MIP-1 (BSC): Going back to peg

#1

This is the first MIP on BSC. 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

  • Get MOR closer to its $ peg
  • Disincentivize borrowing with stablecoin collaterals
  • Incentivize borrowing with volatile collaterals

Changes Proposed

Ilk type: STKAPEMORBUSD-A

Current Parameters:
Stability Fee: 15%
Liquidation Ratio: 102%
Chop: 1.5%

Proposed Parameters:
Stability Fee: 25%
Liquidation Ratio: 110%
Chop: 9%

Ilk type: STKPCSBUSDUSDC-A

Current Parameters:
Stability Fee: 5%
Debt Ceiling: 10,000,000

Proposed Parameters:
Stability Fee: 50%
Debt Ceiling: 0

By lowering the debt ceiling to 0 and increasing the stability fee this collateral type would be discontinued once all borrowers have closed down their positions.

Ilk type: STKCAKE-A

Current Parameters:
Liquidation Ratio: 175%

Proposed Parameters:
Liquidation Ratio: 150%

Ilk type: STKBANANA-A

Current Parameters:
Liquidation Ratio: 175%

Proposed Parameters:
Liquidation Ratio: 150%

Ilk type: STKPCSBNBCAKE-A

Current Parameters:
Liquidation Ratio: 175%

Proposed Parameters:
Liquidation Ratio: 150%

Ilk type: STKPCSBNBETH-A

Current Parameters:
Liquidation Ratio: 175%

Proposed Parameters:
Liquidation Ratio: 150%

Ilk type: STKPCSBNBBTCB-A

Current Parameters:
Liquidation Ratio: 175%

Proposed Parameters:
Liquidation Ratio: 150%

Ilk type: STKPCSETHBTCB-A

Current Parameters:
Liquidation Ratio: 175%

Proposed Parameters:
Liquidation Ratio: 150%

Withdraw 50,000 MOR from system surplus to start WHEAT/MOR and GRO/MOR liquidity on BSC (and test revenue share).

The other proposal is to increase the performance fee going to WHEAT EBCs from 5% to 10%, this will double WHEAT’s revenues from MOR and the yield difference for users is barely noticeable. In exchange for doing so the liquidation ratios for the volatile pairs would be lowered from 175% to 150% allowing users to borrow more MOR with their collateral.

Now is the time for the community to discuss before it is proposed on-chain, do you agree with this proposed changes or think it is a bad idea? Post your thoughts in the comments and let’s get the conversation going. It is our job as members of the GRO DAO to balance the peg strength of MOR, the security of the protocol and the profitability for GRO holders.

Edit 1 (11/22/2021):
-Proposed Stability Fee of STKAPEMORBUSD-A changed from 45% to 25%.
-Proposed Stability Fee of STKPCSBUSDUSDC-A changed from 45% to 50%.
-Added withdrawing 50k MOR from system surplus.

5 Likes
#2

This should have been done yesterday. Let’s get this proposal on chain asap

2 Likes
#3

As soon as possible, MOR pegging is obviously most important. These steps are great starting point.

#4

This is a good thing - reducing the sell pressure even though the liquidity will drop. A MOR that is sitting closer to or slightly above peg is better than sitting 0.10 below. The PSM functions brilliantly above peg but not so well under peg when the contract is empty.

Discontinuing STKPCSBUSDUSDC-A won’t have a great effect with only 237.43k MOR debt, though it is a great pre-emptive measure removing this sell pressure.

Fantastic.

Doubling the Wheat EBC fee sounds great. Are you able to provide figures for the yield difference for users?

1 Like
#5

One thing for MOR-BUSD users to remember is that even though the stability fee increases, your ability to leverage with less risk becomes much greater (as MOR is able to retain its peg easier). The protocol needs a chance to build its reserves which it hasn’t had because the R/R has been too great on MOR-BUSD for users to bother waiting for MOR to re-peg in order to sell. Ultimately it should make the entire borrowing & repaying much smoother for all users, and still provide great, low-risk returns for stable pair farmers

2 Likes
#6

Looks good. I wonder how people feel about reducing the stability fee on the STKPCSETHBTCB-A ilk since the stability fee is almost as much as the vault yield.

#7

Depends on each ilk, but as a good rule of thumb multiply the current yield of the ilk by 0.9475 and you’ll get the difference.

Example: 30% Yield turns into 28.4%

This numbers are very rough estimates.

#8

If anything that vault is being used as a yield arbitrage vault. You deposit your ETH/BTCB LP tokens, mint some MOR and stake it for WHEAT.

1 Like
#9

@SafeGrowth

What are the general timings from this discussion to implementation?

Discussion time in forum + vote duration + implementation duration = ~1 month? Or sooner as it’s a figure tweak with no build required?

EDIT: Plus adding in community notification period.

#10

All sounds like an excellent plan to me!

1 Like
#11

I am also wondering on the implementation time. If it’s too fast then maybe splitting up the increases of the mor-busd vault in two parts might be better to prevent any sudden liquidations.

#12

The voting period itself would have to be a few days. And the likelihood of it being put up for voting before the Avalanche launch is fairly low (but not zero).

I’d imagine the actual implementation can all be done quite quickly though as it’s just a matter of changing parameters - probably looking at mid-November imo

#13

My thought process on the timings is largely around those persons having to
de-lever - it could take a couple of weeks or so to buy back the MOR at
reasonable prices for some due to the size of their positions. If it’s
rushed through it could get very expensive very quickly for those first
users!

It’s a double edged sword as it would be extremely beneficial for all to have the peg retained as soon as possible.

Note: I do not hold any MOR-BUSD positions.

#14

To be fair though that should be a known risk if they’ve sold MOR below peg. PLus if anything this time now that we’re using to discus prior to the voting should be the time to pull back/de-lever any at risk positions (unless they believe the proposal won’t pass for whatever reason)

While I do appreciate that higher leveraged users may be cutting back some of their returns I do believe it is in the benefit of the protocol (the health of which is the DAO’s primary responsibility)

#15

In regards to timing we are looking at implementing the executive proposal for on-chain voting shortly after the launch on Avalanche. It’s important to discuss everything upfront so that the general community consensus is clear by the time voting comes.

#16

By definition anything below 1 BUSD IS a reasonable price. MOR trading below peg is an anomaly, not the norm and any discount captured is pure profit by the borrower who can repay their debt cheaper or a normal user gobbling it up.

This proposal has now been active for a week and we’ll continue reminding people that if you have a collateralization ratio under 110% for MOR-BUSD you SHOULD lower your leverage to avoid liquidation if this proposal is implemented.

There is plenty of time to react and the prices are great to deleverage and close positions, if there is a highly leveraged user (20-50x position) who hasn’t watched over the position for a month plus and ends up getting liquidated there isn’t much that can be done besides advertising it everywhere.

Any liquidations IF they were to happen would only push the price closer to where it belongs.

#17

@SafeGrowth @JGee Great points all around.

With MOR back at peg reliably for several days now and with ~$195k in the PSM, are you of the position that the stability fee of 45% for STKAPEMORBUSD-A is still necessary?

1 Like
#18

I reckon it can be readjusted. Both for that reason (PSM is more stable) but also a 45% stab fee would mean there’s 0 yield spread. Could still have an increase to 20-30% imo so we’re still helping ensure that stability (and still maintaining a 15-25% yield spread).

Cause while 200k is good, we want users to be able to trade in the millions with ease

#19

30-35% might be enough at this point given how things have evolved, needs to be examined before the onchain proposal is done.

What’s not changing is discontinuing the BUSD/USDC vault, we are better off reducing the liquidation ratios of pairs like CAKE or BANANA and having more MOR be minted with those.

2 Likes
#20

I agree with Safe and Wenz, now that MOR´s been at peg for several days 30% sounds more appropriate.