3.1
No slippage is allowed for ALM Tier 3 Collateral.
7.1.1.3.2
ALM Tier 3 Collateral must be able to convert to Cash Stablecoins within at most 12 months with no slippage.
7.1.1.3.3
ALM Tier 3 Collateral or higher can be used for 45% of the AllocatorDAOs collateral portfolio with no Effective Junior Capital requirement.
7.1.1.3.4
If the exposure limit is exceeded, the excess ALM Tier 3 Collateral has an additional 10% Effective Junior Capital Requirement.
7.1.1.4: ALM Tier 4 Collateral.
7.1.1.4.1
No slippage is allowed for ALM Tier 4 Collateral.
7.1.1.4.2
ALM Tier 4 Collateral must be able to convert to Cash Stablecoins within at most 3 years with no slippage.
7.1.1.4.3
ALM Tier 4 Collateral or higher can be used for 10% of the AllocatorDAOs collateral portfolio with no Effective Junior Capital requirement.
7.1.1.4.4
If the exposure limit is exceeded, the excess ALM Tier 4 Collateral has an additional 20% Effective Junior Capital Requirement.
7.1.2: Risk Capitalization Requirements
7.1.2.1: Risk Tier 1.
Risk tier 1 assets have no Effective Junior Capital Requirement. Approved Risk Tier 1 Collateral are specified in the subelements of this element.
7.1.2.1.1
US Government Treasury Bonds, Notes and Bills.
7.1.2.1.2
Money Market Instruments defined as investment-grade, highly liquid, short-term debt instruments that can be exchanged for cash within 5 business days. Allowed Money Market instrument types include: term certificates of deposit, interbank loans, money market funds/ETF, commercial paper, Treasury bills, and securities lending and repurchase agreements (“repos”).
7.1.2.1.3
Overcollateralized ETH and Staked ETH vaults with at least 125% collateral ratio and automated liquidations.
7.1.2.1.4
Overcollateralized major crypto asset vaults with at least 150% collateral ratio and automated liquidations.
7.1.2.1.5
Cash Stablecoins.
7.2: AllocatorDAO Market Requirements
AllocatorDAOs are required to take specific market actions or be penalized. AllocatorDAO Advisor teams must follow these instructions to the best of their ability.
7.2.1: Cash Stablecoin Liquidity Requirements.
7.2.1.1: Cash Stablecoin Reserve Requirements.
AllocatorDAOs must have a reserve of Cash Stablecoins of at least 25% of their total portfolio.
7.2.1.2: Cash Stablecoin Market Making Requirements.
AllocatorDAOs must be actively market making Cash Stablecoins against Dai with at least 10% of their total portfolio.
7.2.1.3: Cash Stablecoin Definition
A Cash Stablecoin is a stablecoin listed in 7.2.1.3.1A or a technically secure DeFi token that can be instantly converted to a listed stablecoin, or a custody solution that can be converted into a listed stablecoin within 30 minutes. The Stability Facilitators can modify 7.2.1.3.1A through the weekly cycle to react to changing market conditions, opportunities or risks.
7.2.1.3.1A:
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List of Cash Stablecoins:
USDC - Exposure to USDC in centralized custody solutions is capped at 500 million USDC.
GUSD - Exposure to GUSD is capped at 110 million GUSD and exposure to GUSD requires that a marketing reward of at least 2% is available.
USDP - Exposure to USDP is capped at 120 million USDP and exposure to USDP requires that a marketing reward of at least 2% is available.
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8: AllocatorDAO Penalties
The Stability Facilitators and Stability Advisory Council Members must research a framework for applying penalties to AllocatorDAOs in alignment with ATL5.8.
9: Surplus Buffer and Smart Burn Engine
9.1: Smart Burn Engine Parameters
The amount of Dai in the Surplus Buffer that causes the Smart Burn Engine to activate, and the rate at which it uses the Dai to improve MKR liquidity, are determined by two parameters defined by the following subelements.
9.1.1
The Surplus Buffer Upper Limit determines the amount of Dai necessary for the Smart Burn Engine to activate.
9.1.1.1
The Surplus Buffer Upper Limit is 50 million Dai.
9.1.2
The Rate Of MKR Accumulation determines how much Dai is used to accumulate MKR per unit of system time. Since the Smart Burn Engine pairs the accumulated MKR with Dai directly from the Surplus Buffer, the effective rate of spending from the Surplus Buffer is approximately twice the Rate Of Accumulation.
9.1.2.1
The Rate Of MKR Accumulation is 100 million Dai per year.
10: SubDAO Economic Resilience Models
The Stability Facilitators and Stability Advisory Councils must develop adequate SubDAO Economic Resilience Models.
11: MKR Backstop
The MKR Backstop is temporarily limitless.
12: Dai Stablecoin Decentralization
AllocatorDAOs must be subsidized to ensure they have an incentive to allocate collateral to decentralized assets.
12.1: AllocatorDAO Decentralized Collateral Rebate
Each AllocatorDAO has a decentralized collateral rebate available to incentivize deploying Dai collateral into decentralized assets.
12.1.1
The decentralized collateral rebate is 0.6% per year.
12.1.2
The decentralized collateral rebate applies to up to 200 million in exposure.
12.1.3
The decentralized collateral rebate applies to exposure to ETH and Staked ETH assets with at least 125% collateralization ratio.
12.1.4
The Stability Facilitators must ensure that each quarter the total exposure of the AllocatorDAOs to the applied assets is calculated, and the decentralized collateral rebate is refunded to the AllocatorDAOs retroactively.
13: Sagittarius Engine Dai Generation Risk Parameters
The Stability Facilitators must research how to set the adjustable risk parameters of the Sagittarius Engine Vaults.
14: Scope Bootstrapping
During the bootstrapping phase, the Stability Scope is modified to override the Atlas requirements in some places.
14.1: Yield Benchmarks
14.1.1
The Stability Collateral Yield Benchmark is contained in 14.1.1.1A and is approximately based on the average yield earned on all Cash Stablecoins. The Stability Facilitators must periodically update the number by computing the latest value and modify relevant on-chain parameters through an executive vote when it is relevant.
14.1.1.1A
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The Stability Collateral Benchmark Yield is:
1.60%
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14.1.2
The Yield Collateral Yield Benchmark is contained in 14.1.2.1A and is approximately based on the 3-month US Government Treasury Bill. The Stability Facilitators must periodically update the number by computing the latest value and modify relevant on-chain parameters through an executive vote when it is relevant.
14.1.2.1A
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The Yield Collateral Benchmark Yield is:
5.44%
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14.2: Protector Advisors
Before the AllocatorDAO Vault system is ready, Protector Advisors help advise the Stability Facilitators on deploying vaults and modifying risk parameters for Legal Recourse Assets in alignment with the spirit of the articles of the Stability Scope Artifact. The Stability Facilitators can trigger a weekly governance poll to onboard or offboard Protector Advisors. The active Protector Advisors are specified in 14.2.1A.
14.2.1A
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List of active Protector Advisors:
Spring
Viridian
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14.3: Native Vault Engine
The Native Vault Engine is controlled by Maker Core temporarily, and will be upgraded to support SubDAO ownership and transferred to the first AllocatorDAO incubated from the Incubator when NewChain launches. While it is under the control of Maker Core it will have a limited set of collateral types and risk parameters that the Stability Facilitators must implement according to the following subelements.
14.3.1
ETH-A. LR = 145%. Debt Ceiling Limit = Unlimited. Stability Fee = Dai Savings Rate + 0.25%.
14.3.2
ETH-B. LR = 130%. Debt Ceiling Limit = Unlimited. Stability Fee = Dai Savings Rate + 0.75%.
14.3.3
ETH-C. LR = 170%. Debt Ceiling Limit = Unlimited. Stability Fee = Dai Savings Rate.
14.3.4
WSTETH-A. LR = 150%. Debt Ceiling Limit = Unlimited. Stability Fee = Dai Savings Rate + 0.25%.
14.3.5
WSTETH-B. LR = 175%. Debt Ceiling Limit = Unlimited. Stability Fee = Dai Savings Rate.
14.3.6
RETH-A. LR = 150%. Debt Ceiling Limit = 100M. Stability Fee = Dai Savings Rate + 0.25%.
14.3.7
CRVV1ETHSTETH-A. LR = 150%. Debt Ceiling Limit = 100M. Stability Fee = Dai Savings Rate + 0.75%.
14.3.8
WBTC-A. LR = 145%, Debt Ceiling Limit = Unlimited. Stability Fee = Yield Collateral Yield Benchmark + 0.25%.
14.3.9
WBTC-B. LR = 130%, Debt Ceiling Limit = Unlimited. Stability Fee = Yield Collateral Yield Benchmark + 0.75%.
14.3.10
WBTC-C. LR = 175%, Debt Ceiling Limit = Unlimited. Stability Fee = Yield Collateral Yield Benchmark.
14.3.11
Debt Ceiling Limit = Unlimited is defined as substantially large to not be reached in the near future. The Advisory Council must research and provide language for DC-IAM methodology which will act as a risk mitigation tool in case of unexpected emergency and limit the rate at which exposure can increase in a short period of time. The Debt Ceiling Limit is numerically provided acts as an upper limit, while Responsible Facilitator can propose changes within this limit.
14.3.12
To protect the protocol from unnecessary complexity, the Stability Facilitators must offboard collateral types above if they fall below a total debt of 20 million.
14.3.13
RETH-A specifically, must achieve at least a proportional share of revenue compared to wstETH vault types combined measured by market capitalization of the token in circulation until end of Q3 2023 or be otherwise removed from 14.3.
14.3.14
CRVV1ETHSTETH-A, WBTC-A, WBTC-B and WBTC-C are defined in 14.3 only for the purpose of Stability Fee consistency and are otherwise not considered Native Vault Engine collateral and should be offboarded according to 14.3.15.
14.3.15
All other collateral types must be offboarded when the Stability Facilitators considers it appropriate, and when there are new mechanisms in place that can take over the role the offboarded collateral covered.
14.4: Legacy Legal Recourse Assets
Legacy Legal Recourse Assets are LRA collateral types that were onboarded based on the governance process prior to the Alignment Artifacts going into force. Legacy LRA should be offboarded when it is possible to do so, but in some cases existing LRA can be maintained and even onboarded to preserve business relationships and reputation, as determined by the Stability Facilitators. All Legacy Legal Recourse Assets must be offboarded prior to NewChain Launch. The Stability Facilitators must expand this article to detail all Legacy Legal Recourse Assets and detailed, specific plans for when and how they will be offboarded.
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