BSIP: 59
Title: Adjustment of MSSR and MCR through voting
Authors: Jerry Liu <[email protected]>
Status: Draft
Type: Informational
Created: 2019-02-15
This BSIP define a process to change MSSR and/or MCR for one specific smartcoin through poll voting.
In smartcoin system, debt and supply are the 2 sides of the same thing, increasing supply also means increasing debt, paying debt also means reducing supply, to make the smartcoin peg well and make the supply match the market demand is always the system goal.
We have done a lot to remove the unnecessary punishment to margin called debt position owners - Target CR, MSSR reduction, Global Settlement Protection, all these is to add more energy to the smartcoin system.
MSSR and MCR are the 2 key parameters in smartcoin system, MCR has big impact on smartcoin supply, MSSR has big impact on smartcoin premium and also the supply.
Now the 2 parameters are published by witnesses, generally speaking, witnesses publish MSSR&MCR following the consensus of the stakeholders, at the begin of BTS2.0, MSSR=1.1 and MCR=1.75 applied to all the smart coins, no changed has beed done until several weeks ago MSSR has been changed to 1.05 for bitCNY through BSIP41.
We can expect that in the future it's also necessary to change MSSR or/and MCR, some more complex proposal - dynamic MCR and MSSR are also discussed, before this advanced solution can get sufficient consensus and be available, we need to define a common process to change MSSR or/and MCR through voting.
Here bitCNY is an example, the logic is same for all the smartcoins.
Definition: ratio = P[bitCNY/CNY] - 1
bitCNY discount = -ratio while ratio<0
bitCNY premium = ratio while ratio>0
While BTS price moves from high to low, bitCNY premium moves from low to high, the whole market condition can be divided into 4 phases:
1.bitCNY discount > force settlement offset (current value 2%) Because of the force settlement, even bitCNY enter into this phase it will soon get out.
2.bitCNY discount < force settlement offset & bitCNY premium < (MSSR-1) In this phase, the margin call orders will be eaten immediately after it is generated, risk will not be accumulated and bitCNY peg well, this is the ideal phase.
3.bitCNY premium > (MSSR-1) In this phase the margin call orders will stay there without being eaten, global settlement price will not drop while the feed price drop, risk accumulate.
4.market price drop below the global settlement price While global settlement protection measure is implemented, global settlement will not happen, feed price will stop to drop following the market price, if BTS price continue to drop, bitCNY will devalue.
It’s best for bitCNY to be always in phase 2, the system should always avoid bitCNY to fall in phase 4 in comparatively high BTS price. If bitCNY fall in phase 3 for long time, it will be good to reduce the premium by reducing MSSR. Decreasing of MCR will help to supply more bitCNY and help bitCNY to jump from phase 3 to phase 2.
In current Bitshares mechanism the witnesses are elected by voters. The values of MSSR and MCR for any smart asset issued by the BitShares Committee (i.e. bitAssets) are published by elected witnesses and then used by the blockchain to calculate the median value of the MSSR and MCR settings.
The above mechanisms will not be changed in this BSIP. This BSIP just establish a formal process to reach consensus on MSSR/MCR value setting and convey the consensus to witnesses.
Changes to MSSR/MCR will be decided on each smartcoin separately by voting, each time one change is issued 2 poll worker proposals will be created standing FOR and AGAINST the change.
For example, to decide whether to reduce MSSR to 1.02 for bitCNY, 2 poll worker proposals will be created for voting:
Poll-BSIP**-Reduce MSSR to 1.02 on bitCNY
Poll-BSIP**-No Reduce MSSR to 1.02 on bitCNY
If the voting confirm the change, committee will announce the change at least 3 days before the change is implemented by witnesses.
As change to MCR is not available because of a bug, this BSIP will apply only to MSSR change until the bug is fixed.
Adjustment to one direction has both pros and cons. Decreasing of MCR will help to supply more smartcoins, but will also make the average collateral ratio more close to 1 and may increase the possibility to fall in phase 4. Decreasing of MSSR will help to reduce premium, but may also reduce the possibility for the margin called orders to be filled and increase the possibility to fall in phase 4.
Although the proposed values for MSSR and MCR could be selected carefully to comply with the market status and to avoid the risk, there is no way to guarantee that they will work well enough. Voters will need to evaluate each setting that is proposed in a BSIP poll.
Suggestion on bitCNY rules update after BSIP42
It is important to define a process for the stakeholders to decide to change MSSR/MCR through voting, This can currently be achieved with the technical options that are available to the witnesses.
This document is placed in the public domain.