AIP #66: Berachain Infrared Vault Cauldrons

Governance Proposals
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AIP #66: Berachain Infrared Vault Cauldrons

TL;DR

Introduce six new cauldrons on Berachain:

  • Infrared WBERA-WETH Vault (BEX LP)
  • Infrared WBERA-WBTC Vault (BEX LP)
  • Infrared MIM-USDT0 Vault (Kodiak Island)
  • Infrared WBERA-HONEY Vault (Kodiak Island)
  • Infrared WBERA-WETH Vault (Kodiak Island)
  • Infrared WBERA-WBTC Vault (Kodiak Island)

All cauldrons Pyth for pricing the underlying tokens.

Parameters for all six cauldrons:

  • Interest Rate: 16%
  • Borrow Fee: 0.5%
  • Maximum Collateralization Ratio (MCR): 75%
  • Liquidation Fee: 8%

Initial topup of 500k MIM for all cauldrons, and potential to scale up to 2M MIM per cauldron.

The Kodiak Island cauldrons roll out after approval for BGT rewards.

Introduction

Building on the success of our previous cauldron expansions, this proposal aims to deploy six new cauldrons on Berachain. This would mark the next step in Abracadabra’s Berachain expansion and align Abracadabra closely with the Berachain ecosystem. It additionally would continue build upon AIP #55 to align Abracadabra closely with Kodiak as four of these cauldrons would be built on their Islands. The proposed cauldrons target LPs with deep liquidity and high volume. By offering new high yield LP-based collateral options, Abracadabra can serve a broader user base, fuel MIM demand, and strengthen revenue from fee generation.

Cauldron Details

  1. Infrared WBERA-WETH Vault (BEX LP)
  2. Infrared WBERA-WBTC Vault (BEX LP)
  3. Infrared MIM-USDT0 Vault (Kodiak Island)
  4. Infrared BERA-HONEY Vault (Kodiak Island)
  5. Infrared BERA-WETH Vault (Kodiak Island)
  6. Infrared BERA-WBTC Vault (Kodiak Island)

All six cauldrons share the following parameters:

  • Interest Rate: 16%
  • Borrow Fee: 0.5%
  • Minimum Collateralization Ratio (MCR): 75%
  • Liquidation Fee: 8%

Initially each cauldron would be topped up with 500k MIM with potential to scale up to 2M MIM per cauldron without further DAO approval. Each cauldron will use Pyth for reliable, real-time pricing of the underlying tokens. The four Kodiak Island cauldrons (MIM-USDT0, BERA-HONEY, BERA-WETH, and BERA-WBTC) will be activated once they are eligible for BGT rewards.

Risk Assessment

  • An MCR of 75% offers a solid protective buffer in case of volatility.
  • A liquidation fee of 8% incentivizes third-party liquidators to participate promptly.
  • All underlying tokens have deep liquidity both on Berachain, cross-chain, and on CEXs.
  • Using the Pyth oracle provides robust, up-to-date price feeds, mitigating oracle-based risks.

Profitability

Each cauldron would with the initial topup amount provide up to 80k MIM per year revenue in interest. This would scale up to 320k MIM per year if scaled up to the maximum permitted amount in this proposal. Across all cauldrons that would be up to 480k MIM per year in revenue with the initial topup amount and up to 1.92M MIM per year if scaled up to the maximum permitted in this proposal. These cauldrons could generate substantial revenue for the protocol and, in turn, for stakers, while maintaining their appeal even at elevated interest rates.

Conclusion

By adding these new Infrared and Kodiak Island cauldrons on Berachain, Abracadabra expands its ecosystem, creating more opportunities for MIM usage and providing increased revenue. Pending approval for BGT rewards, the Kodiak Island cauldrons will launch, ensuring the strongest incentive alignment possible.

Voting

The current proposal will remain as an AIP for the next 48 hours to receive community feedback and will then be moved to voting. Voting will last 72 hours and can be found here.

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