Summary
The objective of this proposal is to make the ATOM market more efficient by reducing its reserve factor from 20% to 10%.
Motivation
The reserve factor determines the percentage of all interest payments within a particular market that are taken as a fee by the protocol. As such, a 20% reserve factor means that 20% of ATOM interest payments go to the protocol while the remaining 80% go to depositors.
The current proposal suggests reducing the current reserve factor for the ATOM market from 20% to 10%. By reducing the protocol fee and increasing the share of revenue distributed to depositors, we aim to not only make the market more efficient, but also promote more activity within the market. If this proposal leads to more deposits, it could also lead to more borrowing, which could lead to more deposits and a virtuous cycle could ensue.
With this adjustment, the interest rate received by depositors will increase by 12.5% across every utilization. For instance, at optimal utilization (70%), the interest rate received by depositors will increase from 11.2% to 12.6%.
Specification
We propose to reduce the reserve factor for ATOM from 20% to 10%. The distribution of the reserve factor will remain the same as it is right now: 50% of the reserve factor (5% of overall interest payments) will be distributed to stakers in the form of MARS and the remaining 50% will be sent to the Safety Fund in the form of axlUSDC.
Implementation
This is a signaling proposal, not an executable proposal.
The Mars smart contracts on the Osmosis chain are currently controlled by the Builder Multisig address. If this proposal passes, the builders will utilize their multisig to make the necessary changes.
Copyright
Copyright and related rights waived via CC0.
Disclaimers/Disclosures
This proposal is being made by Delphi Labs Ltd., a British Virgin Islands limited company. Delphi Labs engages in incubation, investment, research and development relevant to multiple ecosystems and protocols, including the Mars Protocol. Delphi Labs and certain of its service providers and equity holders own MARS tokens and have financial interests related to this proposal. Additionally, Delphi Labs is one of several entities associated with one another under the “Delphi Digital” brand. Delphi Digital’s associated entities and/or equityholders or service providers of such entities may hold MARS and may have financial interests related to this proposal. All such entities, service providers, equity holders and other related persons may also have financial interests in complementary or competing projects or ecosystems, entities or tokens, including Osmosis/OSMO. 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. Delphi Labs may lack access to all relevant facts or may have failed to give appropriate weighting to available facts. Delphi Labs is not making any representation, warranty or guarantee regarding the accuracy or completeness of the statements herein, and Delphi Labs 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.