mars

Prop 155: ATOM HLS Market Launch - Osmosis Outpost

mrc: 62 title: ATOM HLS Market Launch - Osmosis Outpost authors: Delphi Labs forum-url: https://forum.marsprotocol.io/t/1118

Summary

The objective of this proposal is to launch the ATOM High Leverage Strategies (HLS) market with stATOM as its first asset.

HLS Markets

Mars credit accounts are highly flexible and allow for a number of yet unexplored use cases to be implemented. HLS are one of those use cases. In essence, HLS are a type of credit account that allows users to take high leverage on a particular subset of assets by restricting the asset the debt of the account can be denominated in. The reason this is possible is that all assets within a HLS market should be highly correlated with the debt asset of the account and as such, the risk of offering high leverage for those assets is significantly lower than on a generalized credit account.

HLS markets are defined by a single debt asset (in this case ATOM) and a set of collateral assets that can be used with high leverage within that HLS market. The objective of this proposal is to launch the ATOM HLS market with stATOM as its first collateral asset.

The creation of this market will allow users to use stATOM as collateral to borrow ATOM with up to 10x leverage (vs. 3.33x on a general credit account). We expect this additional efficiency to open up new use cases within the Red Bank and further promote organic ATOM borrow demand.

Risks

The implementation of this proposal comes with two new types of risk:

  1. Smart contract bugs: As this is an implementation of a new feature within Mars, there’s always the possibility of unforeseen implementation bugs and smart contract vulnerabilities. The materialization of these risks could translate into loss of funds for users. While the code being used has been audited, this obviously doesn’t guarantee that it’s free from bugs. As such, we suggest caution when using this new feature, especially within the first months of its implementation.
  2. Risk parameter-related vulnerabilities: If the risk parameters are set too aggressively, the liquidations system might not work properly which could translate into protocol insolvency. While we believe the proposed parameters are conservative enough, users should always have this risk present when using the protocol.
  3. Higher leverage means a greater likelihood of liquidation, which poses risk to users of the HLSs and to the Mars system (risk of bad debt if liquidations do not occur as expected/desired).

Risk Parameters Suggestion - stATOM (Collateral Asset)

  • Max. LTV: 90%
  • Liquidation LTV: 90.5%
  • Liquidation Parameters:
    • Starting LB: 0
    • Slope: 2
    • Max. LB: 0.2
    • Min. LB: 0.05
    • Target Health Factor: 1.025
    • Protocol Liquidation Fee: 0.25

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, Stride/STRD and stATOM. Delphi Ventures, a related company, is an investor in rights to receive TIA. 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.