#7 Enable kUSD (KSM as collateral), List KSM/kUSD Pair & Incentive Program

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Summary

This proposal combines previous dependant proposals (#4, #5, #6) into one atomic (batched) proposal, so they will pass and fail together.

If passed, this proposal will

  1. enable kUSD minting with KSM as collateral: at #276,200 (~~Aug 6 2:00am UTC )
  2. enable KSM/kUSD Bootstrap on Karura Swap: at #276,200 (~~Aug 6 2:00am UTC)
  3. earliest KSM/kUSD trading time: at #276700 (~~Aug 6 4:00am UTC)
  4. enable Liquidity Mining Program for KSM/KAR & KSM/kUSD: at #276700 (~~Aug 6 4:00am UTC)

1. Enable kUSD with KSM as collateral

This proposal will enable KSM as collateral to mint kUSD with the following initial risk parameters:

  • Required Collateral Ratio : 275%
  • Liquidation Ratio : 225%
  • Liquidation Penalty : 17%
  • Stability Fee : ~3% per annum (or precisely 937,303,552 x 10^-18 per block)
  • kUSD Mint Ceiling : $25 Million

These initial parameters were recommended by Gaunlet - our risk management partner. Read the full assessment here

Considerations

These parameters are at the far end of the conservative and risk aversion spectrum. They are adopted also because kUSD is the first-of-its-kind launch in such technical and market (KSM) environments.

We are also given a second list of moderately aggressive risk parameters as follows, which may be proposed soon after if the launch is smooth

  • Required Collateral Ratio : 200%
  • Liquidation Ratio : 185%
  • Liquidation Penalty : 17%
  • Stability Fee : ~3% per annum (or precisely 937,303,552 per block)
  • kUSD Mint Ceiling : $100 Million

kUSD Protocol Details & Risks

  • Why some would prefer to mint kUSD, read more here
  • How to mint kUSD here
  • Understand risks and stability mechanism here
  • Liquidation uses a hybrid approach: Karura Swap + collateral auction, learn how to participate in auctions here

2. List KSM/kUSD on Karura Swap via Bootstrap

This part of the proposal will

  • enable Bootstrap for KSM/kUSD pool at #276200, read more on Bootstrap here

No trading is allowed during Bootstrap, and trading can only be enabled once the following criteria are met:

  • The Not Before block #276700 has passed AND

  • Either the pool has 250 KSM OR 50,000 kUSD in liquidity

  • Both KSM & kUSD has >0 liquidity

  • You can contribute liquidity for KSM, or kUSD, or KSM & kUSD at the same time. The actual exchange rate of KSM/kUSD can only be known once the Bootstrap is completed .

  • You should only participate if you want to become a liquidity provider for the pool. Please be aware of various risks associated with being a liquidity provider .

  • You can contribute liquidity for KSM, or kUSD, or KSM & kUSD at the same time. The actual exchange rate of KSM/kUSD can only be known once the Bootstrap is completed .

3. LP Incentive Program for KSM/kUSD & KAR/KSM

KAR/KSM Pool

  • Total ~65,000 KAR rewards per month (precisely 1.5 KAR per period or every 5 blocks) to those who staked KAR/KSM LP tokens
  • Loyalty Bonus: 50%
  • The program is expected to run for a year
  • Reward amount is expected to be adjusted on a monthly basis

Retro Airdrop

While this is not mandated on-chain, but for completeness of the incentive program, there is also a provision to retrospectively airdrop KAR rewards for those who have provided liquidity prior to a certain block number.

The KAR/KSM pool is opened without additional incentive on purpose, that is to verify the protocol’s built-in ongoing incentive scheme - relying on trading volume and trading fees. The result has been promising.

This retro airdrop is a way to say thank you to the early adopters and chaos embraces. More details will be disclosed.

KSM/kUSD Pool

  • Total ~125,000 KAR rewards per month (precisely 3 KAR per period or every 5 blocks) to those who staked KAR/kUSD LP tokens
  • Loyalty Bonus: 30%
  • The program is expected to run for 6 months
  • Reward amount is expected to be adjusted on a monthly basis

Read more on Liquidity Program and Loyalty Bonus here

KSM/kUSD LP triple dip

In addition to trading fees and liquidity mining incentives, kUSD pool LPs also help maintain the stability of kUSD, hence earn some of the stablecoin surpluses.

This is currently set at ~1.5% APY (precisely 56,238,214,645*10^-18 per period or every 5 blocks) payable in kUSD.

Read more here

Proposal

Vote here & read about the democracy process here

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