Polychain will be voting in favor of (FOR) Prop. 039.
Prop 039 puts Compound in a less than ideal situation. Either 1) We liquidate some users and reverse prop. 036 that was voted on only a few weeks ago, or 2) we leave the WBTC collateral factor where it is & ignore data suggesting that the protocol could become underwater in volatile markets.
We see #1 as the lesser of two evils. Security of the protocol is our top priority. The data here sufficiently demonstrates the notable risk posed by a 75% collateral factor, and as such, we are in favor of a collateral factor reduction. While this may end up liquidating users who don’t adjust collateral in time, this is a tradeoff we should be willing to make to ensure protocol security. (Forced liquidations shouldn’t be taken lightly, but the reduction to 65% seems like a good middle ground.)
Setting collateral factors is about optimizing the tradeoff between safety & capital efficiency. There is an argument to make that, in light of certain risks, higher collateral factors may be justified to support growth/competitiveness. We’re open to more discussion on this to find the right balance. In this case, given the risks presented, we believe it is best to err on the side of caution.
This vote also brings up a number of issues worth further consideration (as have been discussed a bit in this thread): 1) Collateral factors shouldn’t see this much volatility; we need to iron out the process for setting these. 2) In extreme cases, when collateral factors need to be reduced, we need a more graceful method of deleveraging users who would otherwise be liquidated. 3) We need better pre-vote signaling to divide proposals into controversial issues that need to be separated & uncontroversial issues that can be bundled (we should start doing more of this through the forum).