To ensure a more constant flow of rewards for MIR stakers by changing the current CDP closing fee (Protocol Fee) structure.
Current Protocol Fee
Currently, Mirror Protocol charges a Protocol Fee of 1.5% from collateral for all CDP/Mint Positions that are being closed. The Protocol Fee is collected and distributed as below:
- 1.5% of protocol fee is sent to a contract called “Collector”
- “Collector” contract converts all gathered fee into MIR through a swap
- Swapped MIR is distributed to all MIR stakers ( not MIR-UST LP) based on their weight
Problems with the current fee model
The problem with the current Protocol Fee model is that,
- Fee is only generated when CDP is closed, causing an irregular flow of MIR rewards. This causes the APR on the Governance page to change irregularly.
- As long as the position remains open, it will result in no MIR staker reward.
It seems that protocols such as MakerDAO and Kava charge a holding fee which is calculated based on the period of time which the CDP has been open for. We can use this to change the fee structure of CDPs that are open on Mirror Protocol:
- 1.5% fee to be an APR instead of one time calculation. Maybe apply a daily compound interest of 0.00407916% to match 1.5% annual interest.
- Fee is deducted from the collateral at every specified number of blocks (1 week is approximately 100000 blocks on Terra blockchain)
Good thing about doing this is that it will generate a more constant flow of reward for MIR stakers as long as the CDP is open.
Higher overall fee maybe charged to open CDPs as long as they are open. So it may become less likely for people to open CDPs in the first place.
What are your thoughts on this? Or is there other ways to make MIR staker rewards more stable?