Dynamic Collateral ratio - take advantage of 'looping guys'

vote for adjusting short farm incentive failed, I was really upset
so I would propse ‘dynamic MCR’
(I’m not english native, sorry about awkward passages)

now we can see extreme-low premium ratio on mKO and mSPY, which has 130% MCR. obviously contributed to ‘looping guys’

how about we take advantage of ‘looping guys’ by adjusting MCR in accordance with premium ratio of mAsset (of course, the opposite way)

MCR goes down → Demand of looping strategy increase → More borrowing → Premium goes down

the basic formula I propose is right here

min col. ratio = 140% - Asset Premium
for example, MCR of mNFLX goes 140%-30% = 110% and mKO 140-(-10%) = 150%

I think period of renewing MCR matter and MCR needs kind of ‘unity’, so we can consider

  1. Snapshot of premium rate : 3 business days before month-end
  2. Renewing period : 1 month
  3. Renewing day : 1st business day, monthly 10:00 AM UTC (should be open-market day)
  4. adjustment unit : 5%p
  5. Firstly, we concentrate only ‘decreasing MCR’, because increasing MCR has liquidation problem like mKO adjustment day before.

I don’t hav enough cash and any code knowledge, just wanna share my opinion
hope everything goes well on Terra ecosystem

1 Like

You can’t be serious in proposing this formula, what if the premium is above 40%? And even if the formula can be reworked, how is MCR below 100%+premium ever a good idea, with collateral too small to safely liquidate the position?

let’s make minimum MCR 110% then
I didn’t consider any details, sorry about that dude

Dynamic MCR would discourage minting by making it far to unpredictable. Hard no from me.

that would be problem…
I was short-sighted

The minimum collateral on Mirror is already favourable if the premium is high:

min_collateral = MCR * oracle_price * amount = MCR * (1/(1+premium)) * market_price * amount

A safer (but less favourable currently) way to calculate would be simply:

min_collateral2 = MCR * market_price * amount

Because to close positions, mAssets are bought at market price, not oracle price.