[Defrost #10] — Whether and by how much to increase the stability fee for the ‘stablecoin’ supervaults II

Proposal Type: Stability fee adjustment

Proposer: Defrost Team

Proposal: This is a proposal to vote on whether and to what level to increase the stability fee for ‘stablecoin’ supervaults II This is one of the proposals aiming to fix the H2O peg.

The stability fee of ‘stablecoin’ supervaults II has been maintained at 1% since our launch. The low cost of holding an H2O position has led to aggressive looping and taking high leverages on the part of some users. This is one of the main factors driving H2O off-peg.

A possible solution could be to increase the stability fee.

However, please note that if the stability fee is increased, a massive unwinding of previous looping strategies could take place, causing a significant drop in the protocol’s TVL and H2O circulation.

In turn, this could magnify the H2O bad debt, caused by the recent Terra incident which is affecting our UST vault.

Should we increase the stability fee of ‘stablecoin’ supervaults II and if so, to what extent?

Options:

1. No, we shall not increase the stability fee of the ‘stablecoin’ supervaults II.
2. Yes, please increase the stability fee of the ‘stablecoin’ supervaults II to 1.5%.
3. Yes, please increase the stability fee of the ‘stablecoin’ supervaults II to 2%.
4. Yes, please increase the stability fee of the ‘stablecoin’ supervaults II to 4%.