Lease Position Interest Recalculation Period Proposal (Osmosis)

Summary

A governance proposal to increase the interest recalculation period for lease positions on Osmosis from 2 hours to 5 days.

Description

Currently, lease positions have an interest recalculation period of 2 hours. This means that once every two hours lease liability is reevaluated based on accrued interest. Should the 90% max liability threshold be reached, then a partial liquidation is triggered. This is independent from price liability. At any given moment, should the price of the asset drop and the 90% threshold is reached, then a partial liquidation would get executed as expected. Given that a 2-hour period puts an unnecessary burden on the time alarm dispatcher service, a longer recalculation period is proposed. For example, should the borrow APR be 18%, the interest per 2 hours would be ~0.0042%. Should the price remain constant, then the LTV (loan-to-value) ratio where the lease would be partially liquidated would be ~90.0038%. With the proposed change, the LTV at which the position would get liquidated given a unchanged market price for a period of 5 days would be 90.22%.

By voting YES on this proposal, participants are indicating their agreement to extend the interest recalculation period from 2 hours to 5 days.