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Cat.bite takes lump-sized chunks out of underwater CDPs for auction. Depending on the math, this process may end up with a tiny about of debt+collateral not liquidated for auction. If the collateral amount is too small (in terms of market value relative to gas costs for liquidation and bidding), it will be economically irrational for Keepers to liquidate and bid on it. While not an immediate issue, over long times, especially with many such positions in existence, the system could unfortunately accrue large amounts of unbacked debt.
While it is possible to combat this through proactively finding an eliminating such positions (altruistic liquidation, e.g. by MKR holders concerned about the long-term health of the system), it would be much nicer if the system just avoided creating such positions in the first place.
The text was updated successfully, but these errors were encountered:
Cat.bite
takeslump
-sized chunks out of underwater CDPs for auction. Depending on the math, this process may end up with a tiny about of debt+collateral not liquidated for auction. If the collateral amount is too small (in terms of market value relative to gas costs for liquidation and bidding), it will be economically irrational for Keepers to liquidate and bid on it. While not an immediate issue, over long times, especially with many such positions in existence, the system could unfortunately accrue large amounts of unbacked debt.While it is possible to combat this through proactively finding an eliminating such positions (altruistic liquidation, e.g. by MKR holders concerned about the long-term health of the system), it would be much nicer if the system just avoided creating such positions in the first place.
The text was updated successfully, but these errors were encountered: