Proposal to change collateral ratio of stablecoin to 100%

Stablecoins such as USDT, BUSD, USDC, DAI are practically of zero price volatility against itself. A buffer doesn’t seem necessary. With a liquidation discount of 10%, these coins would be acquired immediately.

The problem is not with the collateral, it is with what you use the collateral to buy :slight_smile:

Let me give you an example:

Supply 10,000 BUSD, borow BTC which then drops in price to have a value of $10,000
Liquidator takes 50% of your collateral plus 5% fee. Repays half your BTC.
You now have 4,500 BUSD and a liability of $5000 in BTC.
Repeat until you have no BUSD left but protocol still owed BTC…

Hopefully you can now see why this is “a problem”.