Proposal for Augur v2 Upgrade Process for Compound:
Proposal Part 1:
Around V2 launch:
- Prohibit new supply and borrow of rep v1
Proposal Part 2:
10 weeks prior to earliest fork date:
- Set REPv1 collateral factor to 0% (going down 10% every 2 weeks until it’s at 0, e.g. 40-30-20-10-0). Encourage people with v1 to convert to v2.
- If any REPv1 loans are left, use a high rate to liquidate the position, e.g. 10% interest a day or something
- Assuming some exchanges have listed it and/or dexes have v2 with sufficient liquidity, add v2 to compound with same collateral rules as v1 with a new cREP contract
2 weeks prior to potential fork date:
- Upgrade any REPv1 in the reserve to REPv2
The thinking behind this is we can keep it fairly simple (to just two proposals). When v2 comes out it no longer makes sense to be able to do new supplies or borrowing of rep, everyone else should be given time to migrate. There are four months until a fork can potentially happen after REPv2 launches (July 28), so there’s time. After the first proposal is enacted and it’s been a few weeks to see how v2 plays out, I then propose a part 2 which reduces how much people can borrow against rep over time (so as to not cause a bunch of cascading liquidations). Assuming there’s oracles with price feeds for v2 at this point and some of the major exchanges have migrated over, I think it then makes sense to in parallel add v2 with the same rules as v1 to encourage people to easily migrate over from v1 to v2 rep and then resupply or borrow from compound.
Since REP has the ability to fork or split into two assets (rare, has never happened and should never happen but is good to prepare), we should go ahead and address that too. The cREPv2 contract could allow compound governance to vote to migrate REP in the event of a fork. But I don’t think it should for a couple reasons: when a fork happens there’s different REP tokens (different contract addresses too) for each universe of the fork, so to migrate, COMP governance would need to choose the winning fork (before it is known what the winning one is), migrate the cREP contract to it, and hope that exchanges list it immediately post fork (otherwise there’s no price feed to go off of for Compound).
Instead what makes more sense is if a fork did happen in v2, there’s always at least 60 days of warning, so we could follow a similar process to the one above: prohibit new supply and borrow, gradually lower the collateral factor, liquidate existing positions if no one pays them back by the end of the 60 days, and upgrade any remaining REP in the reserve (or just convert it to dai or something to be even easier).
Note: continuing the convo from the prior forum here, borrowed a couple ideas from there re collateral factor etc!
Edit: forgot to add fork date info! After launch it takes 8 weeks for a market to potentially trigger a fork at the earliest, and then 60 days for a fork to actually occur.
