Summary
This proposal seeks to materially improve the utility, responsiveness, and stability of the Mars Protocol Safety Fund by:
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Migrating the fund’s axlUSDC to nobleUSDC to align with chain-wide adoption of nobleUSDC.
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Transferring custody of the Safety Fund from the Mars Hub DAO-controlled multisigs to the Mars Protocol Foundation Multisig for faster operational execution.
Expanding the scope of the Safety Fund to allow discretionary usage by the Foundation in support of protocol safety and sustainability.
Motivation
The Safety Fund is a critical component of Mars Protocol’s risk mitigation strategy, designed to protect users from potential shortfall events. However, under its current configuration, the fund presents several issues:
1. Custodial Inefficiency
The fund is currently split across two Mars Hub DAO-controlled multisigs:
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Osmosis: osmo1gctazemc26f47djkjtdeq3e3mjw5k0dpxqcd29a8gwjwx62mqkhs3stjf6
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Neutron: neutron1pxjszcmmdxwtw9kv533u3hcudl6qahsa42chcs24gervf4ge40usaw3pcr
- These are governed through a slow and inflexible governance process, which impedes timely action in the event of an incident.
3. Token Risk Exposure
The majority of the Safety Fund’s balance is held in axlUSDC, which has a higher risk of depegging compared to nobleUSDC. Osmosis has already transitioned all USDC pairs to nobleUSDC due to its improved trust-minimized structure and native integration with USDC issuance.
Current fund balances:
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129,350.45 axlUSDC
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1,997.67 nobleUSDC
Inflexible Usage Parameters
Currently, the Safety Fund’s mandate is narrowly defined, limiting its potential value. In order to maximize utility and safety for the protocol, the fund should be usable in additional strategic contexts where user safety, liquidity, and operational resilience are at risk.
Proposal Details
This proposal consists of three actionable components:
1. Conversion of axlUSDC to nobleUSDC
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Utilize the Noble Chain USDC converter to convert the Safety Fund’s axlUSDC to nobleUSDC without incurring slippage.
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This avoids the ~6% price impact associated with DEX-based swaps on Osmosis.
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Note: The current DAO DAO multisig lacks support for transactions on Noble, reinforcing the need for custodial migration (see below).
2. Transfer of Custody to the Mars Protocol Foundation Multisig
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Move custody of the Safety Fund to:
neutron1yv9veqnaxt3xwafnfdtr9r995m50ad6039lduux5huay6nhnef8sapq3zp
This 3-of-5 multisig is composed of Mars Core Contributors. -
This allows for significantly faster execution of actions such as fund conversion, emergency response, and approved strategic deployment.
3. Expansion of Safety Fund Use Cases (Conditional & Discretionary)
Enable the Mars Protocol Foundation to use Safety Fund assets—when aligned with protocol security and sustainability—for:
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Deployment into yield-bearing strategies to enhance capital efficiency.
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Emergency backstop for Perps Counterparty Vault liquidity.
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Funding of bug bounties or audits relevant to Mars Protocol security.
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Support of essential services or automation tools required to ensure protocol continuity in adverse scenarios.
Other risk mitigation or recovery efforts as determined necessary by Mars governance.
Risks
This proposal introduces increased flexibility and responsiveness, but also a few risks:
- Custodial Centralization: Moving funds to the Foundation multisig improves agility but concentrates control. This is mitigated by governance oversight.
- Discretionary Use: Broader usage rights could lead to disagreement over spending decisions. Transparency and revocability help reduce this risk.
- Operational Dependence: The proposal relies on timely, responsible action by the Foundation multisig
Implementation
This is a signaling proposal, not an executable proposal. 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 OSMO and NTRN. 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.