Summary
The objective of this proposal is to make all markets on the Osmosis outpost more efficient by reducing their reserve factors from 20% to 10%. The ATOM market’s reserve factor has already been reduced to 10% per [MRC-39] ATOM Market Reserve Factor Reduction and will remain at 10%. This proposal seeks to reduce the reserve factor for all remaining markets on the Osmosis outpost, as well as all markets moving forward unless specified in subsequent proposals, 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 interest payments go to the protocol while the remaining 80% go to depositors.
The current proposal suggests reducing the current reserve factor for all markets on the Osmosis outpost from 20% to 10%. By reducing the protocol fee and increasing the share of revenue distributed to depositors, the market should be made more efficient, thereby increasing deposits. 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.
Specification
I propose to reduce the reserve factor for all markets on the Osmosis outpost 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.