MIP-8┃Adjust WMATIC minimum collateral ratio

Summary:

The goal of this proposal is to adjust the WMATIC minimum collateral ratio (MCR) on Polygon.

Context:

Until now, Mimo has been conservative in its management of collaterals and minimum collateral ratios (MCR). This has made Mimo inefficient and uncompetitive compared to other protocols. We believe that by having active risk management we can increase the efficiency of the protocol and become more competitive.

Rationale:

WMATIC is the wrapped version of MATIC, the native currency of Polygon blockchain.

We propose to adjust WMATIC minimum collateral ratio on Polygon. To do this, we conducted a risk assessment of the WMATIC. We have based our risk assessments on the Mimo Risk assessment methodology available here.

Below are the results of risk assessments on Polygon chain:

  • Smart contract risk: B+

The WMATIC token on Polygon was launched in. WMATIC is the wrapped version of MATIC, the native currency of Polygon blockchain. WMATIC has generated more than 150.3 M transactions.

WMATIC contract: 0x7c9f4c87d911613fe9ca58b579f737911aad2d43

  • Counterparty risk: B+

The process to wrap MATIC is permissionless. Anyone can trade MATIC for WMATIC on the official polygon website. Similarly WMATIC can be unwrapped to get the MATIC back. There are currently 273k WMATIC holders on Ethereum.

  • Market Risk: B-

WMATIC on Polygon has a $442M market cap, one of the highest market cap and trading volume of mrc-20 tokens. Furthermore the price is pegged to MATIC as it is redeemable for it at 1:1. For this reason we consider the risks of WMATIC mitigate by MATIC.

  • Chain Risk: A

Polygon had 0 outages over the last 6 months. (accorded to Polygon PoS Chain Block Count and Rewards Chart | PolygonScan)

  • Liquidity Risk of PAR on Polygon: B+

PAR/USDC has 480k in liquidity on Uniswap V3 concentrated liquidity pool. This provides the following price impact on the following trade sizes:

1000 USDC → PAR: 0.02%
10000 USDC → PAR: 0.15%
25000 USDC → PAR: 0.38%
50000 USDC → PAR: 0.75%

  • Overall Risk: B+

The Overall Risk is the average of the points mentioned above.

Following results of the risk assessment we propose to adjust these parameters for WMATIC on Polygon:

  • Liquidation Ratio: 145%.
  • Minimum collateral ratio (MCR): 150%
  • Liquidation bonus: 5%
  • Debt Limit: 2M.

Means:

  • Human resources: If the proposal is approved, this will need transactions to update minimum collateral ratios.
  • Treasury resources: There is no treasury cost.

Technical implementation:

  • Update contract which manages WMATIC minimum collateral ratio on each chain.

Voting Options:

  • Accept the adjustment of WMATIC parameters
  • Refuse the adjustment of WMATIC parameters
  • Abstain

Community poll:

  • Accept the adjustment of WMATIC parameters
  • Refuse the adjustment of WMATIC parameters
  • Abstain

0 voters

2 Likes

Thanks for pointing out to the Mimo Risk assessment methodology. Is helping to understand the different scores.

2 Likes

MIP-8┃Adjust WMATIC minimum collateral ratio has received a massive approval but unfortunately didn’t reach the quorum which was 5M $vMIMO

Results:
https://snapshot.org/#/mimo.eth/proposal/0x6a6f953b589a5af3f23097a9433d081452ff9653f91beeb82ddf877b67015f28

The creator of the proposal has decided to republish the proposal on snapshot for a new vote: Snapshot