As part of our efforts to reach sustainability and reduce emissions, we have assessed the profitability of each cauldron in the hopes of identifying potential improvements. Initially Abracadabra opened several 0% fee cauldrons to promote growth. These cauldrons are currently costing the protocol essential liquidity in terms of our MIM3 pool which could be redirected to more profitable cauldrons. Five cauldrons have been identified which can optimize the MIM peg through interest rate hikes.
We set two categories for these upcoming hikes:
major interest rate hikes (30 days)
minor interest rate hikes (< a week, immediate effect)
As a first step, our stablecoin v3 cauldrons receive minor interest rate hikes of 1%. Next week we will reassess the health of the MIM peg and respond accordingly.
Cauldrons which receive minor interest rate increases from 0% to 1%:
LUSD Cauldron: 0x8227965A7f42956549aFaEc319F4E444aa438Df5 (https://abracadabra.money/borrow/34)
Stargate USDC: 0xd31E19A0574dBF09310c3B06f3416661B4Dc7324 (https://abracadabra.money/borrow/31)
Stargate USDT: 0xc6B2b3fE7c3D7a6f823D9106E22e66660709001e (https://abracadabra.money/borrow/32)
For more information on interest rate increases on V3 cauldrons, refer to this article here!
Our dev team is currently working on the major interest rate hikes module for our wBTC and wETH cauldrons. We will gradually increase the interest rates on these 0% cauldrons over a 30 day period until the interest rate reaches a fixed 13%. After this 30 day period, we will reassess the situation and, depending on how many outstanding MIMs we still have, decide whether further rate changes are required.
The following cauldrons will receive major interest rate increases from 0% to 13% across a 30 day period:
WBTC Cauldron: 0x5ec47EE69BEde0b6C2A2fC0D9d094dF16C192498 (https://abracadabra.money/borrow/28)
WETH Cauldron: 0x390Db10e65b5ab920C19149C919D970ad9d18A41 (https://abracadabra.money/borrow/27)
Once development of the major interest rate hike module has been completed we will make an announcement.
If you have an open position in either of these cauldrons, we recommend that you monitor its health ratio by simply visiting your “My Position” page.
In addition to helping us reach profitability, higher interest rates will also help us restore the $MIM peg. We expect that some of our wizards with open positions will choose to repay their open CDPs. In order to do so, many of these borrowers will need to purchase $MIM on the Curve markets. As buy pressure increases for $MIM, the $MIM peg will naturally move closer to $1.