Capacity on some several protocols is being limited by staking now, rather than the global capacity limit, and with NXM decreasing in value recently this has limited potential cover purchases.
Staking 3.0 will enable more leverage to be built into the system but in the meantime I believe we can be slightly more aggressive with the capacity factors for established protocols.
Right now capacity factors are:
2x for most smart contract covers
1x for newer ones
2x for Custody Cover
The biggest risk in increasing factors is the potential attack vector where there is an embedded bug and cover is taken out longer term to exploit it. This is almost irrelevant for large established protocols so I believe the upside is worth the risk here.
More generally, I believe we should start being a bit more aggressive with risk settings to push further growth.
Here are my recommendations, which focus on increasing factors where we see the most demand and for those protocols which are stable:
Two things that would be helpful for me are the following:
an indication of “where the action is” from the staking interface. Where does the mutual need capital and where are the returns? For example, I’ve staked against some of the protocols with little cover (expecting there to be some), but little demand so I’ve lost out rewards. How do I max out rewards given risk/reward potential?
*costless re-staking. If I want to move from one cover to another, I have to unstake/restake. I realize this is a bit of a bigger ask, but a Loopring type thing where I could move funds w/o gas costs to stake where the action is might increase value. I’d still be locked into “staking” and a 90 day unstaking, but maybe more liquidity within the staking environment. Easier said than done, I am sure.
We’re discussing the demand one internally, we recognise the challenge as there is a chicken/egg problem that is made more challenging with the 90 lock.
re switching, we can’t allow immediate switching as if a claim comes in then stake just escapes, however I’m sure there are other things we can do.
tl:dr no solid answers right now, but this feedback is on our list and we’re working on it.
I agree with Benjamin that stuff like Hegic is still too new. I’d also have belly pain with increasing Celsius to 4. Let’s not forget these CeFi businesses are also risky and just recently Cred filed for bankruptcy, after their funds had been lost due to fraud: https://www.coindesk.com/crypto-lender-cred-files-for-bankruptcy
Would these kind of changes be automatically adjusted in a governance-minimized way in the long term? We could have cover for 1,000 protocols at some point and reviewing/deciding factor adjustments for each of them would be too manual. I understand the current situation but was wondering if this is part of the long term governance minimization plans.
