Summary
The objective of this proposal is to increase the optimal utilization of the ATOM market from 70% to 80%. This adjustment will make the ATOM market more efficient, which can further promote organic usage of the protocol.
Motivation
Increasing the optimal utilization from 70% to 80% will make the ATOM market more efficient. This efficiency comes from the following factors:
- This increase would allow for more ATOM to be borrowed before the interest rate kink is reached (for a more detailed understanding of the interest rate mechanism please refer to this proposal). This can potentially lead to more utilization within the ATOM market.
- Currently, at optimal utilization (70%), borrowers of ATOM pay 20% interest rate and depositors receive 12.6% (because of the utilization and the reserve factor). At the new optimal utilization, borrowers would pay the same 20%, but now depositors would receive 14.4%, a significant increase from the current scenario.
Risks
The optimal utilization parameter tries to mitigate the risk of the protocol running out of liquidity in any given market. The lower the optimal utilization is, the more conservative the protocol is and vice versa. As such, an increase in the optimal utilization rate makes the ATOM market more likely to suffer from illiquidity scenarios. Having said that, we believe 80% still leaves significant room for the interest rate mechanism to work properly, while meaningfully improving the efficiency of the market.
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 parameter 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 and Cosmos/ATOM. 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.