Dai and Collateral Redemption during Emergency Shutdown

Level: Intermediate

Estimated Time: 60minutes

Description

This guide describes how users can interact with the Maker protocol through proxy contracts to redeem Dai and any excess collateral if the Maker system has entered into emergency shutdown. We will define the setup process, including proxy contract setup, followed by seth calls to; redeem collateral as a Dai Holder, and free excess collateral as a Vault Owner.

Learning Objectives

To redeem Dai and/or excess collateral in the event of Emergency Shutdown

Table of Contents

Setup Process

  1. Installation

  2. Contract Address Setup

Dai Holders to Redeem Collateral

  1. Check user Dai holdings

  2. Approve a Proxy

  3. Create Calldata

  4. Execute Calldata using the MYPROXY Contract

  5. Call cashETH or cashGEM functions

  6. Using cashETH

  7. Define calldata for our function

  8. Execute cashETHcalldata

  9. Alternative from step (6), Using cashGEM

  10. Define calldata for our function

  11. Call execute in MYPROXY

Vault Owners to Redeem Excess Collateral

  1. Vault Holder State

  2. Redeeming ETH using the freeETH function

    2.1. Set Call Data

    2.2 Execute this calldata

  3. Redeeming ETH using the freeGEM function

3.1 Set Calldata

3.2 Execute this calldata

Conclusion

Setup process

1. Installation

In order to interface with the Ethereum blockchain, the user needs to install seth, a command line tool as part of the Dapp.Tools toolset. We also provide further installation information here. Once the user has installed and configured [seth](<https://dapp.tools/>) correctly to use the main Ethereum network and the address which holds their MKR, they can query contract balances, approvals and transfers.

2. Contract Address Setup

The user will require the following contract addresses, shown below as Kovan addresses. Mainnet addresses are accessible at Changelog.makerdao.com which can be verified on Etherscan. Similarly, additional information on the commands described below can be found in the End contract and the Proxy_Actions_End contract. These should be setup in the following manner and pasted into the terminal line by line:

export DAI=0x5e007fb5f350c5f704b6181a5eef7ddfc2f237a9
export PROXY_ACTIONS_END=0xd2169318a93c9934007bc0407fe922cbf304555d
export MCD_END=0xd9026db5ca822d64a6ba18623d0ff2bb07ad162c
export CDP_MANAGER=0x07c4d2afaaa4c21269509f9151ea43776880f3c6
export PROXY_REGISTRY=0x64A436ae831C1672AE81F674CAb8B6775df3475C
export MCD_JOIN_ETH=0x39e05f02eca57a9565674502e5027eda48c3fe4e
export MCD_JOIN_BAT=0x15835e2afe6a897906bb55374f5aa6185867d68e
export MCD_JOIN_DAI=0xfc0b3b61407cdf5f583b5b1e08514e68ecee4a73
export MYPROXY=$(seth call $PROXY_REGISTRY 'proxies(address)(address)' $ETH_FROM)
# This creates a unique proxy address by calling the proxy registry using the users Ethereum address.
export ilk=$(seth --to-bytes32 $(seth --from-ascii ETH-A))
export ilkBAT=$(seth --to-bytes32 $(seth --from-ascii BAT-A))
# Here we have defined two ilk (collateral types) ETH and BAT.
# The number of ilk types needed will depend on the types of collateral vaults that the user had open.
export ETH_GAS=4000000
export ETH_GAS_PRICE=2500000000
# Typically gas costs are slightly increased when dealing with proxy contracts to prevent failed transactions.
export cdpId=$(seth --to-dec $(seth call $CDP_MANAGER 'last(address)' $MYPROXY))
# This is a call to the CDP Manager responsible for making the users CDP ID.
# Note, if user created multiple vaults they will have multiple CDP IDs, all of which must be referenced to retrieve collateral.

Dai holders to Redeem Collateral

There are two functions to be called in order to retrieve the end collateral. The first step is pack and the second step is cashETH or cashGem depending on the leftover amount of each collateral type in the system.

Depositing Dai tokens into the system can be done using the PROXY_ACTIONS_END contract library and the pack function. This function efficiently bundles together three parameters, including three parameters; the Dai(join) adapter, the end contract and the amount of Dai tokens you wish to redeem for allowed collateral in one go.

function pack(
address daiJoin,
address end,
uint wad
) public {
daiJoin_join(daiJoin, address(this), wad);
VatLike vat = DaiJoinLike(daiJoin).vat();
// Approves the end to take out DAI from the proxy's balance in the vat
if (vat.can(address(this), address(end)) == 0) {
vat.hope(end);
}
EndLike(end).pack(wad);
}

1. Check user Dai holdings

The user can check their Dai Token balance and subsequently save it in the wad variable so that it can be later used in the proxy function.

export balance=$(seth --from-wei $(seth --to-dec $(seth call $DAI 'balanceOf(address)' $ETH_FROM)))
export wad=$(seth --to-uint256 $(seth --to-wei 13400 eth))
# in the above, 13400 is an example Dai balance

2. Approve a Proxy

The user needs to approve MYPROXY in order to withdraw Dai from their wallet by using the following function.

seth send $DAI 'approve(address,uint)' $MYPROXY $(seth --to-uint256 $(mcd --to-hex -1))

3. Create Calldata

Next it is necessary to bundle together the function definitions and parameters that the user needs to execute. This is done by preparing a function call to MYPROXY, defined as calldata.

export calldata=$(seth calldata 'pack(address,address,uint)' $MCD_JOIN_DAI $MCD_END $wad)
.
.
.
# 0x33ef33d6000000000000000000000000fc0b3b61407cdf5f583b5b1e08514e68ecee4a73000000000000000000000000d9026db5ca822d64a6ba18623d0ff2bb07ad162c0000000000000000000000000000000000000000000002d66a5b4bc1da600000

4. Execute calldata using the MYPROXY contract

The user is able to call the execute function and utilize the PROXY_ACTIONS_END.pack() function within the environment of MYPROXY. This approves the proxy to take Dai tokens from the user's wallet into the proxy address and deposits it into the end contract, where a proportionate amount of collateral can later be claimed. Once the DAI is packed, it cannot be unpacked.

seth send $MYPROXY 'execute(address,bytes memory)' $PROXY_ACTIONS_END $calldata
# [example](<http://ethtx.info/kovan/0x8f4021e46b1a6889ee7045ba3f3fae69dee7ef130dbb447d4cc724771e04bcd6>) transaction showing actions involved in 'packing' the user's Dai.

5. Call cashETH or cashGEM functions

Users will be able to withdraw collateral depending on the collateral that is in the VAT at the time of shutdown. For example 1 Dai will be able to claim a portion of ETH and BAT (and any other accepted collateral) which when combined will be approximately worth 1 USD. This process is completed by calling cashETH or cashGEM.

6. Using cashETH

The following function cashETH is referenced as part of the calldata function and should be referenced here.

function cashETH(
address ethJoin,
address end,
bytes32 ilk,
uint wad
) public {
EndLike(end).cash(ilk, wad);
uint wadC = mul(wad, EndLike(end).fix(ilk)) / RAY;
// Exits WETH amount to proxy address as a token
GemJoinLike(ethJoin).exit(address(this), wadC);
// Converts WETH to ETH
GemJoinLike(ethJoin).gem().withdraw(wadC);
// Sends ETH back to the user's wallet
msg.sender.transfer(wadC);
}

7. Define calldata for our function

Next, we again define the calldata for our function by bundling together the cashETH parameters shown above.

export cashETHcalldata=$(seth calldata 'cashETH(address,address,bytes32,uint)' $MCD_JOIN_ETH $MCD_END $ilk $wad)

8. Execute cashETHcalldata

Finally, executing the cashETHcalldata in the execute function of the user's MYPROXY contract will redeem ETH for DAI, and place this ETH into the user's ETH wallet.

seth send $MYPROXY 'execute(address,bytes memory)' $PROXY_ACTIONS_END $cashETHcalldata
# [example](<http://ethtx.info/kovan/0x323ab9cd9817695089aea31eab369fa9f3c9b1a64743ed4c5c1b3ec4d7218cf8>) successful transaction

9. Alternative from step (6), Using cashGEM

It is also possible to use the cashGEM function in order to redeem different collateral types. In the below example we are referencing gemJoin as it relates to BAT.

function cashGem(
address gemJoin,
address end,
bytes32 ilk,
uint wad
) public {
EndLike(end).cash(ilk, wad);
// Exits token amount to the user's wallet as a token
GemJoinLike(gemJoin).exit(msg.sender, mul(wad, EndLike(end).fix(ilk)) / RAY);
}

10. Define calldata for our function

Similarly, as done in step (7), the user needs to define the calldata to interact with cashGEM

export cashBATcalldata=$(seth calldata 'cashETH(address,address,bytes32,uint)' $MCD_JOIN_BAT $MCD_END $ilkBAT $wad)

11. Call execute in MYPROXY

Finally, executing the cashBATcalldata in the execute function of the user's MYPROXY contract will redeem BAT for DAI, and place this BAT into the user's ETH wallet.

seth send $MYPROXY 'execute(address,bytes memory)' $PROXY_ACTIONS_END $cashBATcalldata

Vault Owners to Redeem Excess Collateral

Likewise, a vault owner can use the freeETH or freeGEM proxy actions function to retrieve any excess collateral they may have locked in the system.

1. Vault Holder State

There are some constraints for vault holders to be aware of. For example, if a user’s Vault is under-collateralised then they will not have any excess collateral to claim. Likewise, if the user’s Vault is currently in a flip auction at the time of emergency shutdown, it will be necessary for the Vault holder to cancel the auction by calling skip(ilk, id) before calling free__().

Similarly, these functions have been completed using Maker proxy contract calls. There may be other scenarios in which 3rd party front ends such as InstaDApp have their own proxies, which will require users to exit from their proxy in order to use the below.

2. Redeeming ETH using the freeETH function

function freeETH(
address manager,
address ethJoin,
address end,
uint cdp
) public {
uint wad = _free(manager, end, cdp);
// Exits WETH amount to proxy address as a token
GemJoinLike(ethJoin).exit(address(this), wad);
// Converts WETH to ETH
GemJoinLike(ethJoin).gem().withdraw(wad);
// Sends ETH back to the user's wallet
msg.sender.transfer(wad);
}

2.1. Set calldata

Depending on how many vaults the user has, it will be necessary to repeat this process for each vault ID.

export freeETHcalldata=$(seth calldata 'freeETH(address,address,address,uint)' $CDP_MANAGER $MCD_JOIN_ETH $MCD_END $cdpId )

2.2. Execute this calldata

Executing the MYPROXY contract will redeem ETH and place it into the users address.

seth send $MYPROXY 'execute(address,bytes memory)' $PROXY_ACTIONS_END $freeETHcalldata

3. Redeeming ETH using the freeGEM function

function freeGem(
address manager,
address gemJoin,
address end,
uint cdp
) public {
uint wad = _free(manager, end, cdp);
// Exits token amount to the user's wallet as a token
GemJoinLike(gemJoin).exit(msg.sender, wad);
}

3.1. Set calldata

Depending on how many vaults the user has, it will be necessary to repeat this process for each vault ID.

export freeBATcalldata=$(seth calldata 'freeETH(address,address,address,uint)' $CDP_MANAGER $MCD_JOIN_BAT $MCD_END $cdpId )

3.2. Execute this calldata

Executing the MYPROXY contract will redeem BAT (or other collateral types) and place them into the users address.

seth send $MYPROXY 'execute(address,bytes memory)' $PROXY_ACTIONS_END $freeBATcalldata

Conclusion

The above outlines how to redeem Dai and excess Vault collateral using the command line.

In summary, we showed how to check your Dai holdings, how to approve a proxy to withdraw Dai from your wallet and then to use cashETH/GEM functions to withdraw collateral into the user’s ETH wallet using the MYPROXY contract . For Vault owners, we showed how to redeem collateral by using the MYPROXY contract and the freeGEM function.

In the event of emergency shutdown we envision that it will still be possible to sell Dai on the open market as well as by making use of economically incentivized redemption keepers to meet market needs for both Dai owners and Vaults holders.