Oven owners could be allowed to opt-in to a sort of liquidation pool with their ovens.
kUSD can be minted from their excess collateral up to a certain point (say 250% ratio) and pooled together automatically to liquidate large ovens.
In effect, at a 200% collateral ratio, they would be agreeing to mint kUSD and trade it for XTZ at 50% of harbinger price if necessary.
Is this possible? Is this a realistic solution to the large oven problem?
This is a really neat idea, though I think it’d require a new type of vault with this functionality if we wanted folks to continue to operate their own vaults as normal.
If I understand correctly, the idea would be that excess collateral across ovens would be used to mint kUSD, liquidate large ovens, then re-distribute the seized collateral back to the oven owners?
A simpler version would just be a liquidity pool that owns an oven/has an ability to mint kUSD, and people can just stake their XTZ, and the whole mint/liquidate/repay/distribute mechanism can just happen in one batched transaction, with the collateral returned immediately back to the pool.
I like the idea a lot though, it makes sense to do especially if there’s some circuit breakers designed in to make sure that the returned collateral >= the utilized collateral.
If I understand correctly, the idea would be that excess collateral across ovens would be used to mint kUSD, liquidate large ovens, then re-distribute the seized collateral back to the oven owners?
Yes, or any size oven. It would make the liquidity pool unnecessary (unless the collateral ratio of all opted-in ovens is less than required)
A simpler version would just be a liquidity pool that owns an oven/has an ability to mint kUSD
Yeah the liquidity pool could just be denominated in XTZ for a similar solution. Also the liquidity pool could have a special oven requiring a lower collateral ratio since it will be borrowing → recollateralizing in the same transaction (i think).
However, I do think using the extra collateral that already exists in the protocol ovens makes a lot of sense. It would turn the ovens into a yield bearing instrument, giving an extra reason to lock value. The complexity may not be worth it though.