This proposal has two objectives:
- To upgrade the oracle used to price stATOM.
- To increase the Liquidation and Max. LTV of stATOM, which is enabled by the new oracle implementation.
Currently stATOM is priced as follows:
stATOM/USD = stATOM/ATOM (TWAP) * ATOM/USD
- stATOM/ATOM is the 30 minute geometric mean TWAP of the stATOM/ATOM XYK pool on Osmosis.
- ATOM/USD is the Pyth feed.
While the above implementation has served Mars well, we believe it’s time to migrate to a more robust implementation that will allow Mars to both increase the LTV of the asset and rely on Supercharged Liquidity pools, which are significantly more efficient for assets like stATOM. The proposed implementation is as follows:
stATOM/USD = min(stATOM/ATOM TWAP, stATOM/ATOM RR) * ATOM/USD
- stATOM/ATOM TWAP is the 30 minute arithmetic mean TWAP from the stATOM/ATOM Supercharged Liquidity 0.3% pool on Osmosis (Pool #1136).
- stATOM/ATOM RR is the redemption rate of stATOM according to the Stride contract deployed on Osmosis.
- ATOM/USD is the Pyth provided feed, used to normalize the stATOM price to USD.
This implementation achieves the following:
- It is robust to upwards price manipulation attempts since the price will always have a ceiling that is determined by the redemption rate. As such, even if the TWAP is manipulated, an attacker is not going to be able to reflect that into the price Mars uses.
- While downward price manipulation can still happen, it is mitigated by two factors. First, by using an arithmetic mean TWAP, which is more robust to downwards price manipulation attacks than a geometric mean TWAP. Second, given that stATOM won’t be borrowable, the scope of possible downwards price manipulation exploits is reduced to attacks that artificially decrease the price to liquidate a certain position. While this can happen, we believe it’s unlikely because: 1) the potential profits are lower than a pure price manipulation attack to steal assets (especially with Mars’s new auction-based liquidation mechanism); and 2) the risk is higher given that the attacker cannot guarantee that he’ll perform the liquidation.
- It allows Stride to aggregate liquidity in more efficient pool types (Stableswap or Supercharged Liquidity instead of XYK) where TWAP-based oracles by themselves (without the redemption rate) would not be robust.
We propose to increase the LTV parameters as follows:
- Max. LTV from 54.5% to 69%.
- Liquidation LTV from 55% to 70%.
These parameters update is allowed by the new oracle implementation. Previously, the LTV parameters were capped by the liquidity in the stATOM/ATOM XYK pool. Now that the risk of manipulation is significantly reduced, these parameters can be relaxed.
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 parameter changes.
Copyright and related rights waived via CC0.
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, ATOM, stATOM and Stride/STRD. 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.