do research, learn the technology,
test the product, engage with the community, compare with other projects, read the documentation, look for red flags
@donhylo
Collateralised Debt Position
cryptocurrency, assets, etc.
stablecoin
@donhylo
$1000
worth of pooled ETH
$666
$700
fee
in pooled ETH
$1000
worth of pooled ETH
collateral
dai
$300
$180
@donhylo
Reference [Dollar]
Stablecoin [Dai]
stable
risky
@donhylo
They hold Dai
They use it as a medium of exchange
They value stability
They need Dai to be accepted
They borrow Dai
They are risks seekers
They use see Dai as an investment
They want to make profits
They value reliability and responsibility
@donhylo
Dai [market price]
Reference [dollar]
CDP
100 Eth
25 Dai
Dai is cheaper than it should be. Users should probably buy now.
If I had a CDP open and I close it now, I'll have to pay less than what I would normally have to (i.e when Dai = $1).
With the demand for Dai increasing and the supply decreasing, Dai price should increase.
Dai is more expensive than it should be. Users shouldn't probably buy now.
I should think about opening a new CDP now as I'll get Dai worth more than what it would normally be worth (i.e when Dai = $1).
With the demand for Dai decreasing and the supply increasing, Dai price should decrease.
100 Eth
30 Dai
@donhylo
Reference [Dollar]
Stablecoin [Dai]
stable
unstable
risky
@donhylo
collateral
dai
$200
$180
@donhylo
If the market price of the Collateral is close to Dai
The CDP must be liquidated
So the system sells the collateral for Dai
And then close the CDP
By force liquidate a CDP, a fee and a penalty must be paid
@donhylo
1 PETH
1 ETH
=
Because half the fees are paid in PETH and then burnt,
the supply of PETH decreases, so 1 PETH can claim more than 1 ETH
1 PETH
1,5 ETH
=
@donhylo
collateral
dai
$150
$180
@donhylo
If the price of the Collateral is less then Dai
The CDP is underwater and must be covered
So the system sells the remaining collateral for Dai
and mint new PETH
And then close the CDP and pay the fees and the penalty
@donhylo
1 PETH
0,66 ETH
=
By minting new PETH, the supply of PETH increases, so 1 PETH can claim less than 1 ETH
@donhylo
@donhylo
Gets activated in the event of severe market instability.
It consists of a Target Price and a Target Rate.
Target Rate = 0%
Target Price doesn't move
Dai is pegged, equal to $1
Target Rate becomes positive when Dai price is too low
Target Price can fluctuate
Dai is a free floating currency
@donhylo