calls

Untitled - financial motion #12

Gauntlet makes the following recommendations to optimize risk and capital efficiency for Acala and Karura:

**Recommendations:**

* We recommend decreasing the ACA liquidation ratio from 1.65 to 1.6.
* We recommend decreasing the ACA minimum collateral ratio from 2.0 to 1.95.
* We recommend increasing the LDOT liquidation ratio from 2.3 to 2.35.

**Rationale:**
The VaR is $1.1M, and our recommendations will reduce it slightly. KAR has a VaR of effectively $0. LCDOT has a VaR of $423k. LDOT has a VaR of $160k. LKSM has a VaR of $522k. ACA, DOT, KAR, and KSM each have a VaR of $0.

ACA is relatively safe from a market risk perspective, so can have its liquidation ratio gradually lowered to improve capital efficiency. LDOT is relatively riskier, so we recommend increasing its liquidation ratio to reduce insolvency risk. DOT, KAR, KSM, LCDOT, and LKSM’s liquidation ratios are currently at an optimal balance of risk and capital efficiency.

**Potential Forced Liquidations:**
Whenever we raise liquidation ratios, there’s a chance that some users may immediately become liquidatable as a result. However, as of our latest data, no LDOT borrowers were under our recommended liquidation ratio.

*By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.*

Gauntlet Risk Parameter Recommendation (8/03/2022)

Gauntlet makes the following recommendations to optimize risk and capital efficiency for Acala and Karura:

**Recommendations:**

* We recommend decreasing the ACA liquidation ratio from 1.7 to 1.65.
* We recommend decreasing the ACA minimum collateral ratio from 2.05 to 2.0.
* We recommend decreasing the DOT minimum collateral ratio from 1.7 to 1.6.
* We recommend increasing the KSM liquidation ratio from 1.5 to 1.55.
* We recommend increasing the KSM minimum collateral ratio from 1.8 to 1.9.

**Rationale:**
The VaR is $1.7M, and our recommendations will leave it unchanged. KAR has a VaR of $3k. LCDOT has a VaR of $575k. LDOT has a VaR of $343k. LKSM has a VaR of $810k. ACA, DOT, and KSM each have a VaR of $0.

ACA is relatively safe from a market risk perspective, so can have its liquidation ratio gradually lowered to improve capital efficiency. KSM is relatively riskier, so we recommend increasing its liquidation ratio to reduce insolvency risk. DOT, KAR, LCDOT, LDOT, and LKSM’s liquidation ratios are currently at an optimal balance of risk and capital efficiency.

**Potential Forced Liquidations:**
Whenever we raise liquidation ratios, there’s a chance that some users may immediately become liquidatable as a result. However, as of our most recent data, the lowest KSM collateral ratio is 1.78, so no accounts would be immediately liquidated at today’s prices.


*By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.*

Gauntlet Risk Parameter Recommendation (7/27/2022)

Gauntlet makes the following recommendations to optimize risk and capital efficiency for Acala and Karura:

**Recommendations:**

* We recommend decreasing the ACA minimum collateral ratio from 2.1 to 2.05.
* We recommend decreasing the DOT liquidation ratio from 1.35 to 1.3.
* We recommend decreasing the DOT stability fee from 3.0% to 2.75%.
* We recommend increasing the KSM liquidation ratio from 1.45 to 1.5.

**Rationale:**
The VaR is $2.7M, and our recommendations will leave it unchanged. ACA has a VaR of $824k. KAR has a VaR of $729k. LCDOT has a VaR of $381k. LDOT has a VaR of $262k. LKSM has a VaR of $495k. DOT and KSM both have a VaR of $0.

DOT is relatively safe from a market risk perspective, so can have its liquidation ratio gradually lowered to improve capital efficiency. KSM is relatively riskier, so we recommend increasing its liquidation ratio to reduce insolvency risk. ACA, KAR, LCDOT, LDOT, and LKSM’s liquidation ratios are currently at an optimal balance of risk and capital efficiency.

As background, we have observed a general downward trend in lending interest rates across DeFi. In line with this, we recommend lowering the DOT stability fee. For further context, lending rates for DAI and USDC on Ethereum mainnet have fallen below 2% for major DeFi lending platforms reflecting lower demand for leverage than we have seen historically.

**Potential Forced Liquidations:**
Whenever we raise liquidation ratios, there’s a chance that some users may immediately become liquidatable as a result. However, as of our latest data, there were no borrowers with KSM collateral ratios below 1.79, so we do not anticipate any immediate risk-off liquidations due to this parameter change.

*By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.*

Gauntlet Risk Parameter Recommendation (7/20/2022)

Gauntlet makes the following recommendations to optimize risk and capital efficiency for Acala and Karura:

**Recommendations:**

* We recommend decreasing the ACA liquidation ratio from 1.75 to 1.7.
* We recommend decreasing the ACA minimum collateral ratio from 2.2 to 2.1.
* We recommend increasing the KSM liquidation ratio from 1.4 to 1.45.
* We recommend increasing the LCDOT minimum collateral ratio from 2.7 to 2.8.
* We recommend increasing the LDOT liquidation ratio from 2.25 to 2.3.
* We recommend increasing the LDOT minimum collateral ratio from 2.8 to 2.85.
* We recommend increasing the LKSM liquidation ratio from 1.8 to 1.85.
* We recommend increasing the LKSM minimum collateral ratio from 2.3 to 2.4.

**Rationale:**

The VaR is $3.5M, and our recommendations will reduce it to $3.4M. ACA has a VaR of $1.1M. KAR has a VaR of $888k. LCDOT has a VaR of $472k. LDOT has a VaR of $334k. LKSM has a VaR of $674k. DOT and KSM both have a VaR of $0.

ACA is relatively safe from a market risk perspective, so can have its liquidation ratio gradually lowered to improve capital efficiency. KSM, LDOT, and LKSM are relatively riskier, so we recommend increasing their liquidation ratios to reduce insolvency risk. DOT, KAR, and LCDOT’s liquidation ratios are currently at an optimal balance of risk and capital efficiency.

**Potential Forced Liquidations:**

Whenever we raise liquidation ratios, there’s a chance that some users may immediately become liquidatable as a result. However, as of our latest data, there are no borrowers with liquidation ratios below those we have recommended.

*By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.*

Gauntlet Risk Parameter Recommendation (7/14/2022)

Gauntlet makes the following recommendations to optimize risk and capital efficiency for Acala and Karura:

**Recommendations:**

* We recommend decreasing ACA’s liquidation ratio from 1.8 to 1.75.

* We recommend decreasing DOT’s liquidation ratio from 1.4 to 1.35.

* We recommend decreasing DOT’s minimum collateral ratio from 1.8 to 1.7.

* We recommend decreasing KAR’s liquidation ratio from 1.4 to 1.35.

* We recommend decreasing KAR’s minimum collateral ratio from 1.7 to 1.6.

* We recommend increasing KSM’s liquidation ratio from 1.35 to 1.4.

* We recommend increasing KSM’s minimum collateral ratio from 1.7 to 1.8.

* We recommend increasing LKSM’s liquidation ratio from 1.75 to 1.8.

* We recommend increasing LKSM’s minimum collateral ratio from 2.2 to 2.3.

**Rationale:**

Since our last recommendations, VaR has increased from $478k to $670k. All of the VaR comes from three assets: LDOT, LCDOT, and LKSM. LDOT’s VaR has increased from $66k to $203k. LCDOT’s VaR has increased from $1k to $120k. LKSM’s VaR has decreased from $411k to $348k. The other assets (KSM, KAR, DOT, ACA) all have VaR remaining at $0.

ACA, DOT, and KAR are all relatively safe from a market risk perspective, so can have their liquidation ratios gradually lowered to improve capital efficiency. LKSM and KSM are relatively more risky, so we recommend increasing their liquidation thresholds to reduce insolvency risk. LDOT and LCDOT’s liquidation thresholds are currently at an optimal balance of risk and capital efficiency.

**Potential forced liquidations:**

Whenever we raise liquidation thresholds, there’s a chance that some users may immediately become liquidatable as a result. ***As of today, for KSM, the riskiest account has a collateral ratio of 1.39, so would be liquidated by this change at today's KSM price. That user has borrowed 24.5k aUSD.*** 

*By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.*

Gauntlet Risk Parameter Recommendation (6/30/2022)

Untitled - financial motion #6

Gauntlet makes the following recommendations to optimize risk and capital efficiency for Acala and Karura:

**Recommendations:**

* We recommend decreasing ACA's liquidation ratio from 1.9 to 1.85.
* We recommend decreasing ACA's minimum collateral ratio from 2.4 to 2.3.
* We recommend decreasing DOT's liquidation ratio from 1.5 to 1.45.
* We recommend decreasing DOT's minimum collateral ratio from 2.0 to 1.9.
* We recommend decreasing KAR's liquidation ratio from 1.5 to 1.45.
* We recommend decreasing KAR's minimum collateral ratio from 1.9 to 1.8.
* We recommend increasing KSM's liquidation ratio from 1.25 to 1.3.
* We recommend increasing KSM's minimum collateral ratio from 1.5 to 1.6.
* We recommend increasing LCDOT's liquidation ratio from 2.35 to 2.4.
* We recommend increasing LCDOT's minimum collateral ratio from 2.75 to 2.85.
* We recommend increasing LDOT's liquidation ratio from 2.2 to 2.25.
* We recommend increasing LDOT's minimum collateral ratio from 2.8 to 2.9.
* We recommend decreasing LKSM's liquidation ratio from 1.75 to 1.7.
* We recommend decreasing LKSM's minimum collateral ratio from 2.2 to 2.1.

**Rationale:**
Since our last [recommendations](https://acala.discourse.group/t/gauntlet-risk-parameter-recommendation-6-9-2022/1013), VaR has decreased from $1.02M to $63k. All of the VaR comes from two assets: LDOT and LCDOT. LDOT's VaR has increased from $0 to $4k. LCDOT’s VaR has decreased from $479k to $60k. LKSM’s VaR has decreased from $541k to $0. The other assets (KSM, KAR, DOT, ACA) all have VaR remaining at $0.ACA, DOT, KAR, and LKSM are all relatively safe from a market risk perspective, so can have their liquidation ratios gradually lowered to improve capital efficiency. KSM, LCDOT, and LDOT are all relatively more risky, so we recommend increasing their liquidation thresholds to reduce insolvency risk.

**Potential forced liquidations:**
Whenever we raise liquidation thresholds, there's a chance that some users may immediately become liquidatable as a result. For KSM, the riskiest account has a collateral ratio of 1.46, so would not be liquidated by this change at today's KSM price. For LDOT, the riskiest account has a collateral ratio of 2.45, so would not be liquidated by this change at today's LDOT price. One large account borrowing against LCDOT, with $40k aUSD borrowed, is relatively close to being liquidated, though we do not expect it to be forced liquidated as a direct result of this change


*By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.*

Gauntlet Risk Parameter Recommendation (6/15/2022)

Gauntlet makes the following recommendations to optimize risk and capital efficiency for Acala and Karura:

**Recommendations:**

* We recommend increasing LKSM’s liquidation ratio from 1.7 to 1.75.
* We recommend increasing LKSM’s minimum collateral ratio from 2.1 to 2.2.
* We recommend increasing LCDOT’s liquidation ratio from 2.3 to 2.35.
* We recommend decreasing KAR’s liquidation ratio from 1.55 to 1.5.
* We recommend decreasing DOT’s liquidation ratio from 1.55 to 1.5.
* We recommend decreasing LDOT’s liquidation ratio from 2.25 to 2.2.
* We recommend decreasing LDOT’s minimum collateral ratio from 3.0 to 2.8.
* We recommend decreasing ACA’s liquidation ratio from 1.95 to 1.9.

**Rationale:**


Since our [last recommendations](https://acala.discourse.group/t/gauntlet-risk-parameter-recommendation-6-2-2022/948), VaR has increased from $694k to $1.02M. All of the VaR comes from two assets: LKSM and LCDOT. LKSM’s VaR has decreased from $565k to $541k. LCDOT’s VaR has increased from $98k to $479k. The other assets (KSM, KAR, DOT, LDOT, ACA) all currently have VaR of $0.

KAR, DOT, LDOT, and ACA are all relatively safe from a market risk perspective, so can have their liquidation ratios gradually lowered to improve capital efficiency. LKSM and LCDOT remain risky, so we recommend continuing to increase their liquidation thresholds to further reduce insolvency risk. KSM optimally balances insolvency risk against capital efficiency at its current parameters.


**Dashboard:**

The community should use [Gauntlet’s Risk Dashboard](https://gov.gauntlet.network/acala) to understand better the updated parameter suggestions and general market risk in Acala.

*<sup>By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.<sup>*

Gauntlet Risk Parameter Recommendation (6/9/2022)

currencyId

interestRatePerSec

liquidationRatio

liquidationPenalty

requiredCollateralRatio

maximumTotalDebitValue

Untitled - financial motion #3

Gauntlet makes the following recommendations to optimize risk and capital efficiency for Acala and Karura:

**Recommendations:**

* We recommend increasing LKSM's liquidation ratio from 1.65 to 1.7.
* We recommend increasing LCDOT's liquidation ratio from 2.25 to 2.3.
* We recommend decreasing ACA's liquidation ratio from 2.0 to 1.95.
* We recommend decreasing DOT's liquidation ratio from 1.6 to 1.55.

**Rationale:** 

We have ingested the new Acala assets into our simulations, so we can report on their status alongside the existing Karura assets. 

Since our [last recommendations](https://acala.discourse.group/t/gauntlet-risk-parameter-recommendation-5-26-2022/940), VaR has decreased from $827k to $694k. All of the VaR comes from two assets: LKSM and LCDOT. LKSM's VaR has decreased from $827k to $565k. LCDOT has a VaR of $98k. The other assets (KSM, KAR, DOT, ACA) all currently have VaR of $0.

Now that we have simulations of Acala assets, Gauntlet's models can elucidate which assets present the most market risk to Acala. DOT and ACA both show low insolvency risk and so can accommodate lower liquidation thresholds. LCDOT is relatively riskier, so a higher liquidation threshold can mitigate risk to the protocol. LKSM remains risky, so we recommend continuing to increase its liquidation threshold to further reduce insolvency risk.

**Dashboard:**

The community should use Gauntlet's Risk [Dashboard ](https://gov.gauntlet.network/acala) to understand better the updated parameter suggestions and general market risk in Acala.

*<sup>By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.<sup>*

Gauntlet Risk Parameter Recommendation (6/2/2022)

This proposal aims to enable LDOT as collateral with conservative ratios while supporting aUSD liquidity under current market conditions.

- Liquidation Ratio: 2.25
- Min collateral ratio: 3.0
- Liquidation penalty: 0.15
- Stability fee: 0.03
- Debt ceiling: $3M

Enable LDOT as Collateral

LCDOT debt is approaching the 5M limit (~4.5M). While it’s important to grow the protocol, our analysis shows that it would be prudent to gradually increase the debt ceiling rather than having a more aggressive liquidation ratio or required collateral ratio which can more directly increase the chances of liquidation cascades.

The total liquidity in aUSD-LCDOT pool is around $6M, and a $300k LCDOT liquidation can potentially move the market price by around 20% (assuming no one arbs the pool immediately). Therefore, we recommend increasing the LCDOT debt ceiling to 6M and observing user behavior. Ahead of making more aggressive parameter recommendations, we would recommend (1) increasing aUSD-LCDOT liquidity (2) creating an aUSD-DOT pool (3) having a two-way DOT bridge (in addition to Kucoin exchange that can potentially help liquidators to offload their liquidated LCDOT position to stablecoins through LCDOT-DOT pool and Kucoin).