MIR-36┃Add DAI as collateral for paUSD on Parallel on Ethereum

Integration Request (PIR) Approved PIRs
1

Summary:

This proposal aims to add DAI as new collateral for paUSD on Parallel on Ethereum.

Rationale:

The Maker Protocol is one of the largest dApp on the Ethereum blockchain.

It allows users to generate DAI by leveraging collateral assets approved by the Maker Governance.

DAI is designed to minimize price volatility. It is a decentralized, unbiased and collateral-backed cryptocurrency that is soft-pegged to the US Dollar.

Users generate DAI by depositing collateral assets into Maker Vaults within the Maker Protocol.

Each DAI in circulation is directly backed by excess collateral, meaning that the value of the collateral is higher than the value of the DAI debt.

To generate DAI, the Maker Protocol accepts as collateral any Ethereum-based asset that has been approved by MKR holders. MKR holders must also approve corresponding Risk Parameters for each accepted collateral.

With a supply of almost $5.4 billion in circulation, DAI is one of the most widely used dollar stablecoins in DeFi.

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 : Maker DAO
Token requested : DAI
Token contract address : $1.00 | Dai Stablecoin (DAI) Token Tracker | Etherscan
Audit(s) links : Audit Reports - Security
Chain requested : Ethereum
Relation with the project : None.
Website: MakerDAO | An Unbiased Global Financial System
Github: Maker · GitHub
Twitter : https://twitter.com/fraxfinance
Telegram: Telegram: Contact @makerdaoOfficial

Token metrics & Risk assessment:

1122×451 19 KB

  • Smart Contract risk: A-

All accepted collateral assets can be leveraged to generate DAI in the Maker Protocol through smart contracts called Maker Vaults. The smart contracts are known as Collateralized Debt Positions (CDPs) and the vaults are inherently non-custodial. DAI has generated more than 18M transactions on Ethereum.

  • Counterparty risk: B-

Users interact with Vaults and the Maker Protocol directly, and each user has complete and independent control over their deposited collateral as long the value of that collateral doesn’t fall below the required minimum level (the Liquidation Ratio, discussed in detail below). There are currently 497k holders on Ethereum.

  • Market Risk: B

DAI on Ethereum has a $5B market cap and is the 3rd largest stablecoin. Furthermore the price is correlated to the USD and over-collateralized at (currently) 274%. For this reason, we consider the risks of DAI mitigated by his over-collateralized assets such as USDC, ETH, BTC, etc. which have the highest market capitalizations and trading volumes of the MRC-20 tokens. The liquidity available on Ethereum is nearly $434M with approximately $32M of volume per day on Ethereum.

Collateralization of the DAI and its different collaterals: https://daistats.com/

  • 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: C-

The paUSD/wUSK/USDC pool on Balancer has $245k liquidity composed of 17,8% USDC, 27,67% wUSK and 54,53% paUSD. The paUSD/wUSK pool Uniswap (Bunni) has $17k liquidity.

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

1000 USDC → paUSD: 0.12%
10000 USDC → paUSD: 0.29%
25000 USDC → paUSD: 0.48%
50000 USDC → paUSD: 0.68%

  • Overall Risk : B+

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

  • Community size :

Twitter: 229,3k followers
Telegram: 14,5k members

Means:

  • Human resources: If the proposal is approved, multisig DAO signers will need to sign and execute transactions to add DAI as collateral on Parallel.
  • Treasury resources: There is no cost for the treasury to add DAI on Parallel Ethereum.

Technical implementation:

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

Voting options:

  • Add DAI as collateral for paUSD on Parallel on Ethereum
  • Against adding DAI as collateral for paUSD on Parallel on Ethereum
  • Abstain

Authors: @starny & @JeanBrasse from Mimo Labs

Community poll:

  • Add DAI as collateral for paUSD on Parallel on Ethereum
  • Against adding DAI as collateral for paUSD on Parallel on Ethereum
  • Abstain
0 voters
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The vote is now live on Snapshot: Snapshot

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The proposal has been approved by the DAO, result: Snapshot

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