MIP-25 l Update Partial Automated Borrow Rates Adjustments

Improvement Protocol (MIP)
1

Summary:

The proposal aims to update partial automation of borrow rates adjustments for PAR & paUSD, introduced in MIP-23.

Context:

Following the ever-increasing borrow rates on the DeFi money markets (~20% p.y on Curve, ~25% p.y on Aave) allowing interest rates to be arbitraged between money markets, selling pressure continued to increase on PAR & paUSD on Ethereum, creating a depeg of the latter.

To counter this, the DAO approved the MIP-23, which introduced partial automated borrow rates adjustments. However, with the depeg of the jEUR on Polygon increasing (due to their bad debt), dragging PAR with it, and borrowing rates rising ever higher, MIP-23 has become too conservative.

Rationale:

With the aim of keeping the price of PAR and paUSD as close as possible to the EUR and USD, we propose to set up a more aggressive approach.

We propose to continue to delegate the management of borrowing rates to the DAO multisig on a partial basis, within an updated framework defined below:

  • Current framework:

  • The sole purpose of adjusting borrow rates is to keep the PAR price as close as possible to the EUR and the paUSD price as close as possible to the USD.

  • This framework includes PAR and paUSD, on all the chains where they are deployed.

  • Interest rates per annum must range from a minimum of 3.00% to a maximum of 18.00% per annum for all tokens authorized as collateral.

  • It will only be possible to modify interest rates every 72 hours minimum.

  • Productive assets allowed as collateral must have a borrow rates 0.30% p.y higher than non-productive assets.

  • Adjustment of borrowing rates must be between 0.30% p.y and 1.20% p.y, in slopes of 0.3% (0.30%, 0.60%, 0.90%, 1.20%) and subject to this table:

  • Proposed framework:
    • The sole purpose of adjusting borrow rates is to keep the PAR price as close as possible to the EUR and the paUSD price as close as possible to the USD.
    • This framework includes PAR and paUSD, on all the chains where they are deployed.
    • Interest rates per annum must range from a minimum of 3.00% to a maximum of 45.00% per annum for all tokens allowed tokens as collateral.
    • It will only be possible to modify interest rates every 72 hours minimum.
    • Productive assets allowed as collateral must have a borrow rates 0.30% p.y higher than non-productive assets.
    • Adjustment of borrowing rates must be between 1.20% p.y and 3.00% p.y, in slopes of 0.60% (1.20%, 1.80%, 2.40%, 3.00%) and subject to this table:

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To determine the price of PAR and paUSD and adjust borrowing rates accordingly, the DAO multisig signers will use an aggregator (e.g. Paraswap) and simulate a $10,000 swap. Users & DAO members are able to follow borrow rates adjustments here.

We also propose to set PAR borrow rates for non-productive assets to 24.00% p.y and 24.30% p.y for productive assets on both Ethereum & Polygon PoS before updating partial automated borrow rates adjustments.

We also propose to set paUSD borrow rates for non-productive assets to 18.00% p.y and 18.30% p.y for productive assets on both Ethereum & Polygon PoS before updating partial automated borrow rates adjustments.

Means:

  • Human Resources: Multisig signers will need to sign transactions to execute the proposal
  • Treasury Resources: There will be no treasury resources needed to execute the proposal.

Technical implementation:

  • On Ethereum, Parallel DAO multisig will call following smart contracts:
    • PAR ConfigProvider contract:
      • Call ‘SetCollateralBorrowRate’ function with these parameters:
        • ‘_collateralType’ : [token address]
        • ‘_borrowRate’ : [borrow rate]
    • paUSD ConfigProvider contract:
      • Call ‘SetCollateralBorrowRate’ function with these parameters:
        • ‘_collateralType’ : [token address]
        • ‘_borrowRate’ : [borrow rate]
  • On Polygon PoS, Parallel DAO multisig will call following smart contracts:
    • PAR ConfigProvider contract:
      • Call ‘SetCollateralBorrowRate’ function with these parameters:
        • ‘_collateralType’ : [token address]
        • ‘_borrowRate’ : [borrow rate]
    • paUSD ConfigProvider contract:
      • Call ‘SetCollateralBorrowRate’ function with these parameters:
        • ‘_collateralType’ : [token address]
        • ‘_borrowRate’ : [borrow rate]

Voting Options:

  • Accept the Update
  • Against/Rework the proposal
  • Abstain

Authors: @JeanBrasse from Mimo Labs

Sentiment poll:

  • Accept the Update
  • Against/Rework the proposal
  • Abstain
0 voters
2

The proposal is live on Snapshot

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3

The proposal has been republish on Snapshot due to a lack of participation
https://snapshot.org/#/mimo.eth/proposal/0xdcbde947c83311121ae76535a47534048be45b099f2046596e44884c8b899562

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