MIP-1 (Avalanche)

#1

This is the first MIP on Avalanche. A MIP is a “MOR Improvement Proposal”, all suggestions for the next executive proposal are put in place in a MIP, discussed in the forum and the final result of it is the executive proposal that goes live on-chain for GRO holders to vote on through the Governance Page

Purpose of the proposal

  • Onboard the Curve PSM and tighten the peg spread
  • Withdraw 100,000 MOR from surplus for WHEAT
  • Refund MOR lost in repayment at block 7819191

Curve PSM

This PSM (Peg-Stability Module) would be backed by av3CRV LP tokens also known as the AAVE Avalanche Curve pool. It holds a bit over 600 Million $ in TVL at the time of this post and is providing a yield of 14%+.

Onboarding this PSM would enable us to:

  • Tigthen the peg spread from 1.1% to 0.1%
  • Allow minting and redeeming MOR with the top 3 stablecoins: DAI, USDC and USDT
  • Higher yields for the PSM
  • Implement Curve type PSMs across all current and future chains

It is also important to note that volumes on MOR/Volatile pairs will increase as a direct result of having a smaller peg spread.

The changes proposed would be adding this PSM with a debt ceiling of 100,000,000 MOR, 0.1% tin (mint fee) and 0% tout (redeem fee).

Surplus Withdrawal

As part of revenue sharing from MOR Yield (to be announced this week) WHEAT gets a share of the system surplus generated by MOR by incentivizing the outstanding MOR in circulation with staking rewards and offering bonds that hold it in LPs (such as with WHEAT/MOR or MOR/AVAX).

As a result the proposal is to withdraw 100,000 MOR from the surplus (around half of the current surplus) and give it to WHEAT which can then be used for the following:

  • Buyback and burn WHEAT Avalanche
  • Add more liquidity to WHEAT/MOR
  • Add funds to EBCs such as the atricrypto EBC soon to be released

This 100k MOR would be used to acquire WHEAT/AVAX liquidity (which also involves buybacking WHEAT).

WHEAT has many revenue sources that add value to the token and increase its treasury such as:

  • Revenue Sharing from MOR
  • EBC Principal Growth
  • EBC Farm Yield
  • Performance Fees on MOR collaterals

And many more products to be built on top of it.

25,000 MOR would also be withdrawn from surplus to buyback GRO and acquire GRO/AVAX liquidity.

Refund MOR lost in repayment at block 7819191

On block 7819191 two txs happened leading to a very low chance event:

Event 1: The bark function that initiates the liquidation for a certain CDP was called, this starts the dutch auction process and sets the collateral of the CDP aside.

Event 2: In the same block the owner of this CDP tried repaying the debt with 17,491.79 MOR, the MOR was burnt but no collateral was returned to the user since it was no longer in the CDP but rather waiting for liquidation.

The liquidation auction completed a couple hours later and the same debt was repaid twice as a result (the user repayment + the liquidation), liquidation tx can be found here.

The proposal is to refund the 17,491.79 MOR that was “donated” to the surplus in this highly unlikely sequence of events.

It is highly unlikely that we’ll see similar things repeat as it requires both the user’s repayment tx and the bark tx to confirm in the same block and the bark tx has to be within the block at a higher priority position.

Changes Proposed Summary

-Onboard Curve PSM with 100,000,000 debt ceiling, 0.1% tin and 0% tout.
-Withdraw 142,491.79 MOR from system surplus

Edit (20/12/2021):

-Specify use of the WHEAT surplus withdrawal to acquire WHEAT/AVAX liquidity
-Withdraw 25k MOR from surplus to acquire GRO/AVAX liquidity

3 Likes
#2

Love it ser! Happy to vote for this once votings live.

1 Like
#3

GRO is an integral part of the whole ecosystem, but is mentioned nowhere.

I think that any burn action, should also be linked to burn actions for gro.
Just as with wheat bsc, the locked tvl would have been used for 70% for wheat burns, but also 30% for gro burns (or wathever it was), any burning of wheat shpuld also burn an amount of gro.
For example 10 or 20% or something.

This way gro is still a center in the ecosystem, being linked to anything happening.

Also would like to see a discussion what percentage would be used for burns and which for added lp to wheat lp’s. I’m not sure what would be best for those.

#4

First of all, GRO gets all the surplus which isn’t shared through MOR Yield (Revenue sharing). This means that there is over 150k$ in profits that MOR has created for GRO holders since launch.
The reason for not withdrawing all of it and doing a big buyback of GRO is that it is important to have a minimum surplus balance relative to the MOR in circulation that ensures that even during ugly times the surplus won’t go negative (which would cause a lot of problems).

This accumulated profit WILL end up in the hands of GRO token holders, the two main options being either purely buybacking GRO and burning it or using it to create GRO specific EBC for which 100% of the profits would buyback and burn GRO.

Also, the better that WHEAT does the more yield GRO accrues since you can stake govGRO to farm WHEAT. There is a direct correlation between WHEAT’s price, the number of chains MOR and WHEAT are live in and the price of the tokens.

In regards to how much of the 100k should be used for each thing I would love to see a discussion going for it too. WHEAT Avalanche is currently at cheap prices relative to P/E and treasury so it would make sense to at least buyback with half then pair it with MOR to increase the liquidity of WHEAT/MOR by 100k and putting buy pressure of 50k.

5 Likes
#5
#6

I was using this as reference, where the surplus is referenced as a way to buyback gro, but the wheat yield vhanged, so this graph is too old. But it did show that first intentions were to use surplus for gro and not wheat.

Now I’m confused. There is one thing: system surplus, which has 200k mor in it.

What is this mor yield and this 150k you talk about? Is there a seperate surplus getting Mor fees, that is used for gro, that is outside of what is mentioned in this mip?
Also seems a perfect time to use that and include it in this mip for gro buybacks? As gro is cheap and may go lower by the time this mip comes out, making it already possible for a big buyback to happen.

I feel like it is hard for me to know if I support this mip and what to discuss, without the documentation being up to date also. But that’s a different discussion. Will have to go through the medium articles and see if somewhere there it mentions something about.

In my mind it is all the same pool. I think better wheat value is important also, that’s why I am not against it being used, but rather would have a more direct connection between meet and gro when using profits. Every profit gives positive incentives to both tokens.

#7

In terms of buying back $100K worth of Wheat on Avax. I think it’s a complete waste of resources considering the price of Wheat will continue dropping on Avax overtime until it is closer to the price of Wheat on the BSC. Instead I would recommend Buying back 100K worth of Wheat on the BSC since this will reduce the number of actual Wheat coins in circulation by over 400% more vs buying Wheat on Avax. This option will also help bring the Wheat price on the BSC closer to the Wheat price on Avax thus making it less risky to bridge over Wheat to Avax since many users fear the price of Wheat is likely to continue to drop on Avax and the difference in price is still over 400%… Not to mention this will greatly also help increase the rate at which Wheat is being burned on the bridge do to the increase in bridging volume likely.

#8

That part is correct, there is a mechanism where when it crosses a threshold it starts auctioning MOR, anyone can bid that MOR with GRO and when the auction ends the auction winner gets the MOR and the protocol burns the GRO.

This is set as a defense mechanism in the case that too much surplus is accumulated, it automatically buybacks and burns GRO through this mechanism.

The purpose of MOR revenue sharing is to bootstrap the supply of MOR and earn 50-75% of the profits instead of 100% but on a much larger amount of MOR in circulation. In a nutshell protocols/DAOs and trreasuries (not only WHEAT) can have MOR in their balance sheets, LPs or creates incentives for it and get paid a rebate in MOR in the same way that WHEAT is getting this 100k. The idea is that this type of incentives together with partners will increase the MOR supply thus increasing the profits that end up in GRO holder’s pockets.

The above mentioned auction mechanism is the last resort, more generally what would happen is that similar to the current proposal there would be a vote on specifically withdrawing MOR from surplus to buyback GRO, fund an EBC that buybacks GRO or whatever else is deemed needed. Anyone can start this type of proposal through this forum tho you do need to take into account that it is not a good idea to have too little surplus accumulated relative to the MOR in circulation since if the surplus were to go negative in a bad situation that would cause a lot of problems and that is why there have been no votes to do the above for GRO (tho you can expect that the next vote would add a surplus withdrawal for GRO too).

The 150k number comes from about 100k in surplus that would stay in Avalanche after paying revenue share and the already 50k approximately reserved on BSC for GRO. Those are numbers after any type of revenue share so it’s pure profit already owned by GRO holders.

1 Like
#9

It’s not really a waste of money since the whole theory about it dropping to BSC’s price forgets a simple fact which is that there is at least 10 times less WHEAT Avalanche in circulation than WHEAT BSC in circulation (atm of writing this).

Also, there are other options included such as adding 100k of liquidity for WHEAT/MOR or even using it to grow further the atricrypto EBC.

There was already a 50k surplus withdrawal on BSC which was used to buyback WHEAT BSC and increase the liquidity for WHEAT BSC. It’s only fair that the revenue share generated by WHEAT on one chain belongs to WHEAT on that chain.

1 Like
#10

After looking at the current liquidity for Wheat/Avax I can definitely see how having more liquidity for Wheat on Avax is crucial for the growth/stability of Wheat on Avax. It also fits in perfectly with the vision of the protocol of owning it’s own liquidity vs renting it, especially since it will be permanent liquidity which will also be generating fees for Wheat holders.

#11

Yes, for WHEAT/AVAX we will be launching bonds later in the week.

For WHEAT/MOR we can also increase the liquidity with things like the above mentioned system surplus withdrawal in the proposal and also continuing with bonds for it.

#12

Okay, then I stay with my first suggestion.

Instead of having gro and wheat using Mor surplus seperate, I think they should always be combined.

Even when mor out of the surplus is used for rebate when other protocols make lp’s, also there always have some automatically go to wheat and gro burns.

This also makes sure burns hapoen more regularly, instad of massive 50-100k burns by always having an allocation for wheat and allocation for gro. Means both of them also always have a direct incentive to have new partnerships.

Off course doesn’t need to be a burn, just having 10-20% used to add to mor/gro is also fine.

And for a gro burn in a mip, I would also agree to have som allocated to wheat burns/lp creation always.

Otherwise in the future, if gro holders are less focussed on wheat. They may never support any big wheat burns, and only gro burns if they dont hold any wheat. Making these mip proposils going one sided. As you dont need wheat to vote on these.

If there is already a presedence set from the start that there is always a portion going to both, then this is less likely to happen and seem more healthy overall.

#13

@gtorres368
Mor gained in a specific chain, should be used for that chain. Stronger chains get more incentives, higher prices, which is needed because they also have higher liquidity in mor and need it more.
Also hybridge mostly does it thing when a stronger chain does very well and everyone wants to go to it. Bsc will get more burns by getting avalanche wheat higher, instead of doing a direct buy there. Making it a double win: less avax wheat → more people bridge over, a lot get burned on bsc.
But the amount increased on the avalanche side will be less then the amount that has gone out of circulation. And you have the bsc burns qs an extra on top of it.

#14
  1. How was this issue discovered?
  2. Will the withdrawal of the 17,491.79 MOR for this unfortunate and unlikely event be treated as set precedence or is the compensation a one-off?
  3. Are there any feasible options available to avoid this issue happening again?
#15

I am curious about these questions as well

#16

You can absolutely bet that the next DAO proposal will include a surplus withdrawal to buyback GRO or use it to add more liquidity for it.

1 Like
#17

1-The affected user DMed me about it. I looked at it + the tx history of the bot we use to track liquidations and it matched to the above events. Confirmed it with our lead smart contract dev too.

2-I don’t think it’s a precedence for much because it’s hard to replicate and you still lose the money until it can even go through a DAO vote. Also you’re still paying the 15% liquidation penalty on the debt so it’s better to just repay the loan before liquidation.

As a direct result of this the surplus of MOR shot up by 17,491.79 MOR instantly so this tx will simply bring it back to the level it should be at.

3-There isn’t anything that can be done specifically to avoid this issue, simply use common sense to avoid liquidations. After the “bark” function is called you’d see no collateral or debt in your dashboard (until the auction ends and you can reclaim). So it doesn’t let you repay either if “bark” already happened.

1 Like
#18

off course.
My stance, in short, is just:
Having each MIP for using MOR funds mentioning both WHEAT and GRO will make burning/adding liquidity more even (instead of these sudden big burns for a month and then a month of nothing), will make sure both have a constant support, and would make users happy as both GRO and WHEAT users would want to vote on the MIP.

(I know GRO holders have incentive for wheat to do well, but people voting aren’t always looking at it this way)

#19

Big fan of using half the MOR to buy WHEAT and pair that with MOR to increase liquidity. I am a long-term believer in BSC and AVAX WHEAT, but the AVAX WHEAT chart has definitely created negative buzz. I agree that a larger profile buy back helps demonstrate value that might not be so readily obvious. I also agree that revenue generated on a given chain should be used generally for the benefit of that chain’s ecosystem tokens and there shouldnt be the blending of mechanisms between different chains (i.e. using AVAX generated funds to buy back BSC of FTM WHEAT and vice versa). At least in the still very early days here. That only stands to create unnecessary friction amongst supporters, with those holding only on one chain, or mostly on one chain, allowing bias to creep in when lobbying and voting for changes.

I applaud the willingness to make a user whole who suffered a loss secondary to an anomalous event. This speaks to the people behind the scenes pulling the levers.

2 Likes
#20

Edit (20/12/2021):

-Specify use of the WHEAT surplus withdrawal to acquire WHEAT/AVAX liquidity
-Withdraw 25k MOR from surplus to acquire GRO/AVAX liquidity