Mirror Treasury and leveraged mAsset minting

Hello @ all,

I was looking through the DEUS Finance Litepaper (https://deus.finance/litepaper.pdf) since they will be one of our main competitors. As far as I understand, they will use a treasury that acts as a general Collateral for their synthetic assets.

This got me thinking. Could we create a treasury that allows people to under-collateralize their mAsset minting?

For example:
I want to create an mAsset that needs 150% collateral. We could implement a function that would allow me to only deposit 50% and subscribe the community treasury (which would need to be created) to another 150% collateral. The treasury will get most of the auction discount in this case, which generates an income for people who stake ust in the treasury pool. The minter will get liquidated once their own 50% is used up, but will be able to profit from falling prices at leverage.

This mechanism would have two important upsides. It will allow leveraged shorting for those who want to take risk without sacrificing the overall safety of the protocol. On the other hand it will allow stakers in the treasury to profit from asset minting without having to take risk on shorting an asset. This might also reduce the spread (though I am not sure about that point)

The treasury should profit from a variable share of the auction discount. If the money in the treasury is underutilized, minters will keep more of the auction discount. If the treasury is utilized more, it’s share in minting profit will rise. This should incentivize users to keep the treasury both liquid and sufficiently utilized. Maybe we will need a flexible withdraw Limit based on utilization as well to keep people in the Pool in times of low liquidity.

Any thoughts?

A treasury is an interesting idea.

However, unless I am misunderstanding what you are saying, I think you need to look at the definition of the auction discount. It’s a cost to under-collateralized minters, not a benefit.

Oh, right. Now I see my problem in thinking. So we would need to have more of an interest payment to the treasury to make it worthwhile to stake into it. This interest could be taken out of the Collateral of the minter periodically and distributed to the treasury. This should work just as well. With interest rates being adjusted according to utilization similar to anchor

Again, this doesn’t work because I could just utilize the treasury to undercollateralize mint, sell the stocks, and let the position get liquidated. I net positive by doing this and can effectively drain out the whole treasury.