tl;dr Abracadabra is currently exposed to significant amounts of CRV risk. To address this, a strategy is proposed to apply collateral-based interest to both CRV cauldrons.
All proceeds from this strategy will be kept in our treasury and used to reduce the DAO risk associated with the liquidity conditions associated with CRV.
The difference between 13.5 and this proposal is highlighted in the Amendments sections.
I believe that the repayments which have been made as well as potential increases in CRV liquidity call for a change in the proposed increases of interest. Therefore, I have voted against the previous proposal and am presenting new terms.
In order to avoid unnecessary compounding of principal interest, I would like to propose applying collateral-based interest, much like the DAO did with the WBTC and WETH cauldrons [Link]. I believe this solution will reduce negative externalities associated with such positions compared to a simple interest rate hike.
The effect of collateral-based interest is such that all interest will be charged directly on the cauldron’s collateral and will immediately move into the protocol’s treasury to increase the reserve factor of the DAO. Once in the treasury, the collateral can be converted to MIM via on-chain transactions or through one of our off-chain partners.
The proposal will have a base interest rate, which will be dependent on the combined outstanding principal of the both CRV cauldrons:
Amendments from AIP #13.5:
Since the posting of AIP 13.5 on 01/08/23 the situation around the MIM loan backed by CRV as well as the overall on-chain liquidity conditions have changed.
Multiple repayments have been executed bringing the total amount of MIM backed by CRV assets to 12.5m.
Furthermore, Convex and Curve communities have expressed willingness to execute a coordinated effort in bringing more CRV liquidity on chain.
In order to reflect these new variables, the new model proposed to the community focused on a base interest (charged as explained in the previous paragraphs AIP 13.5 to reduce sell pressure of CRV on the market), to which discounts can be applied based on:
- Principal Size
- Position Health
- On Chain Liquidity
To reflect these changes in the interest rate increase proposed in AIP 13.5, the new proposed interest rate to be voted by the DAO is the following:
|Principal||Base Interest Rate|
Interest Rate Multiplier is replaced by following values and the ability to influence the overall base interest rate. The following discounts will be applied on the base interest rate above (eg. 80% - 20% = 60%)
|Collateral Ratio||Interest Rate Change|
|<= 40%||- 20%|
|<= 60%||+ 15%|
|<= 70%||+ 25%|
Onchain Liquidity section
|TriCRV: crvUSD/ETH/CRV Curve liquidity||Interest Rate Change|
|5M <= 10M USD||- 5%|
|10M <= 20M USD||- 10%|
|20M <= 30M USD||- 15%|
|30M <= 40M USD||- 20%|
Note: the current collateral based interest is applied in addition to the base $MIM interest rate highlighted in AIP #13.1. Also note that if the on-chain liquidity conditions and collateral ratio conditions are met, and the base interest goes below 0%, the interest rate on the collateral is voided and only the MIM interest rate will be charged.
Further changes to these set up can be voted by the DAO using 24 hours snapshot votings.
Due to the time sensitive nature of this proposal, which reflects the volatile evolution of CRV liquidity, the following proposal is already posted on snapshot and will go live on snapshot at 6PM ET on 02/08/23.
Voting will continue for 72 hours.
At the end of the 72 hours, if the proposal passes, the new CRV interest rates will be applied to both CRV cauldrons.