09.22.2023 - Update
Since the release of this proposal, an additional $1.15 million in BUSD has been repaid and redeemed. Following the implementation of the forced liquidation mechanism and considering the limited number of repayments observed in recent weeks, we recommend executing forced liquidations after conducting a community Snapshot. As outlined in the initial post, this action will facilitate the return of BUSD to the Venus Core pool and enable suppliers to redeem their BUSD positions.
Enabling users to redeem their BUSD positions serves to reduce the protocol’s exposure to potential bad debt in cases of future BUSD price fluctuations and liquidity declines, especially as we approach Paxos discontinuing its support for BUSD in February 2024. Furthermore, given the compounding borrow interest rates given 100% utilization (borrow rates are currently at nearly 96%), initiating forced liquidations, where some accounts are potentially inactive, can safeguard them from larger losses resulting from the accumulation of additional BUSD debt and potential future “organic” liquidations.
Impacted Accounts:
As of today, considering accounts that have borrowed at least $1 of BUSD, a total of approximately $6.5 million across over 2.5K accounts will be eligible for liquidation.
A complete list of affected accounts can be found here.
Next Steps:
- Snapshot to approve the use of the forced liquidation mechanism.
- Should the community approve the above, target a VIP to execute the forced liquidations on the second week of October. The exact date for VIP launch is contingent upon additional development and will be communicated to the community at least seven days in advance.
- Chaos Labs will continue to publicly communicate the planned amendments and list of affected accounts leading to the on-chain execution.