[PIP-037] Proposal to reduce IR on LSTs and LRTs

DAO Proposals
1

Summary

This publication proposes revising the Debt Interest Rate from 15% to 10% for LSTs and from 20% to 15% for LRTs on Prisma Finance.

Abstract

We propose decreasing the Debt Interest Rate parameter from 15% to 10% for LSTs and from 20% to 15% for LRTs. mkUSD maintaining its peg lately and given market condition it might be a good time to decrease IR and stimulate minting of Prisma stablecoins.

Motivation

Current Prisma Active debt APRs compensate for the cost of borrowing but the markets rates globally decreased in the past few weeks.
Peg is strong for the past weeks.
TVL and Total debt could benefit from a decreased of IR and make Prisma more competitive in the CDP landscape.

Protocol IR % Type
Curve 17% CDP
AAVE 12% Lending
Spark 14% Lending

Specification

Update the Debt Interest Rate and Redemption Fees as followed:

Parameter Current Value Proposed Value
Debt Interest Rate LSTs 15% 10%
Debt Interest Rate LRTs 20% 15%
Redemption fee LST 1% 1%
Redemption fee LRT 5% 4%
Redemption Rebate LRT 0% 4%

Next steps

Feedback are important, please comment. If a consensus is reached, the proposal will go next on a Snapshot vote.

2 Likes
2

This all makes sense, but what’s the plan for the long run? It would be way more convenient to have, for example, boundaries that we can vote on (for instance, a minimum of 10, maximum of 25), where the interest rate would adjust based on market conditions (mkUSD peg, ULTRA peg, IR available elsewhere).

This way, lenders would know the best and worst-case scenarios, and PRISMA would get the flexibility it needs instead of having an IR proposal every other week. I’m not sure, however, how much effort it would take to implement this though…

2 Likes
3

Yeah. Great idea.

At this point, we really need to rebuild TVL, get more mkUSD and ULTRA into 2pools so people can actually use it and swap to other coins without taking massive slippage.

It’ll be really hard to build TVL when our rates are significantly higher than much more battle-tested protocols, and immediately after an exploit (even if the core contracts are perfectly fine).

Can we put this to a vote?

2 Likes
4

Looks like snapshot vote went through. What’s next step to execute?

5

On-chain vote will be up shortly

1 Like