[RFC] Increase MIM Borrow Factor to 0.76

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1

Simple Summary

This RFC offers to increase the MIM borrow factor to 0.76.

Motivation

There has been a lot of FUD going on around FTX and Alameda which spilled into FTT price action. I personally don’t agree with it, but it would be neat if Euler allowed traders to express this view in a capital efficient way.

As Spreek pointed out on Twitter, a lot of MIM by Abracadabra is backed by FTT (FTX token):

So if FTT suddenly dropped to 0, MIM could become unbacked as MIM borrowers have no incentive to repay their debts and liquidators can’t sell the FTT backing the MIM loans.

There is in fact a decent MIM shorting market on UwU lend Finance already (about 20mil MIM):
https://app.uwulend.fi/reserve-overview/0x99d8a9c45b2eca8864373a26d1459e3dff1e17f3-0x99d8a9c45b2eca8864373a26d1459e3dff1e17f30x011c0d38da64b431a1bdfc17ad72678eabf7f1fb

So there is definitely demand.

Risks

MIM trades on various CeFi and DeFi exchanges and sees good volumes:

There is a $125mil TVL pool on Curve:

Screenshot 2022-11-06 at 11.59.35
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https://curve.fi/#/ethereum/pools/mim/deposit

There is also a Chainlink feed which is already implemented on Euler, which makes oracle manipulations quite unlikely:

Conclusion

Given at proven demand on UwU lend for borrowing MIM, good liquidity, pricing feed and opportunities to express FTX-bearish trading views, increasing the borrow factor would be an easy win for Euler to help MIM lenders and shorters meet.

2 Likes
2

Hey! Interesting proposal! Some points I would like to clarify:
1.It seems that MIM trading has not been very popular on Euler so far

Снимок экрана 2022-11-08 в 10.05.21
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In this regard maybe u have spoken to some funds or whales on whether they are ready to allocate capital to Euler. I mean can we be somehow sure that changing the borrow factor will bring liquidity?

  1. I just wonder what are the borrow factors for MIM on other platforms, for example Curve? I suppose that in order to succeed we need to provide better conditions than other platforms.

  2. Finally, since the FTX story is not going to last forever, I believe this proposal should be subject to fast track procedure. So I would suggest, by way of exception, to put it to a vote without long discussion on the forum. I would support it

3

We can’t be sure that increasing the BF factor will bring liquidity, but it defo won’t come through now that the BF is 0.28. It’s probably a good shot.

And I agree, we should probs fast track it.

UwU lend got a max LTV of 85%, but it’s a bit too high IMO: https://app.uwulend.fi/reserve-overview/0xc02aaa39b223fe8d0a0e5c4f27ead9083c756cc2-0xc02aaa39b223fe8d0a0e5c4f27ead9083c756cc20x011c0d38da64b431a1bdfc17ad72678eabf7f1fb

1 Like
4

I would give it a try and set at least the same parameters as Curve to be competitive. All in all, I would support this proposal.