14% of Maker CDPs to date have been forcibly liquidated. When this happens, the ETH held as collateral in the CDP is automatically sold at a 3% discount to pay off the CDP holder's DAI debt, and on top of this a 13% liquidation penalty is applied.
When ETH prices drop, many CDP holders can't afford to top up their CDP with ETH to prevent liquidation; but often, they don’t have enough cash to buy DAI close their CDP. So even though they may still be collateralised at over 150% (i.e. they have sufficient assets to pay back their debt), there is no way to effectively close their CDP and pay back the debt.
We asked ourselves: how can we allow these users to close their CDP without paying a hefty liquidation fee?
What it does
Introducing... $dai daddy - an autonomous platform for buying and selling Maker CDPs. Sellers can list their CDP for sale and offer a "discount rate" - less than the 13% fee they would have to pay if forcibly liquidated - which incentivises buyers to provide capital upfront and buy out the seller's debt.
This means CDP holders who are short on cash can always pay back their CDP, even if they have a low collateralisation ratio.
How we built it
DAI daddy works by transferring the ownership of a MakerDao CDP to the DaiDaddy contract which holds the CDP in escrow until someone buys it. At that point the CDP is transferred to the buyer and the funds for the purchase are sent to the seller.
The value of the CDP is calculated by looking at the underlying collateral and debt associated with the CDP. These values can be found by querying the MakerDao Single Collateral Dai(SAI) tub contract which acts as the SAI CDP engine.
Using these values the total value of the CDP can be found by finding the difference between the underlying collateral and debt. DAI daddy enables you to sell your debt at a discount, which is also considered in the debtPrice function.
Challenges we ran into
- Front-end devs are experienced with React.js. However, we decided to use Vue.js because it was easier to integrate it with Web3, so learning this on the fly was a challenge.
- Working remotely with one of our team mates caused delays at times, but we managed to keep communications productive in general.
Accomplishments that we're proud of
- We achieved the scope we set for hack; we’re ready to audit and deploy our MVP.
- Learning Vue.js.
- We have an awesome front-end.
- A unique and eye-catching aesthetic!
What we learned
- The front-end team for this project had no experience with Vue so a lot was learnt about the framework.
- UX/UI designers gained more familiarity with GitHub.
- How to operate under the time pressure of a hackathon.
What's next for DAI daddy
We're keen to build this product out properly, optimise for mobile devices, get it audited, and launch it on mainnet as a fun tool for the community and an addition to the ever-growing DeFi stack.