eIP46: Increase default borrow factor to 0.5 from 0.28

Title: eIP 46:Increase default borrow factor to 0.5 from 0.28

Author: @seraphim

Submission Date: 20 January, 2023

Simple summary:

Pretty straightforward idea. At the moment we have little borrowing of long-tail assets because the current BF requires you to post 100 USD worth of collateral to borrow 25 USD worth of tokens. However, clearly there is demand for more.

For eg, there was lots of LDO shorting up until LDO exploded. This guy for instance was willing to short LDO at very restrictive borrow factors: https://app.euler.finance/account/0?spy=0x7d070e1ec0d5a144ea036d3f5d6c35e394de7b0a

Similarly, this account has been rather profitable in shorting FTT even at the default factor: https://app.euler.finance/account/2/?spy=0xaee2ae13ebf81d38df5a9ed7013e80ea3f72e39b

But there could be a lot more demand for other tokens had the default been higher, which would also generate more fees for the DAO.

When it comes to risks, the major one is liquidations. If there is no onchain liquidity, then liquidators will find it hard to buy the asset on the market to repay debts. But frankly, I don’t see how that becomes much harder from a 0.28 → 0.50 increase.

This also only increases the risk for the long-tail asset lenders, so it’s not systemic.

Voting

Options are:

YES - implement the changes above

NO - do not implement the changes above