Objective
Allow the TIME treasury to benefit from market volatility in Abra assets and volatility in TIME. This will stabilize the protocol in bear markets and continuously grow the treasury in bull markets.
Background & Abra Liquidation Mechanics
When an Abra user leverages the liquidation price of the asset is X amount and the liquidation fee is between 4% and 12.5%. The liquidation fee is the price that it costs the person who leverages to be liquidated. As an example, if you max leverage say $110 worth of $SHIB the liquidation price could $100 (this is for example purposes only) and the liquidation fee is currently 12.5%. So assume that the price of $SHIB drops and your position value drops at or below $100 you would be liquidated by a liquidation bot. When the bot liquidates you you would now have $88.5 worth of $SHIB. The $12.5 liquidation fee is split to 10% to $SPELL holders (2.5% of the liquidation price) and 90% to the liquidation bot (11.25% of the liquidation price) which the bot can sell to any exchange for an immediate RISK-FREE GAIN OF 11.25% OF THE LIQUIDATION PRICE
Idea
Since 90% of all Abra liquidation fees are given to bots and 10% of fees go to $SPELL holders. This translates to as much as 11.25% instant risk-free gain for the bot which in a bear market is literally millions of dollars in fees within minutes. The $TIME DAO should use the treasury to support the liquidation bot and benefit from the market volatility of $TIME and other Abra assets.
Allowing $TIME treasury to increase in bear markets from liquidation bots will limit downside risk, continuously grow the treasury (frogs will be frogs will always get liquidated), and volatility in $TIME will be a feature that grows the treasury. This will transform $TIME into an asset that cannot lose because as long as markets are volatile and people overleverage the treasury will grow!
Business & Technical Challenges
There are a few ways to implement this idea.
The Abra team exclusively uses time liquidity to collect liquidation bot fees.
Business Challenge #1: Dani, team, & friends are the #1 liquidators and the name of their liquidation bot is called El Patron. They would have to be willing to give up this gravy train for the betterment of $TIME or be willing to accept fractional risk-free returns paid to the team.
Business Challenge #2: Abra liquidations would be limited to $TIMEs treasury.
The Abra team outsources liquidation bots with a preference to $TIMEs liquidation bot and other bots 2nd.
Business Challenge #1: If there is a market event that creates more damnd than the liquidity that is allocated to the $TIME liquidation bot other bots can compete.
$SPELL team runs and manages the liquidation bot & uses $TIME treasury to do it and Dani, team, and friends get paid a % of liquidations in perpetuity.
Not familiar enough on how all of this works and I assume most people aren’t either. Some clarification would be nice. However, it may be too technical ?
Overall, I think a better integration of the whole ecosystem can be beneficial as long as we aren’t all too depend on each other.
I didn’t look at the code of abracadabra to know more in detail, but do we need to use the wonderland treasury to liquidate positions ? To my knowledge, usually those liquidation bots take flashloans to do the liquidation (this is one of the more legitimate features of flash loans/flash swaps). What i can derive from your proposal is mainly give special access to the liquidation reward to a bot from wonderland; is it correct ?
Yes. Occasionally you need more liquidity than what flash loans can provide. Either way it’s dumbshit simple to implement and TIME should benefit from its own volatility.
This is pennies compared to the amount a bot earns in liquidation fees. TIME treasury should benefit from the price volatility of the asset instead of a bot.
Can’t see any reason why you wouldn’t? 90% versus a split of 10%. Sounds like we’re taking on the “risk” anyway. Although collateral is already there so not really a risk, unless slippage is massive I.e. greater than 12.5%. In futures, if I’m right, times of higher volatility that 12.5% goes up. Always did in FX and CL markets.
I agree to create a bot to use the DAO liquidity to buy with a discount and sell immediately. This takes advantage of bear markets as is it now and protect Wonderland Holders in this situations.
I agree that Time should have a much greater benefit from abra liquidations. This would make me feel a lot better about any potential self-dealings and conflicts of interest the TIME team might have.
As it is, the owners of spell and spell liquidation bots have an incentive to get TIME to over-leverage and then pump and dump the price to get liquidations. This destabilizes TIME.
If you are going to make it so easy to get leverage by seamlessly feeding TIME holders into Abra and add bit of destablization to TIME in the process, we should get much more of a benefit from when the degens in our community get liquidated. Sure, our treasury holds spell, but this only gets a small fraction of the liquidations as compared to the bots.
Agree with @Nimrod. Wonderland should develop a DAO owned bot to capture the other side of those liquidation fees.
Unless there’s some sort of benefit in having 3rd parties do them that I’m unaware of.
Don’t agree with having special privileges over other bots though. We should compete like all the other bots.
I can actually see the FUD already like accusations of us PURPOSEFULLY triggering liquidations to canabalize our own degens. Hmmm
would it not help dilution if it simply held wmemo, transferred it back to the treasury rebase helper then useable as part of the next rebase memo supply? reducing the token inflation of the next rebase round?
maybe not but im thinking it would recover MEMO, thereby having the ability to either reissue it at a higher price in the future (think kucoin spot bot spread) or repurpose it during the next rebase.
You should ask around Abra discord about this, i tried to find something they are doing to get fairer liquidations, but i dont remember who said that and what was specifically being work on. But im pretty sure this proposal doesnt align with the changes there.