Introduction
As a dedicated user of the JustLend platform, I would like to suggest an important measure to enhance the stability and security of our ecosystem: lowering the collateral factor of the ETHOLD market to 0%. In the past few weeks, the price discrepancy between ETHOLD and ETH has been discussed hotly in the community. The ETHOLD market has exhibited extreme price fluctuations, posing a significant risk of liquidations and potential losses for borrowers and the platform. Therefore, lowering the collateral factor of the ETHOLD market to 0% and finally delisting it from the market are vital to safeguard both users and the platform.
Background
JustLend has introduced the ETH(NEW) market and simultaneously taken significant steps to phase out the ETHOLD market. The changes, detailed in Proposal #19, include disabling deposit and borrowing functions for ETHOLD and adjusting the reserve factor to 100%. This adjustment means that the supply in the ETHOLD market will no longer yield any base rewards, causing the Supply APY to drop to 0%. Meanwhile, Proposal #25 reduced the collateral factor of ETHOLD to 40%. This substantial reduction in the collateral factor was implemented to mitigate the risks of price fluctuations and prevent user liquidations. Although the Justlend platform has done a lot of measures to prevent the risks from the ETHOLD market, it is still an uncertain factor. Reducing the collateral factor of ETHOLD to 0% is a necessary step to safeguard the platform against market volatility and liquidity risks.
Proposal
Key reasons for Lowering the Collateral Factor to 0%:
-
Risk Mitigation:
A collateral factor of 0% means that users cannot borrow against their ETHOLD holdings, which in turn reduces the risk of bad debt and liquidations during market downturns. This would create a more stable and secure environment for all participants. -
Encouraging User Participation:
By eliminating the collateral factor, we could attract a broader range of users, including those who may have been hesitant to lock up their assets in collateral. This inclusivity could drive higher engagement and participation in the platform. -
Simplicity and Transparency:
A collateral factor of 0% simplifies the platform’s operations and makes it easier for users to understand the terms and conditions of their investments. This transparency can build trust and foster a positive user experience. -
Aligning with Market Trends:
Many modern financial platforms are moving towards lower collateral requirements to promote more agile and flexible trading environments. Adopting a 0% collateral factor would position ETHOLD as a forward-thinking and user-centric platform.
Implementation Phases
To ensure a smooth transition, I propose the following steps:
- Phased Approach: Gradually reduce the collateral factor over a defined period, allowing users to adjust their strategies accordingly. So far, the collateral factor of ETHOLD market has reduced to 40%, and this proposal will reduce to 0%.
- User Education: Provide comprehensive resources and support to help users understand the implications and benefits of this change.
- Feedback Mechanism: Establish a feedback loop to gather user insights and address any concerns during the transition period.
Impact Analysis
Positive Impacts:
- Enhanced Platform Stability: Removing ETHOLD from the collateral pool strengthens overall platform stability.
- Reduced Systemic Risk: Minimizing exposure to a volatile and illiquid asset reduces the risk of large-scale liquidations during market downturns.
- Increased User Confidence: Proactive risk management builds user trust and confidence in the platform’s long-term health.
Challenges:
- User Adaptation: Users will need to adjust their borrowing and collateral strategies, which may cause short-term inconvenience.
- Market Reactions: ETHOLD may experience price volatility as it is gradually delisted.
About ETH(New)
ETH(New) is a mapped Token of ETH on the TRON network, which is cross-chained from the Ethereum network to the TRON network via the BTTC decentralized cross-chain bridge. No centralized institution or exchange is involved in this process, unlike ETHOLD, which makes ETH(New) more decentralized and provides users with greater autonomy and control over their assets. Any institution and user can transfer ETH from the Ethereum network to the TRON network via the BTTC decentralized cross-chain bridge at their own discretion and without restriction.
Conclusion
Lowering the ETHOLD market collateral factor to 0% presents a strategic opportunity to boost trust, mitigate risk, and attract a diverse user base. I am confident that this change will foster a more robust and user-friendly platform, driving long-term growth and success.