Summary:
The proposal aims to issue a new over-collateralized stablecoin pegged to USD, called paUSD.
Context
Parallel Protocol started working as a Collateral Debt Position (CDP) protocol issuing PAR, an overcollateralized EURO pegged stablecoin. It quickly became one of the most decentralized stablecoin euro on the market.
As the launch of the KUMA protocol approaches, it would be beneficial to launch a USD-indexed stablecoin to pair with the USK. This is because the first IBT stablecoins that the KUMA protocol will provide will also be pegged to US Treasuries (with a price close to the $). The launch of an over-collateralized stablecoin pegged to the USD would allow the protocol to reach new users that have so far been beyond our reach, as well as create new synergies between the Parallel Protocol and the KUMA Protocol.
Rationale:
paUSD will be an over-collateralized stablecoin, it will work exactly the same way as PAR :
The core of the Parallel Protocol are Vaults. Users mint paUSD by depositing collateral such as Ether (ETH) into the Vault smart contract (tokens as collateral to be determined in another proposal). The steps involved to mint new paUSD are as follows:
- A Borrower deposits collateral, automatically creating a new Vault. Based on the Vault’s collateral balance, a Borrower can borrow up to a certain amount of paUSD. The Vault must be collateralized with more than a Minimum Collateralization Ratio (MCR) for borrowing. For example, an MCR of 150% means borrowers need 150% collateral deposited before they can borrow.
- A separate liquidation MCR (Liquidation Ratio (LR)) is used to calculate liquidations. For example, a LR of 130% means Vaults with an MCR below 130% can be liquidated. Both ratios for initial borrowing and liquidations are configured per collateral type.
- The paUSD smart contract mints the borrowed amount of paUSD tokens to the Borrower.
- An Origination Fee is applied for newly created debt. (0.2% of minted amount)
- paUSD are ERC20 tokens that one can transfer and use normally, pegged to the USD fiat currency.
- A Borrowing Fee accrues over time on all active Vaults, which has to be fully repaid before the Borrower can withdraw their collateral. (0.3% per year on the debt)
- A Health Factor is the ratio between a vault’s current and minimum MCR (or LR.) If a Vault’s liquidation health factor goes below a minimum value due to market changes, profit-seeking Liquidators can liquidate the undercollateralized Vault to receive its collateral at a discount.
- Borrowers need to retain enough collateral in their Vaults to borrow additional funds and avoid being liquidated.
- The paUSD token is a fully redeemable stablecoin. Borrowers can redeem and burn paUSD to repay their debt, close their Vault, and withdraw their collateral.
- Liquidators earn a liquidation bonus for liquidating underwater vaults.
- A Liquidation Fee is charged to the Borrower during liquidation, which is added to the outstanding debt.
Liquidation ensures that there is always sufficient collateral to cover all paUSD tokens. Vaults below a specified health factor are subject to liquidation by profit-seeking actors in the network. Network actors have a financial incentive to trigger liquidations as fast as possible. This has the positive effect of removing risky vaults from the system.
Means:
- Human resources: If the proposal is accepted, DAO Multisig Signers will need to sign transactions to execute the proposal.
- Treasury resources: There is no cost for the treasury to adjust the Parallel Protocol fees.
Technical implementation:
Another proposal will be published to determine the deployment plan for the paUSD stablecoin.
Voting options:
- Accept to issue paUSD
- Against issuing paUSD
- Abstain
Authors: @starny & @JeanBrasse from Mimo Labs
Community poll:
- Accept to issue paUSD
- Against issuing paUSD
- Abstain
0 voters
MIP-14┃Introducing paUSD, the Parallel USD Stablecoin is live on Snapshot !
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