MIR-27┃Add wUSK as collateral for PAR on Parallel on Polygon

Integration Request (PIR) Approved PIRs
1

Summary:

This proposal aims to add wUSK as new collateral for PAR on Parallel on Polygon.

Rationale:

The KUMA Protocol is a decentralized protocol issuing interest-bearing tokens backed by regulated NFTs, themselves backed by Real World Assets (RWA). At its launch, the KUMA Protocol accepts regulated KUMA NFTs that are backed by bonds. The protocol aims to make investing in bonds more accessible and user-friendly by allowing anyone to buy and sell KUMA interest-bearing tokens (KIBT) on decentralized applications, similar to stablecoins.

The KUMA Protocol is a collaborative effort between Mimo Capital AG, a company that issues NFT-backed tokens, and the KUMA DAO, a decentralized entity governed by MIMO token holders that issues interest-bearing tokens using the NFTs.

Overall, the KUMA Protocol aims to offer a transparent, secure, and audited process for issuing interest-bearing tokens, backed by real-world assets, that can be easily traded on DeFi platforms.

You can learn more about these mechanisms in their announcement article.

wUSK is the wrapped version of USK, a KUMA Interest Bearing Token (KIBT) backed by tokenized (as NFTs) 12 Months US T-Bills. Below are the information of the NFTs in backing of the KIBT:

  • Currency: USD
  • Issuer: US
  • Term: 12 (months)

USK is a rebase token which accrues the generated yield from underlying bonds every 4 hours by minting new tokens that are automatically added to the owner. It means that the price of the token doesn’t move but the quantity increases. Parallel does not support token rebases, however KUMA has developed a wrapper to keep the same amount of tokens whose price increases over time.

Adding wUSK as collateral would both diversify the backing of PAR and increase capital efficiency for users, as wUSK generates yield while being collateral. This would allow users to be remunerated for long USD (wUSK = 4.5% APR > borrow rate = 0.3% APR) but also to increase capital efficiency in leverage farming. For the protocol it allows to generate additional revenue with a low risk token as collateral.

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

Project Presentation:

Protocol name : Kuma Protocol
Token requested : wUSK
Token contract address : wUSK to be deployed (USK: Mimo: USK Token | Address 0x01bF66BEcDcFD6D59A5Ca18869f494feA086cdfD | Etherscan)
Audit(s) links :

Token metrics & Risk assessment:

  • Smart Contract risk: B

The Kuma Protocol launched in March 2023 and code has audits from Hacken and Code4Arena and has Financial audits by Grant Thornton.

wUSK is the wrapped version of USK and is redeemable for USK at any point.

USK launched on May 11, 2023 and has currently generated more than 20 transactions.

  • Counterparty risk: B-

The Kuma Protocol multisig is owned by 4/7 multisig currently held by the Mimo Labs team members (this will change in the near future with a multisig shared with elected DAO members), and this multisig has access to different functions such as: Admin_role, Pause/Unpause_Swap, Set_Uri and Set_Epoch_Length.

In addition, KumaSwap uses a central bank oracle to keep the protocol competitive and avoid an excessively high KIBT rate. There is one oracle for each risk class since different risk classes have different interest rates.

Keepers monitor the KIBT and KUMASwap contracts to keep the KIBT yield up-to-date. Keepers are incentivized through the KUMAKeeper contract

Mimo Capital AG (MCAG) is the centralized entity that holds the physical bonds represented by KUMA NFTs is MCAG. MCAG mints new KUMA NFTs every time a user buys a claim to the physical bonds off-chain. Additionally, MCAG maintains the central bank oracle and a multisig with a manager role in the MCAG access controller to manage centralized aspects of the system.

See Kuma Smart Contract Architecture to learn more.

  • Market Risk: B-

wUSK is a rebase token, which means that the value of 1 wUSK increases continuously according to the central bank’s Oracle feed rate.

wUSK is the wrapped version of USK (ERC-4626 compliant) and is redeemable for USK at any point.

USK is a Kuma IBT (interest-bearing token) backed by ERC-721 NFTs that represent ownership of a physical bond. The NFT holder can redeem the NFT off-chain from MCAG for the market-rate bond value at any point.

  • Chain Risk : A

Polygon had 0 outages over the last 6 months. (Polygon Blocks | PolygonScan)

  • Liquidity Risk of PAR on Polygon: A-

The PAR-USDC UniV3 pool has 554K$ in concentrated liquidity, composed of 50% PAR and 50% USDC at the time of writing. The 2eur Curve pool has 27k$ in liquidity, composed of 41,7% PAR and 58,3% jEUR at the time of writing. The 4eur Curve pool has 188k$ in liquidity, composed of 16,7% PAR, 19,7% jEUR, 37,4% EURS and 26,1% EURT at the time of writing. The PAR-jEUR Balancer pool has 880k$. The MIMO-PAR Balancer pool has 127k$ in liquidity, composed of 80% MIMO and 20% PAR.

This provides the following price impact on the following trade sizes:

1000 USDC → PAR: 0.08%
10000 USDC → PAR: 0.21%
25000 USDC → PAR: 0.42%
50000 USDC → PAR: 0.78%

  • Overall Risk : A-

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

Means:

  • Human resources: Parallel Multisig DAO signers will need to sign and execute transactions to add wUSK as collateral on Parallel on Polygon.
  • Treasury resources: There is no cost for the treasury to add wUSK for PAR on Parallel Polygon.

Technical implementation:

  1. Add wUSK in the PAR ConfigProvider Contract with all parameters decided by the Mimo governance.
  2. Set the MimoLabs’s customized Oracle PriceFeed related to the wUSK Contract

Voting options:

  • Add wUSK as new collateral on Parallel on Polygon
  • Against adding wUSK as new collateral on Parallel on Polygon
  • Abstain

Authors: @starny & @JeanBrasse from Mimo Labs

Community poll:

  • Add wUSK as new collateral on Parallel on Polygon
  • Against adding wUSK as new collateral on Parallel on Polygon
  • Abstain
0 voters
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2

The vote start today : Snapshot

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3

The proposal has been accepted by the DAO

Result: Snapshot

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