Summary
This proposal aims to increase the deposit caps for the following LP tokens on the Neutron outpost of the Red Bank:
- NTRN/dATOM LP from 150k to 400k USDC (from 50,000 to 150,000 LP)
- USDC/NTRN LP from 100k to 400k USDC (from 80,000 to 320,000 LP)
- USDC/dATOM LP from 150k to 400k USDC (from 30,000 to 90,000 LP)
The increased aggregated caps (including both Red Bank deposits cap and Farm vault cap) do not exceed the maximum allowable caps as per Deposit Caps Risk Framework.
Motivation
The above recently whitelisted pools already have their caps ~100% filled showing how these vaults generate organic demand from the Red Bank.
Following the Drop launch on Neutron, all pools that contain dTokens will continue to be incentivized by Drop protocol, NTRN/USDC pool will be incentivized by Neutron.
We believe that there will be an extra demand to use those LP tokens as collateral within the Red Bank to leverage farm points and leverage yields. Hence, this listing has the potential to increase activity within the Red Bank on Neutron.
Risks
As mentioned in previous proposals, the Red Bank deposit caps serve 2 main purposes:
They limit the exposure to any single token. This is important to mitigate idiosyncratic risks specific to any particular token and to mitigate liquidity risk, which may impede proper functioning of the liquidations system and may ultimately lead to bad debt.
They mitigate looping attacks in which attackers are able to generate artificially large positions of certain tokens with the purpose of subsequently manipulating their price and effectively stealing assets from the protocol.
Obviously, as the caps increase, so do the risks explored above. At the end of the day, a correct level of the caps should strike the right balance between risk aversion and protocol usefulness. In this sense, we think while the proposed cap does increase risk for the protocol, it is far from representing an unmanageable risk, while at the same time will help the protocol operate more smoothly in the near future.
Implementation
This is a signaling proposal, not an executable proposal.
The Mars smart contracts on the Neutron chain are currently controlled by the Builder Multisig address. If this proposal passes, the builders will utilize their multisig to make the necessary parameter changes.
Copyright
Copyright and related rights waived via CC0.
Disclaimers/Disclosures
This proposal is being made by Mars Protocol Foundation, a Cayman Islands foundation company. Mars Protocol Foundation engages in research and development of the Mars Protocol. Mars Protocol Foundation and certain of its service providers and managers own MARS tokens and have financial interests related to this proposal. The aforementioned persons or their affiliates may also have financial interests in complementary or competing projects or ecosystems, entities or tokens, including NTRN, USDC, and dATOM. These statements are intended to disclose relevant facts and to help identify potential conflicts of interest, and should not be misconstrued as a complete description of all relevant interests or conflicts of interests; nor should they be construed as a recommendation to purchase or acquire any token or security.
This proposal is also subject to and qualified by the Mars Disclaimers/Disclosures. Mars Protocol Foundation may lack access to all relevant facts or may have failed to give appropriate weighting to available facts. Mars Protocol Foundation is not making any representation, warranty or guarantee regarding the accuracy or completeness of the statements herein, and Mars Protocol Foundation shall have no liability in the event of losses or damages ensuing from approval or rejection or other handling of the proposal. Each user and voter should undertake their own research and make their own independent interpretation and analysis of all relevant facts and issues to arrive at their own personal determinations of how to vote on the proposal.ARS money market. Explain as much as possible for best discussion and response.