SAIP #54 - Add a stdeUSD Cauldron
Tldr: Add a stdeUSD cauldron to our Ethereum Lineup.
Introduction
This proposal outlines an exciting new collaboration between Abracadabra and the Elixir (https://www.elixir.xyz) ecosystem, introducing $stdeUSD as a collateral type for a new cauldron. This initiative marks a significant milestone as the first integration of Elixir-based collateral into Abracadabra’s innovative DeFi platform.
By incorporating stdeUSD as a collateral option, Abracadabra aims to strengthen its ties with the Elixir community while expanding its diverse range of offerings. This strategic move not only enhances Abracadabra’s market position but also provides Elixir users with new opportunities within our ecosystem.
The proposed parameters for the stdeUSD cauldron have been carefully crafted to strike an optimal balance between robust risk management and attractive market conditions. This collaboration showcases the potential for synergies between Abracadabra and Elixir.
Cauldron Parameters
- Interest Rate: 6.9%
- Borrow Fee: 0.5%
- Minimum Collateralization Ratio (MCR): 85%
- Liquidation Fee: 7.5%
Initial Top-Up:
- 1 million $MIM initially, with potential scaling up to 2 million depending on volume and liquidity.
Background
Abracadabra continues to innovate by integrating ecosystem-native assets as collateral, provided they meet liquidity and stability requirements. The introduction of stdeUSD, a stablecoin part of the Elixir ecosystem, will be a fundamental addition to our collateral lineup. With close to $100M in TVL attracted across three different deUSD - pairs on Curve, a cauldron launch can tap into the demand of this new asset.
Risk Assessment
The stdeUSD is designed with a conservative approach to ensure robust risk management. The underlying asset’s stable nature and the following conservative parameters aim to provide a safety buffer for liquidations:
- High MCR of 85%: Ensures that collateral is sufficiently higher than the borrowed amount, reducing the risk of under-collateralization.
- Large Liquidation Fee of 7.5%: Provides a substantial buffer to handle potential market volatility and ensure liquidations are profitable for liquidators.
Pricing stdeUSD at 1 DAI is appropriate in this case as deUSD can be redeemed at 1 DAI over a 7 days waiting period, making it an interesting endeavor for liquidators.
Profitability
Based on the given parameters and an initial top-up of 1 million MIM, this cauldron is projected to generate approximately 74,000 $MIM annually for the protocol and $SPELL holders. This figure is scalable with the increase in MIM deposits, presenting a lucrative opportunity for the protocol.
Technology
The stdeUSD cauldron will utilize V4 cauldron contracts and be deployed on Degenbox. This includes variable interest rates, upgradable oracles, and built-in strategy rebalance functions to ensure optimal performance and yield capture. The oracle will price the collateral at 1 DAI, ensuring transparent and stable valuation.
Conclusion
The introduction of the stdeUSD cauldron represents a strategic move to diversify and strengthen Abracadabra’s collateral options. With robust risk management parameters, this proposal aligns with our goal of offering innovative and secure products to our users.
By expanding Abracadabra’s collateral offerings to include stdeUSD, we can further solidify our position as the premier platform for borrowing against ecosystem-native tokens, enhancing our synergy with key players in the DeFi space.
Next Steps
This proposal will remain as a SAIP to allow the engineering team to assess the feasibility of integrating stdeUSD as a collateral type. In the meantime, a 72 hours period will commence to signal the DAOs position on the proposal.
Voting is already posted, will start in 24 hours and can be found here.