LIP-002: Decrease borrowing rates for lisUSD

Summary

This proposal aims to decrease the borrowing rates on Lista DAO to make borrowing lisUSD more attractive, thereby increasing user engagement and overall platform utilization.

Abstract

The proposal suggests lowering the borrowing rates across various asset tiers on Lista DAO. This change is expected to enhance the platform’s competitiveness in the DeFi space by attracting more users to borrow lisUSD. The proposed changes will be implemented by adjusting the fixed borrowing rate parameters in the protocol.

The overall implementation process will involve updating the relevant smart contracts for both of the following:

1. assets with fixed borrow rate
2. assets tied to our AMO module

Additionally, the implementation process will also include all front end changes to ensure that the changes are accurately reflected across all user interfaces.

Motivation

Addressing High Borrowing Costs:

1. Current Problem: High borrowing rates may be deterring users from borrowing lisUSD, limiting the platform’s growth potential.
2. Proposed Solution: By reducing the borrowing rates, we can make borrowing more accessible and appealing to a broader audience, thus driving more activity and liquidity on the platform.

Value-Add:

1. User Growth: Lower borrowing rates are expected to attract new users and increase the borrowing volume, leading to higher liquidity and activity on the platform.
2. Market Competitiveness: Competitive rates will position Lista DAO as a more attractive option in the DeFi space, enhancing its reputation and market share.

Specification:

Proposed Borrowing Rate Changes:

AMO adjustments:

Benefits (Pros):

1. Increased User Engagement: More competitive borrowing rates are likely to attract a larger user base.
2. Enhanced Platform Liquidity: More borrowing activity will drive liquidity on the platform, benefiting all participants.
3. Market Positioning: Lower rates will help Lista DAO compete more effectively in the DeFi space, potentially capturing a larger market share.

Downside (Cons):

1. Liquidity Risks: Lowering rates may attract more borrowers, but it is essential to ensure that the platform maintains sufficient liquidity to support the increased demand.
2. Revenue Impact: Reduced rates might lower short-term revenue; however, the increase in user activity is expected to offset this by increasing overall volume.

Voting:

1. Yes: Approve the proposed reduction in borrowing rates across all specified asset tiers, implementing the new proposed parameters.
2. No: Reject the proposal, maintaining all current borrowing rate & AMO settings.