[ARFC] Add MAI to Optimism Aave V3 pool

Governance
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Title: [ARFC] Add MAI to Optimism Aave V3 pool
Author: @marczeller - Aave-Chan Initiative
Date: 2023-04-13

Summary

This proposal presents Aave with the opportunity to onboard MAI to the Optimism Aave V3 Market.

Abstract

MAI is a decentralized stablecoin minted by the Qidao Protocol. For more details about MAI, please refer to Qidao’s official website.

Motivation

Supporting stablecoin diversity is part of the Aave-Chan Initiative (ACI) delegate platform. The risk parameters provided are the same as those adopted on the Polygon PoS Aave V3 Pool.

The newly proposed risk parameters replicating the MAI parameters on Polygon V3 pool are merely suggestions to start the conversation. The ACI is inviting Risk Service Providers to provide feedback on them.

Specification

Ticker: MAI
Contract Address: 0xdFA46478F9e5EA86d57387849598dbFB2e964b02

Risk Parameter Value
Isolation Mode YES
Enable Borrow YES
Enable Collateral YES (in isolation mode)
Loan To Value 75%
Liquidation Threshold 80%
Liquidation Bonus 5%
Reserve Factor 20%
Liquidation Protocol Fee 10%
Borrow Cap 1,200k
Supply Cap 2,200k
Debt Ceiling 2,000k
Base 0%
Slope1 4%
Uoptimal 80%
Slope2 75%

Disclaimer

The ACI is not affiliated with Qidao or any other entity and has not received payment to present this ARFC.

At the time of writing, the author (@marczeller) owns QI & vQI, the native asset of the Qidao Protocol, for ~50k$. The author was not paid to publish this ARFC.

Next Steps

  1. If consensus is reached and the proposal is refined, submit the ARFC for a snapshot vote for final approval.
  2. If consensus is reached, submit an Aave Improvement Proposal (AIP) to onboard MAI on the Optimism Aave V3 pool.

Copyright

Copyright and related rights waived via CC0.

1 Like
2

Chaos Labs supports the proposal to onboard MAI to V3 Optimism with the following parameters:

Risk Parameter Value
Isolation Mode YES
Enable Borrow YES
Enable Collateral YES (in isolation mode)
Loan To Value 75%
Liquidation Threshold 80%
Liquidation Bonus 5%
Reserve Factor 20%
Liquidation Protocol Fee 10%
Borrow Cap 1,200k
Supply Cap 2,200k
Debt Ceiling 2,000k
Base 0%
Slope1 4%
Uoptimal 80%
Slope2 75%

Liquidity on Optimism is better than that on Arbitrum, leading us to adopt the parameters proposed by @MarcZeller, which are identical to the ones from the Polygon deployment.
We updated the reserve factor to 20% to match that of Polygon.

Overview

Chaos Labs supports listing MAI in Isolation Mode as part of an overarching strategy to increase the offering of AAVE protocol with more volatile assets. As a low market cap asset, MAI is susceptible to price manipulation, so listing it with an appropriate debt ceiling is crucial to prevent a profitable pump attack.

Liquidity and Market Cap

When analyzing market cap and trading volumes of assets for listing, we look at data from the past 180 days. The average market cap of MAI over the past 180 days was $46.6M, and the average daily trading volume was $3.8M (CeFi & DeFi). We find the market cap adequate and the trading volumes reasonable as long as they are considered when setting appropriate supply caps, a debt ceiling, and borrow caps.

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Liquidation Threshold

Analyzing MAI price volatility over the past, we observed daily annualized volatility of 5.66% and 30-day annualized volatility of 2.51%. Considering this volatility and the history of MAI on other networks, we support the suggested LT of 80%.

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We support listing MAI as borrowable under reasonable limits of supply cap, as we do not observe a significant risk to the protocol by allowing to borrow MAI, as long as it is bound by a well-defined cap.

Debt Ceiling

Following Chaos Labs’ Isolation Mode Methodology, we support the initial debt ceiling of $2M.

Supply Cap, Borrow Cap, and Liquidation Bonus

Given the concentrated liquidity of MAI on Optimism we recommend a 5% Liquidation Bonus and support the proposed initial supply cap of 2.2M and borrow cap of 1.2M

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This proposal has been escalated to Snapshot stage

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Gauntlet Parameter Recommendations

The following table contains Gauntlet’s recommended initial parameters for MAI on Optimism. We include Chaos’s recs so that the community can easily compare them, and highlight differences in bold.

Risk Parameter Gauntlet Rec Chaos Rec
Isolation Mode YES YES
Enable Borrow YES YES
Enable Collateral YES YES
Loan To Value 75% 75%
Liquidation Threshold 80% 80%
Liquidation Bonus 5% 5%
Reserve Factor 20% 20%
Liquidation Protocol Fee 10% 10%
Borrow Cap 2,500,000 1,200,000
Supply Cap 7,600,000 2,200,000
Debt Ceiling $1,900,000 $2,000,000
Base 0% 0%
Slope1 4% 4%
Uoptimal 80% 80%
Slope2 75% 75%

MAI is an overcollateralized stablecoin backed by collateral in user-managed vaults, similar to DAI.

MAI has previously been listed on Aave V3 Avalanche and Aave V3 Polygon. For the initial MAI listing on Optimism, we follow many of the same parameters that it has on other chains.

We recommend the following parameters for MAI on Aave V3 Optimism:

Isolation Mode - Yes
Borrowable - Yes
Collateral Enabled - Yes
eMode - No

Supply and Borrow Caps

Supply Cap (in tokens) - 7,600,000 / Borrow Cap (in tokens) - 2,500,000

These caps are determined using Gauntlet’s supply and borrow cap methodology.

Debt Ceiling $1,900,000

Gauntlet recommends starting the debt ceiling at 10% of the token’s on-chain circulating supply. The circulating supply is $19M, so gauntlet recommends a debt ceiling of $1.9M.

LTV - 75% / LT - 80%

Gauntlet recommends the same LTV and LT on Optimism as on Polygon and Avalanche, given the similar profiles of these markets.

Liquidation Bonus - 5%

Gauntlet recommends the same Liquidation Bonus on Optimism as on Polygon and Avalanche, given the similar profiles of these markets.

Liquidation Protocol Fee - 10%

Gauntlet recommends an LPF of 10%, matching the LPF for MAI on Polygon and Avalanche.

Reserve Factor - 20%

Gauntlet recommends a reserve factor of 20% for MAI on Optimism, matching the RF on Polygon and Avalanche.

IR Curves

We recommend the same IR curves used for MAI on Polygon and Avalanche:

Parameter Recommendation
Base Variable Borrow Rate 0%
Variable Rate Slope 1 4%
Optimal Usage Ratio 80%
Variable Rate Slope 2 75%
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As the main differences between the proposals are the supply and borrow cap, we support moving forward with the Gauntlet recommendations. Utilizing our updated supply cap methodology, we approve the suggested caps for the initial launch.

Risk Parameter Recommendation
Isolation Mode YES
Enable Borrow YES
Enable Collateral YES
Loan To Value 75%
Liquidation Threshold 80%
Liquidation Bonus 5%
Reserve Factor 20%
Liquidation Protocol Fee 10%
Borrow Cap 2,500,000
Supply Cap 7,600,000
Debt Ceiling $1,900,000
Base 0%
Slope1 4%
Uoptimal 80%
Slope2 75%
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The ACI acknowledge this consensus solution provided by risk service providers and will shortly publish an AIP incorporating them.

1 Like
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the proposal has been escalated to AIP stage, voting starts tomorrow

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Related with this listing, an update here [ARFC] Add MAI to Arbitrum Aave V3 Market - #8 by bgdlabs