The Hover Labs team launched kUSD to mainnet just 16 days ago, and in that time we’ve seen amazing growth and support from the community. We now have over $5M+ total value locked (TVL), and 1M+ kUSD tokens minted, and have a healthy system-wide collateralization ratio of ~582%.
Peg volatility between Mar 4, 8:00AM PST to Mar 5, 8:00PM EST (1.5 days)
That said, as the system has grown, the price of kUSD has generally traded below target, with the past couple days trading on Dexter at an average of $0.88, or ~12% off the price target of $1, implying the system is unbalanced. We’ve seen some volatility as markets are slow to arbitrage, but ultimately this seems to be the current market’s “discovered price” of kUSD, at least in the current environment.
Therefore we believe it’s necessary to raise the stability fee within the Kolibri system in order to help stabilize the system. As other exchanges and more arbitrage bots kick off, the underpinnings of the current market conditions will change, which we’ll also monitor and react to in order to keep the peg stabilized.
In order to successfully stabilize the system, we need additional data points to understand how this market will react to changes in interest rates. A 1% change could produce a large, or small, change. Without additional data we can not know. However, we are certain that we have enough data to say that the current rate is not producing the desired peg, and so we must make a change.
Given that there are a lot of factors at play regarding stabilizing a system like Kolibri, we’re proposing a signaling vote from the community to determine if this increase should be 0.5%, 1%, or 1.5%. Any of these adjustments will help us to generate more data which will help us make better decisions about the system as a whole.
This vote will be open on the public Kolibri Discord, in the #governance-announcements channel for 24 hours before the winning parameter is packaged and signed by the Hover Labs team and injected into the multi-sig timelock (which has an additional 8 hours before activation). We plan to inject a proposal at, or shortly after 03:00 GMT March 7 (24 hours from this being posted live).
Discussions for this will be happening in the #governance-discussions channel, so please come weigh in on the decision there.
- The Hover Labs Team