MIR-1┃Add LUSD as collateral on Mimo on Ethereum

Integration Request (MIR) Approved MIRs
1

Summary:
This proposal aims to add LUSD as new collateral on Mimo on Ethereum.

Rationale :
Liquity is a decentralized, permissionless and governanceless borrowing protocol. All the contracts of the Liquity protocol are immutable, without any multisig which makes LUSD the most trustless USD stablecoin currently available on the Ethereum mainnet.

Loans are Interest-free, to mint LUSD users will have to open a Trove and deposit ETH as collateral with a base initiation fee of 0.5%.

What makes LUSD so resilient is that it is only backed and redeemable by ETH and has a 110% Minimum Collateral Ratio. These two mechanisms create interesting arbitrage opportunities that result in a price floor and a price ceiling.

It is also important to note that LUSD has a Chainlink Price Feed and a Fallback System in place by switching to Tellor if the ChainLink price feed data is deemed incoherent.

In addition to the collateral, the loans are secured by a stability pool containing LUSD and by fellow borrowers collectively acting as guarantors of last resort and an instant liquidation mechanism which also helps maintain the peg by acting as a liquidity buffer. There is also a failsafe mechanism, called the Recovery Mode, that is triggered when the total collateralization ratio of the protocol falls below 150%. So far, it was only triggered twice in the early days of the protocol in a short period of time.

You can learn more about these mechanisms in their documentation / whitepaper.

Once the vote is accepted on Snapshot, we will determine the associated liquidation ratio, minimal collateral ratio, debt ceiling, liquidation bonus on a second MIR discussion.

Project Presentation:

Protocol name : Liquity
Token requested : LUSD
Token contract address : $1.03 | LUSD Stablecoin (LUSD) Token Tracker | Etherscan
Audit(s) links :
Coinspect - March 2021
TrailOfBits Security assessment
TrailOfBits Liquity Protocol and Stability Pool Financial Report - March 2021
TrailOfBits Liquity Proxy Contracts Report - March 2021
Chain requested : Ethereum
Relation with the project : None.
Website: https://www.liquity.org/
Github : GitHub - liquity/dev: Liquity monorepo containing the contracts, SDK and Dev UI frontend.
Twitter : https://twitter.com/liquityprotocol
Discord : discord.gg/2up5U32

Token metrics & Risk assessment:

1600×87 57.1 KB

  • Smart Contract risk: B-

The entire Liquity protocol and its stablecoin LUSD are permissionless, governanceless and without any multisig. The way LUSD are minted/burned works around a “Trove”. In order to mint LUSD, you must open a Trove. LUSD will be burned by the repayment of the debt, by the owner of the Trove or by redemptions (Arbitraging). LUSD has generated more than 219k transactions.

  • Counterparty risk: C+

The process to mint LUSD is permissionless, governanceless and without any multisig, which makes it one of the most secure and decentralized stablecoins. There are currently 4915 holders on Ethereum.

  • Market Risk: B

LUSD on Ethereum has a $184M market cap. Furthermore the price is correlated to the USD by the Liquity over-collateralization mechanism. For this reason we consider the risks of LUSD mitigated by his only over-collateralized asset: ETH, which is one of the highest market cap and trading volume of ERC-20 token.

  • Chain Risk : A

Ethereum had 0 outages over the last 6 months. (Ethereum Block Count and Rewards Chart | Etherscan)

  • Liquidity Risk of PAR on Ethereum: A

The PAR-USDC UniV3 pool has 1,7M$ in concentrated liquidity, composed of 20% PAR and 80% USDC at the time of writing. The PAR-USDC Curve pool has 430k$ in liquidity, composed of 52,1% PAR and 47,9% USDC at the time of writing. The MIMO-PAR Balancer pool has 260k$ in liquidity, composed of 80% MIMO and 20% PAR.

This provides the following price impact on the following trade sizes:
1000 USDC → PAR: 0.02%
10000 USDC → PAR: 0.04%
25000 USDC → PAR: 0.08%
50000 USDC → PAR: 0.16%

  • Overall Risk : B

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

  • Community size :

Twitter: 31,7k followers
Discord: 7860 members

Technical implementation:

  1. Add LUSD in the ConfigProvider Contract with all parameters decided by the Mimo governance.
  2. Set the chainlink oracle related to the LUSD: LUSD/USD into PriceFeed Contract

Voting options:

  • Add LUSD as new collateral on Mimo on Ethereum
  • Against adding LUSD as new collateral on Mimo on Ethereum
  • Abstain

Authors: @starny & @JeanBrasse from Mimo Labs

Community poll:

  • Add LUSD as new collateral on Mimo on Ethereum
  • Against adding LUSD as new collateral on Mimo on Ethereum
  • Abstain

0 voters

2

With over 72M votes from vMIMO holders, MIR-1 was approved at 100%.

The Mimo DAO will add LUSD as collateral on Mimo on Ethereum, another proposal will be published soon on the governance forum to define the parameters of the collateral.

Result: Snapshot

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