LIP-05: Lodestar V0 forced liquidation

Introduction:

In July, Lodestar Finance successfully transitioned from its initial version (V0) to our full product (V1), coinciding with the launch of our staking module and gauge system. This transition marked a significant milestone, with over $30 million in deposits and borrowings seamlessly transferred to V1 in just a matter of days. We extended an invitation to all users and liquidity providers to migrate their positions to V1.

The request

At the same time, maintaining the V0 live implies operational costs such as the APIs, the liquidation bots or even oracle prices costs.

Despite our transition's success, a significant amount of liquidity remains active in the V0 markets: approximately $322,000 in deposits and $141,000 in outstanding borrows. This situation has created challenges for some liquidity providers who have reported difficulties in withdrawing their funds, as noted in various support tickets. Their deposits are currently tied up due to these pending borrows.

Maintaining the V0 platform also incurs significant operational expenses, including API maintenance, liquidation bots, and oracle price updates. These costs are increasingly hard to justify and we believe it is time to completely sunset the V0.

Proposal

Given these circumstances and considering that V1 has been operational for over four months, we propose a structured sunset of V0. This action aims not only to reduce operational costs and complete the migration to V1 but also to resolve the issues faced by liquidity providers whose funds are currently inaccessible.

Specifically, we propose to initiate the forced liquidation of all outstanding borrow positions on V0. This process will begin after a 14-day grace period following this proposal's approval, offering borrowers a final opportunity to close their positions voluntarily. Should they fail to do so, their positions will be liquidated, and their collateral subjected to an 1% haircut.

We believe this step is crucial for the long-term health and efficiency of our platform, ensuring we can focus our resources and attention on the continued development and improvement of V1.

Vote

Yes: Force liquidate the borrowing positions on Lodestar V0 following a grace period of 14 days No: Do not force liquidate the positions and keep V0 active