Karura aUSD liquidation has a triple cushion/protection system. It will attempt to sell the collaterals on the DEX first, if the price does not meet the required levels, then it will attempt to sell it on auctions, and if that’s unsuccessful, then the collaterals will be collected by the CDP treasury. These collected collaterals can later be sold to clear aUSD debt.
Karura CDP treasury currently has 18,686 collected KSM collateral. The proposal below will outline steps to sell off these KSM to clear aUSD debt.
The goal will be to maximize the amount of aUSD that can be recouped from selling off the collected KSM to repay aUSD debt. There are two on-chain mechanisms at our disposal: auctions and DEX. Auctions will likely result in selling collaterals at a discount, while using the DEX will have better chances to maximize the amount of aUSD recouped.
The following steps will be required to execute via DEX
Delegate the KSM to a proxy account that only allows DEX transactions (no balance transfer or other actions are allowed)
A trading bot will be using this proxy account to execute trades with the following principles:
a. Execute small enough trades to avoid slippage
b. Stop trading if the current KSM trades cannot cover the aUSD debt
c. Restart trading if projected KSM trades can cover aUSD debts
d. Randomize trading windows to avoid front-running
aUSD traded will directly be deposited back to CDP treasury to cover debt
CDP treasury vault address (qmmNufxeWaAUp4SVa1Vi1owrzP1xhR6XKdorEcck17RF498
) delegate DEX swap and Homa transaction proxy to be used by trading bot (rFibBR3JY6BQgWS6owJJz3fgC9Mwp5EzFwPB42Zzg4fUzA5)