What you are voting for?

Extending 500,000 XAI of Credit to the DAI silo

DAI Credit Line

Basics

Name: DAI

Ticker: $DAI

Contract Address: 0x6b175474e89094c44da98b954eedeac495271d0f

Description: $DAI is MakerDAO’s overcollateralized stablecoin which is backed by assets such as $ETH, $wBTC, and $stETH.

Absolute Parameters

Oracle: Chainlink DAI/ETH price feed

Liquidation: Silo’s liquidation engine can liquidate DAI collateral efficiently.

Protocol-Wide Parameters

As discussed in the original Risk Framework, no individual silo will receive a credit line extension exceeding 2,348,150 $XAI (1,643,705 $XAI after application of liquidity buffer).

Silo-Specific Parameters

$DAI has extremely high on-chain liquidity across multiple exchanges and is a constituent of Curve’s 3CRV base token.

Simulating sales on Matchaswap indicate that swaps of even 10,000,000 $DAI for $ETH would incur slippage of only 0.93%%.

As such, the binding constraint for a credit line to $DAI is our Protocol-wide Parameters (i.e. $XAI on-chain liquidity) rather than $DAI itself.

Recommendation

$DAI is the primary on-chain CDP stablecoin and is heavily utilized for yield farming strategies from protocols such as Yearn Finance. The DAI silo currently does not have a credit line deployed.

Given that on-chain liquidity of $DAI is extremely high and as a battle-tested stablecoin with a CDP design and low risk of de-peg, we recommend the deployment of a 500k $XAI credit line. The core team is currently in discussion with Yearn Finance contributors who aim to use the DAI silo to deploy yield strategies so we expect borrowing activity will be relatively high. Given the extent of $DAI on-chain liquidity, we recommend reassessing utilization and adjust upwards to our Protocol-Wide Limit as demand requires.

We recommend continued assessment of on-chain liquidity of both $DAI and $XAI to ensure that it remains within a safe range that will allow liquidations to occur as normal.