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SBF
@SBF_FTX
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@SBF_FTX
12) c) what are CREAM's biggest risks? Well, single asset risk is one thing. But sometimes it's not the biggest. There's about $70m combined between ETY, YFI, BAL, COMP, CREAM, LINK, LEND, CRV, MTA, SUSHI, and UNI. That's similar to the FTT balance.
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SBF
@SBF_FTX
13) Which has higher crash risk--FTT, or that basket together? Well, on May 1st, FTT was 15% lower. Half the DeFi coins didn't exist, the other half were on average 60% lower. Similar on 6/1, and 7/1, and 8/1. DeFi is way more volatile than FTT.
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SBF
@SBF_FTX
14) In fact, it's *so* much more volatile that even though FTT is one asset and the other DeFi coins are a basket, the *correlated* part of the basket's volatility is still higher than FTT's volatility.
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SBF
@SBF_FTX
15) In both directions. On 9/1, FTT was 20% higher. The *average* of the DeFi coins was 240% higher.
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SBF
@SBF_FTX
16) The data is pretty clear here: The DeFi coins in CREAM pose a greater risk than FTT. Much, much greater. So much that FTT blowout risk doesn't really register compared to the other risks in DeFi right now.
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SBF
@SBF_FTX
17) If you're worried about a 60% move causing liquidations in CREAM: This has happened about once/month for the DeFi basket together recently. FTT hasn't been at a 60% different price in 2020.
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SBF
@SBF_FTX
18) So, FTT is probably less risky than the rest of CREAM, but it might get banned. It'd better be useless for it then, right?
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SBF
@SBF_FTX
19) Well, it *is* less useful per $ than many of the other coins. But I think the community is not correctly understanding the implications of banning that much of the collateral. a) CREAM TVL down 30% b) CREAM borrowing down 40% c) Interest earned by lenders down 40%
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SBF
@SBF_FTX
20) No one will use CREAM for large size again -- it loses a lot of its future value. (and, of course, some partners, liquidity, etc.) I think this probably nukes something like 20% of the protocol's value.
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SBF
@SBF_FTX
21) That's a lot! Giving up 20% of value based on an emotional, error-laden tirade to a single large voter for one of the lesser risks of the protocol. Because some people don't believe in borrowing (on a borrow-lending protocol, none the less!)
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SBF
@SBF_FTX
22) So, yeah, this is a pretty crap-tastic proposal. That being said -- I think some variants would be reasonable! Want to decrease collateral to 40%? Want to cap any single asset at 20% of the total supply? IDK if those are right, but they're totally plausible.
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SBF
@SBF_FTX
24) If that's what you want for CREAM--fine. But also then why use CREAM and not Compound? If you want a small, neatly curated list of assets in a static system, that's what Compound specializes in. In CREAM, I see a dynamic, broader protocol, for better or for worse.
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SBF
@SBF_FTX
25) But, idk, in the end this is the community's decision. Or, you know, 0xDa495C2Ab0a91623564126778D5AB20fA87C1DFc's. Either way.
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SBF
@SBF_FTX
26) Anyway, we just voted to keep FTT as it is now. We would be happy to vote for a reasonable alteration--a moderate decrease in collateral weight, or 20% cap on a single coin! But the 'partial' option here is massively under-specified (as is the voting process for 3 options).
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