[Proposal] Lowers the MCR for mIAU from 150% to 125%

Poll Link: (https://terra.mirror.finance/gov/poll/76)

Minimum collateral ratio (MCR) only needs to be high for a relatively volatile asset, such that when the collateralisation ratio falls below the MCR, it should still be above 100% when the liquidation happens, to ensure that all mirror assets are backed with a sufficient amount of UST.

Gold on its own has become a store of value due to its stability in price. As such it does not make sense to use an MCR of 150% for mIAU. From the image below we can see that over the last 12 months, even at gold’s most volatile period, the price moved ~15% over the span of 2-3 weeks in it’s most volatile period.

Estimated impact if approval passed:
With ~12 million UST worth of mIAU minted, we can expect ~20% of it to be freed up and be used more efficiently.
This change to mIAU hopefully marks the beginning of a better choice of consideration of historical price volatility. (e.g. lower for mIAU, and possible higher MCR for mVIX).

1 Like

given that mIAU is at it’s peg i don’t see why we would lower…

it is to increase the capital efficiency, and allow more liquidity to be provided for a synthetic asset.

Asset at peg or not should not be the main consideration for MCR, but assets’ volatility should be.

Simple is the best. I just want to let every mAsset in the same ratio.

Financial instrument, especially synthetics is a complicated asset type in itself. Typing to keep everything simple is too naive.

There needs to be a complete framework for evaluating the risk, and suitable parameter for each synthetics.

I agree with this proposal. Too many people don’t even understand what the purpose / function of the MCR actually is. More efficient minting is definitely a good thing and will incentivize more CDP fees in the long run.