Enable KAR as collateral to mint kUSD

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Summary

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

The Risk Parameters are recommended by Gaunlet, our risk management partner. Read more on the methodology here.

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.

7 Likes

Happy to see this proposition !
It’s nice to have more feature with KAR token.

How will be calculate the KAR price for the liquidation ?
It will be by an external Oracle, if yes where it take the information, or it will be by KAR/KSM pool of Karura ?

Also, why don’t have a direct pool KAR/kUSD ?

Thank you !

NRNF

1 Like

Nice. Been waiting on that a long time.

The price information will be from external oracle, similar to KSM. It will be coming from multiple exchanges and price aggregators.

The Karura Swap price is not used but we do plan in future to make it one of the price feed (along with all existing external price sources).

We are also planning add more trading pairs and please feel free to suggest what additional trading pairs we should have.

1 Like