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This proposal will enable KAR as collateral to mint kUSD with the following initial risk parameters:
- Required Collateral ratio: 190%
- Liquidation ratio: 150%
- Liquidation Penalty: 15%
- Stability Fee: ~3% per annum
- kUSD Mint ceiling: $2 Million
Given that the Karura treasury is denominated in KAR, the price of KAR directly affects Karura’s ability to cover insolvent debts. Gaulnet’s analysis recommends a conservative approach with KAR recommendations to ensure that the price impact of KAR liquidations doesn’t hinder the ability of the protocol to use KAR to finance insolvent debt.
On Karura Swap, the KAR/KSM liquidity pool contains ~92,000 KAR and ~15,000 KSM, each with a USD value of ~$5 M. If $1M USD worths of KAR were sold, it would produce 32% slippage.
For these reasons, Gaulnet’s analysis recommends setting a debt ceiling of $2M for KAR.
The Financial Council will take this recommendation and propose these new ratios on-chain.