[WOOF!] Kill Switch

Kill Switch

Co-authors: @bryancolligan, @Gauntlet, @AlphaGrowth

Inspired by the Collateral Factor discussion, WOOF! sees an opportunity to initiate a technical conversation about implementing a Kill Switch feature. This feature could provide additional security and flexibility for the protocol, especially in high-risk or emergency scenarios.

WOOF! has scheduled a call with Gauntlet this week to explore the business case for this functionality. To make the most of the community’s insights and ensure a well-rounded implementation, we invite everyone to join the discussion by sharing their ideas on:

  1. Implementation Details: What technical considerations should we prioritize?
  2. Triggers: What specific conditions or thresholds should activate the Kill Switch?
  3. Operational Scope:
    • Should the Kill Switch pause all protocol activity or target specific functionalities (e.g., borrowing, withdrawals)?
  4. Community Feedback: What additional considerations should we take into account to align with user needs and expectations?

We encourage all members of the community to contribute their thoughts and expertise to this initiative. Your input will be invaluable as we move forward in designing and implementing this potentially critical feature.

Next Steps:

  • WOOF! will share insights from the upcoming call with Gauntlet.
  • Community discussion.
3 Likes

This sounds like a wise addition. I value the insight the authors bring to the team and table, so I’m a yes. This is a nice add.

for now I will just comment one part of your questions (3)

There are 3 things that we should never pause in my opinion

  1. Supply: cause it can harm users trying to protect their position from liquidation.
  2. Withdraw: no for any reason.
  3. Liquidation: pausing this function (depending on the market conditions) could cause more harm than benefit.

that leaves the only option for the killswitch is the borrow

4 Likes

Thanks for the comment.

I would like to clarify and distinguish some of the actions.

Risk collateral - an asset that depeged in price.

  1. Supply. To protect the position, the user can a) supply risk collateral b) supply non-risk collateral, and b) lend base assets to increase HF.

I would suggest restricting the case A

  1. Withdraw. a) The user can withdraw the base asset, aka borrow it against risk collateral. a) The user can withdraw the base asset, aka borrow it against non-risk collateral. c) The user can withdraw risk collateral. d) The user can withdraw non-risk collaterals.

I would suggest restricting the case A

  1. Liquidation. The key goal is to prevent liquidation for the cases when depeg happen but then the price normalized later. However it is another case, how to understand, if it is depeg or asset crush.

Is the kill switch primarily for targeting higher collateral/LTV ratio and this will probably just apply to correlated assets? If yes then,

The Kill switch functionality

  1. Should be asset based and for smaller market cap and less liquid assets
  2. Should block borrow when applied
  3. Should apply automatically if the price ratio changes by ~10%
1 Like

The primary goal is to increase CF for LRT/LST to increase the leverage opportunities.