We are excited to unveil that MIMO, PAR, and their LPs are available to be lent, collateralized, and borrowed in their own isolated market on Midas Capital, a multi-chain money market protocol. This opens up a new world of possibilities for users to maximize the potential of their assets.
What is Midas Capital ?
Midas Capital is bringing isolated and customizable money markets to EVM-compatible blockchains. Through Midas pools, users can create and participate in isolated money markets that support various assets across chains. With a vision to be a cross-chain platform, Midas has onboarded various key ecosystems, and it’s the first permissionless and isolated crosschain money market on Polygon, Moonbeam, and BSC. That's why it makes a perfect ally for the future of Mimo.
Pool creators will also have the ability to modify pool parameters, which include the supported assets, collateral factors, and pool fees, to offer isolated money markets to users. Users, on the other hand, can deposit their assets to lend them to other users to earn a part of the lending fees, or use the assets as collateral and earn against them. With multiple pools across chains, Midas Capital is bringing isolated money markets for both retail and institutional investors.
To know more about Midas Capital, you can directly follow these links :
Twitter | Discord | Telegram | Website
What Are Midas Pools?
Similar to many other DeFi protocols such as Aave and Compound, Midas pools are lending and borrowing pools where users can supply assets to earn interest, while other users can borrow these assets.
In Aave and Compound, all assets are combined into one money market and managed through governance. Midas pools take a different approach by introducing isolated pools. This allows anyone to create their own isolated money markets. As a result of being isolated, the pool creator can select any assets, oracle, interest rate model, etc.
Moreover, since all pools are isolated and are running their own money markets, protocol risks are also contained in the affected pool itself. Therefore, the value at risk is completely limited to the pool in question, while all assets in other pools are still secure. Here’s a detailed article that highlights the difference between isolated pools and single cross-collateral pools.
This customizable nature of the Midas market allows to build new use cases on top of lending/borrowing markets, because ultimately supporting any asset requires two things:
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Way to get the price of the asset (price-feed oracle)
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Way to access liquidity of the asset (to liquidate an unhealthy position)
This allows supporting a long tail of assets such as LP tokens which is a non-standard asset that represents a liquidity share of a token pair.
A Mimo Midas pool will be live on Polygon containing MIMO, MIMO-PAR Balancer LP, PAR, PAR-jEUR Curve v1 LP, PAR-USDC Uni v3 LP, WMATIC, FRAX, DAI, and USDC. Users will be able to provide liquidity and borrow against their assets with a maximum loan-to-value (LTV) ratio defined for each asset by the Mimo DAO. Since Midas Pools are highly customizable, the Mimo community will be able to discuss and vote on future changes such as adding new assets and changing pool parameters.
Why create pools on Midas instead of allowing these assets directly as collateral on Mimo Protocol?
Midas offers Isolated markets, meaning that each isolated market contains its own risk only. If any issue should arise, it will not contaminate any other market, and therefore the protocol. This segregation allows for riskier assets to be lent and borrowed or used as collateral.
Some assets like MIMO don’t have a significant volume and market cap, which makes them more vulnerable to manipulation, if these assets are used as simple collateral on Mimo Protocol, like WETH for example. This is why Midas offers a new approach: Protected Collateral. The main improvement is that protected collateral can be provided but not borrowed.
The Mimo DAO decided to set LPs and assets containing MIMO and PAR’s LPs as protected collateral to prevent users from shorting MIMO by borrowing MIMO and then selling it. It’s only possible to go long by borrowing stable and buying back MIMO. This will limit the downside pressure on the MIMO token and the potential manipulation.
Sustainable Yield
But, users also have the ability to borrow on assets like Mimo, PAR, and their associated LPs to access additional possibilities offered by lending platforms such as leverage, short, long, hedge, etc, which was not possible before Midas pools. So, where’s the yield coming from? The active market and lenders and borrowers; incentives don’t run dry or collapse from under anyone because they’re siloed in their own isolated market.
Note that your MIMO-PAR and PAR-USDC LPs will continue to receive Liquidity Mining through the Mimo Midas pool.
Collateral risks
Some collateral types are less liquid and/or more volatile than others, creating a few risks, such as:
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Liquidators could be demotivated to liquidate under-collateralized loans since the collateral could not be sold without a big slippage, creating a risk for the lenders;
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In some situations, borrowers may prefer to be liquidated rather than pay back the loan. This can happen when the collateral liquidity is very low or when gas prices are too high on Mainnet. It can also be an intended behavior from bad actors, who can use the liquidation excuse to exit from a position.
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For low-liquid assets, prices could be manipulated easily to trigger liquidations or to borrow more assets than what is usually possible.
Liquidation risks
Liquidators protect the market by ensuring proper collateralization, but as seen above, some issues can happen, such as:
- To liquidate an under-collateralized loan, they would need to repay the loan and therefore need a liquidity source to acquire the assets. The liquidity of the assets can dry out or become very low, making it impossible for liquidators to properly secure the market.
Note that using the Mimo Protocol Midas pools includes accepting all the risks related to each protocol and assets being used.
How to Follow Along…
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