SAIP 54.2 – Increase in MIM Availability for Secondary sdeUSD Cauldron

Governance Proposals
1

SAIP 54.2 – Increase in MIM Availability for Secondary sdeUSD Cauldron

Tldr: This proposal aims at increasing the MIM cap for the secondary sdeUSD cauldron from 10 million to 20 million. This expansion is justified by the robust risk mitigation provided by instant deUSD redemptions into DAI and USDT for liquidation purposes provided by the elixir team, ensuring system stability and safety.

Introduction

The secondary sdeUSD cauldron, launched under SAIP 54.1, was designed to meet overwhelming demand for sdeUSD collateral options. Given the continued high interest and sustained borrowing activity, we propose increasing the available MIM cap to 20 million. This proposal ensures broader user participation while maintaining liquidity and security within the ecosystem.

The safety of this increase is bolstered by the existing mechanism that allows instant deUSD redemptions into highly liquid assets like DAI and USDT during liquidation events.

Risk Analysis

Increasing the MIM cap to 20 million is considered safe due to:

  1. Instant deUSD Redemptions:

• During liquidations, deUSD can be instantly redeemed into DAI or USDT, ensuring ample liquidity for covering liquidated positions thanks to our partnership with the Elixir team.

  1. Robust Liquidity Management:

• This mechanism mitigates risks by maintaining a strong liquidity buffer, preventing adverse effects on the broader ecosystem even with increased borrowing.

  1. Existing Risk Analysis:

• The foundational risk analysis conducted for SAIP 54.1 remains valid and supports this increase without additional adjustments.

Updated Parameters

The revised cap for the secondary sdeUSD cauldron is as follows:

• MIM Cap: Increased from 10 million to 20 million

• Interest Rate: 9.6%

• Borrow Fee: 0.5%

• Minimum Collateralization Ratio (MCR): 85%

• Liquidation Fee: 7.5%

All other parameters remain unchanged, and risk mitigation measures stay in effect.

Conclusion

This increase to 20 million MIM ensures the protocol can meet sustained user demand while maintaining safety through instant deUSD redemptions into DAI and USDT for liquidations. This strategic adjustment allows Abracadabra to further capitalize on the success of sdeUSD collateral and strengthen the ecosystem’s utility and profitability.

Next Steps

• Voting: The proposal will remain open for feedback and voting.

• The voting period will commence in 24 hours and run for 24 hours. Snapshot can be found here.