Parameter updates: ATOM onboarding and mint limits

Inter Protocol Econ Committee
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The Economic Committee’s role, as established by the BLD community in prop #15, is to set and adjust governance parameters for Inter Protocol contracts for collateral types that the BLD community nominates.

The EC and the DCF have engaged Gauntlet to provide economic simulation and recommendations for collateral parameters. Gauntlet will be providing the EC with regular recommendations for parameter adjustments according to their model of the Inter Protocol cryptoeconomy. In addition, Gauntlet are also supporting the onboarding of collateral through analysis of collateral types. However the EC is not bound by any recommendations offered by Gauntlet.

In prop #32 (enacted by prop #34) the BLD community endorsed the use of ATOM as the first collateral type available for vaults. Gauntlet has provided an analysis of ATOM as a collateral and offered recommendations about parameters. The EC has also conducted its own analysis.

The EC seeks to be conservative in the first stage of vaults. The EC met shortly after the launch of Mainnet 1B and set a low debt limit of 500 IST in ATOM as a ‘smoke test’. Upon satisfactory completion of this test, the EC has set the following parameters for ATOM:

  • Minimum Collateral Ratio 250%
  • Liquidation Ratio 230%
  • Interest Rate 2.5%
  • Liquidation Penalty 10%
  • Minting Fee $0.5%
  • Minimum Initial Debt $25
  • Mint Limit $1,000,000

The EC expects to potentially vary these parameters as the community gains confidence in the Inter Protocol vaults, and the EC can observe the performance of processes such as liquidation auctions.

Looking forward, there is a great deal of interest in the BLD community for new collateral types. Participants at the Gateway conference voted for the community to prioritise new collateral types. We are also watching closely the discussion opened up on onboarding stATOM.

Shortly the EC will be releasing a formal collateral onboarding document, which we will suggest to the community is adopted as part of a careful process of onboarding. The EC’s preference is to take a conservative approach to onboarding collateral in coming months. However, subject to risk and engineering constraints - we note specifically the need for high quality oracle prices for different collateral types - we look forward to supporting the BLD community as it expands the functionality of IST.

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Hello from the Economic Committee, we wanted to inform the BLD community that we’ve commissioned Gauntlet to provide us with a set of new recommendations in regards to ATOM vault parameters.

Now that Vaults have been live for a few weeks without any notable incident, the EC feels like we can move forward with next steps which are to to make IST minting parameters via ATOM less conservative while keeping sound risk management practices.

The EC will consider Gauntlet recommendations and make changes to the ATOM vault parameter, if any, before announcing those changes here on the forum.

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Hello BLD community,

I’m reaching out on behalf of the Economic Committee (EC) to share important updates regarding the risk parameters for ATOM.

As part of our comprehensive evaluation, we collaborated with Gauntlet and their insights provided valuable data that complemented our internal assessment.

Based on the above, we’ve decided on the following adjustments:

  • Minimum Collateral Ratio: Decreased from 250% to 210%. This adjustment aims to boost demand for the protocol, allowing for more flexibility while maintaining a secure buffer against market volatility.
  • Liquidation Ratio: Decreased from 230% to 200%. A conservative liquidation ratio ensures that the protocol can withstand significant market drawdowns, safeguarding both the protocol and its users. We want to see the protocol handle more liquidations but we’re also mindful of doing it in a gradual way.

These changes reflect the EC’s commitment to optimizing the protocol’s parameters. We continuously monitor and refine these parameters in response to evolving market conditions and insights from Gauntlet.

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As @yamrani has noted, the EC is informed by both its own analysis and analysis provided by Gauntlet. Gauntlet is now providing regular recommendations to the EC about potential parameter changes in response to both market conditions and the economic performance of the Inter Protocol. For transparency, their most recent report is available here: Gauntlet Recommendations: Inter Protocol - Risk Parameter Changes (8/14/23)

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