MIP-9┃Adjust WFTM minimum collateral ratio

Improvement Protocol (PIP) Approved PIPs
1

Summary:

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

Context:

Until now, Mimo has been conservative in its management of collaterals and minimum collateral ratios (MCR). We believe that by having active risk management Mimo can increase its capital efficiency and become more competitive.

Rationale:

WFTM is the wrapped version of FTM, the native currency of Fantom blockchain.

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

Below are the results of risk assessment:

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  • Smart contract risk: B+

The WFTM token on Fantom was launched in. WFTM is the wrapped version of FTM, the native currency of Fantom blockchain. WFTM has generated more than 119M transactions.

WFTM contract: 0x21be370D5312f44cB42ce377BC9b8a0cEF1A4C83

  • Counterparty risk: B+

The process to get WFTM uses the fSwap module which is decentralized and controlled by FTM stakers.There are currently 105k WFTM holders on Fantom.

  • Market Risk: C+

WFTM on Fantom has a $304M market cap, the highest market cap and trading volume of frc-20 tokens on Fantom. Furthermore the price is pegged to FTM as it is redeemable for it at 1:1 ratio. For this reason we consider the risks of WFTM mitigate by FTM.

  • Chain Risk: A

Fantom had 0 outages over the last 6 months. (accorded to Fantom Block Count and Rewards Chart | FtmScan)

  • Liquidity Risk of PAR on Fantom: D+

PAR USDC has 800k in liquidity on a pool that doesn’t have concentrated liquidity or incentivized bands. (Curve V2 has been launched on Fantom, so we could propose to move liquidity incentives to a Curve V2 pool which has concentrated liquidity). This provides the following price impact on the following trade sizes:

1000 USDC → PAR: 0.37%
10000 USDC → PAR: 3.54%
25000 USDC → PAR: 8.39%
50000 USDC → PAR: 15.48%

  • 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 WFTM on Fantom:

-Liquidation Ratio: 190%.
-Minimum collateral ratio (MCR): 200%
-Liquidation bonus: 10%
-Debt Limit: 3M.

Means:

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

Technical implementation:

  • Update contract which manages WFTM minimum collateral ratio on Fantom.

Voting Options:

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

Community poll:

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

0 voters

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