Educate and/or Limit Overleveraging using wMemo

Overleveraging is a double edged sword as it accelerates price action upwards and also steep declines during a downtrend. This makes $TIME very volatile even in comparison to other DAOs as it is a trivial matter to wrap MEMO and borrow against it on Abracadabra. One of the only reasons the price has stabilized in the 4k range is because Sifu has placed a backstop. This is likely to be unsustainable in the long run. To mitigate this issue I propose either or a combination of the following actions:

  1. Educate people on the risks of overleveraging on official documentation related to 9,9
  2. This may come off as heavy handed but for people’s own safety, perhaps there should be a steeper cap on the percentage that can be borrowed against wMEMO
6 Likes

Shouldn’t the people be free to do whatever they want? It’s their assets after all… If you’ve heard about 9,9 strategy you have probably heard what it implicates but some people cannot control their greed

7 Likes

I think it’s important to protect Wonderland. We’ve seen how devastating even a relatively small drop in the crypto market can be. That’s real world evidence that leverage is a huge risk for Wonderland right now.

Also, there already are limits. It’s just a proposal to make them more conservative.

We may also want to explore initial margin vs maintenance margin.

1 Like

I agree with Freedom but the looping concept does need to be better explained. It was not obvious to me that even one loop puts 100% of your investment at risk or liquidation and seizure. Harsh to say the least. Could we should add programing to automatically de-lever part of your position to maintain a pre determined LTV ratio?

Also need to better explain the cost to de-lever and how slippage plays into the process.

3 Likes

May be greed, may just be inexperience. Lots of new people on the scene thanks to YouTube and Tiktok videos. Someone seeing $9500 TIME and not being familiar with volatility in the Defi space may not expect the token to drop through, say, $6000 anytime soon and get an unpleasant reality check by way of liquidation.