Abstract

The application of PIP-58 has introduced unforeseen risks to the DAO, stemming from the combination of outdated multipliers and higher LTVs. This proposal aims to address them by:

• Reducing the maximum boosted LTV from +20% to +10%
• Reduce Liquidation Threshold across all collections by 1%
• Limit combined LTV Boost and Cig Boost to +10%
• Burning the locked JPEG of a boosted position in case of liquidation
• Keeping the Base LTV introduced by PIP-58
• Keeping the BAYC and Azuki vaults closed until the trait multipliers for those collections can be revised and eventually updated with a subsequent PIP

Background

After implementing the changes from PIP-58, some users have found ways to arbitrage assets with overvalued multipliers. As a security measure, the team has closed the Azuki and BAYC vaults.

PIP-58 aimed to make JPEG’d more competitive, but the chosen parameters were too aggressive. The LTV updates have been applied with multipliers that are out of date with the current market state. Traits Multipliers, an innovation in this space, need to be fine-tuned to be more efficient. Like the floor, the premium associated with traits is moving and more so for newer collections, so a better method for addressing them needs to be put in place.

To reduce risk on the DAO and to remove the ability for a user to borrow too close to liquidation, this proposal suggests to:

• Reduce the max LTV boosts from 20% to +10%, for example allowing for a max borrow of 70% LTV for Cryptopunks and BAYCs (see table below for full details). The Max Liquidation Threshold will remain the same, and existing positions boosted beyond 10% will not be at risk of liquidation.
• Reduce Liquidation Threshold and Liquidation Buffer values across all collections by 1%
• Implement a burn mechanism of the locked JPEG in case of liquidation. The burn would be instant for the uninsured position, while for the insured position, the JPEG would be burned only if the position is not repaid within the grace period.

To accompany this measure, a longer-term plan is being undertaken to revise the traits multipliers, their current relevancy in the current market, and possibly automate their value to track the market. Until this is enabled, the BAYC and Azuki vaults will remain closed. This will be the object of a follow-up PIP.

| Collection Name | Base LTV | Base Liquidation Threshold | Cig Boost | Max LTV Boost | Max Boosted LTV | Max Boosted Liquidation Threshold | | --- | --- | --- | --- | --- | --- | --- | | Cryptopunks | 60 | 70 | 10 | 10 | 70 | 80 | | BAYC | 60 | 70 | 10 | 10 | 70 | 80 | | MAYC | 50 | 60 | 10 | 10 | 60 | 70 | | BAKC | 40 | 50 | 10 | 10 | 50 | 60 | | Azuki | 50 | 60 | 10 | 10 | 60 | 70 | | CloneX | 40 | 50 | 10 | 10 | 50 | 60 | | Doodles | 40 | 50 | 10 | 10 | 50 | 60 | | Meebits | 40 | 50 | 10 | 10 | 50 | 60 | | Pudgy Penguins | 50 | 60 | 10 | 10 | 60 | 70 | | Otherdeeds | 40 | 50 | 10 | 10 | 50 | 60 | | Milady | 50 | 60 | 10 | 10 | 60 | 70 | | Autoglyphs | 40 | 50 | 10 | 10 | 50 | 60 | | Fidenza | 40 | 50 | 10 | 10 | 50 | 60 |

Specifications

• Keep the updated base LTVs values as per PIP-58
• Reduce the max LTV Boost value from +20% → +10%
• Limit combined LTV Boost and Cig Boost to +10% LTV increase
• Reduce Liquidation Threshold and Liquidation buffer across all collections by 1%
• When an uninsured position is liquidated, the locked JPEG would be burned. When an insured position is liquidated and not repaid within the insurance grace period, the locked JPEG would be burned.