HIP-021 $500,000 DAI for wsHEC liquidation protection at Hector Bank

Over the last few weeks and months we have seen the effect of cascade liquidations caused by the collateralization of the underlying tokens of a network. We can mitigate that risk by implementing a custom liquidation contract at Hector Bank which will burn all liquidated wsHEC as well as giving DAI to the liquidating party to ensure that a cascade liquidation of wsHEC can not happen.

For this solution, we will need to move $500,000 in DAI to a contract which will intercept liquidations and replace the wsHEC with DAI so that we can burn the liquidated wsHEC.

Given how stringent the safety measures for wsHEC collateral are, we don’t expect this measure to be needed regularly, but it is safe to have it as a fall-back mechanism to protect users.

Vote below.