Increase Max Rate on Virtual xy=k DBR Auction

Increase Max Rate on Virtual xy=k DBR Auction

Summary

This proposal seeks to increase the maximum DBR rate per year that the Fed Chair can set for the virtual xy=k DBR auction. The current maximum is 5m/year, and this proposal seeks to increase this rate to 20m/year.

Background

The virtual xy=k DBR auction, launched in January, is a contract that continuously sells DBR for DOLA, with the DOLA proceeds being used to pay down DOLA bad debt. Since the auction’s first organic sale on Feb 3rd, it has raised over 170k DOLA from DBR sales. As the DBR burn rate on FiRM scales up, it is possible to scale up the issuance of DBR too, which is currently done via the streaming to INV stakers, the sDOLA auction and the virtual xy=k DBR auction.

Objective

Over the past couple of months, the virtual xy=k DBR auction has proved to be a great success. The current DBR rate per year is at the DAO-set maximum for most of the time, at 5m/year. The current 5m/year rate, based on the current DBR market price, is expected to raise around $1.04m/year. The new proposed maximum of 20m/year would be expected to contribute in excess of $4m/year towards DOLA bad debt repayment if the DBR price stays the same throughout the year. Check out the transparency portal for an up-to-date view of progress in repaying bad debt.

We do not expect the Fed Chair to utilize the Max Rate immediately, as debt on FiRM needs to scale further before this is possible. However, as debt on FiRM is currently growing very quickly, with 3.5m growth over the past three weeks, we are proposing this large max rate so the Fed Chair can more easily accommodate larger burn rates.

Auction Parameter Changes

An analysis is ongoing to optimize the auction parameters while operating with a higher DBR rate. It is likely that the auction depth can be increased to increase the DAO’s efficiency (increase the price of DBR sold). Once the analysis has been completed, a subsequent proposal with the adjustments laid out will be put on the forum.

On-Chain Action

  • Set maxDbrRatePerYear to 20m
4 Likes

Voting in favor. Been incredible to see how well the auction has paid off over the last month and a half. Looking forward to further scaling of that biz line as it improves all other aspects of the business.

-M

2 Likes