MIP-3┃Adjust WBTC minimum collateral ratio

Summary: The goal of this proposal is to adjust the WBTC minimum collateral ratio (MCR) on Ethereum, Polygon and Fantom.

Context: Until now, Mimo has been conservative in its management of collaterals and minimum collateral ratios (MCR). This has made Mimo inefficient and uncompetitive compared to other protocols. We believe that by having active risk management we can increase the efficiency of the protocol and become more competitive.

Rationale: WBTC is the wrapped version of BTC, the native currency of Bitcoin blockchain.

We propose to adjust WBTC minimum collateral ratio on Ethereum, Polygon and Fantom. To do this, we conducted a risk assessment of the WBTC on each blockchain independently. We have based our risk assessments on the Aave’s and Euler’s risk framework with their methodology:

• https://docs.aave.com/risk/
• https://docs.euler.finance/risk-framework/introduction

Below are the results of risk assessments on each chain:

Ethereum:

Smart contract risk: A WBTC is the wrapped version of BTC, the native currency of Ethereum blockchain. WBTC is currently the most decentralized erc-20 token in the world. WBTC has generated more than 3.4M transactions.

WBTC contract: 0x2260fac5e5542a773aa44fbcfedf7c193bc2c599

Counterparty risk: A WBTC is centralized with bitcoins custodially locked on the Bitcoin blockchain. The custody is performed by BitGo, a leader in blockchain custodian technologies.

Market Risk: B+ WBTC on Polygon has a $11.1B market cap, one of the highest market cap and trading volume of erc-20 tokens. Furthermore the price is pegged to Bitcoin’s as it is redeemable for it. For this reason we consider the risks of WBTC mitigate by BTC.

Polygon:

Smart contract risk: A- WBTC is the wrapped version of BTC, the native currency of Bitcoin blockchain. WBTC on Polygon is the bridged version of WBTC on Ethereum. The bridge used is the official Polygon bridge. WBTC has generated more than 8.6M transactions.

WBTC contract: 0x1bfd67037b42cf73acf2047067bd4f2c47d9bfd6

Counterparty risk: A The process to bridge WBTC use the official polygon bridge who is controlled by a ⅖ multisig. The multisig doesn’t have the possibility to deposit/withdraw funds from contracts. There are currently 27K WBTC holders on Polygon.

Market Risk: B+ WBTC on Polygon has a $419M market cap, one of the highest market cap and trading volume of mrc-20 tokens. Furthermore the price is pegged to Ethereum’s as it is redeemable for it. For this reason we consider the risks of WBTC mitigate by BTC.

Fantom:

Smart contract risk: B+ WBTC is the wrapped version of BTC, the native currency of Bitcoin blockchain. WBTC on Fantom is the bridged version of WBTC on Ethereum. The bridge used is the Multichain bridge. WBTC has generated more than 3.7M transactions.

WBTC contract: 0x321162Cd933E2Be498Cd2267a90534A804051b11

Counterparty risk: A The process to bridge WBTC uses the Multichain bridge which is controlled by a threshold distributed signature algorithm based on secure multi-party computation (SMPC). This algorithm enables the generation of a set of private keys on independently run nodes and then a corresponding public key will be produced through distributed computation.

The application of the algorithm in the cross-chain interconnection of digital assets is a decentralized way to handle digital assets safely and effectively.

There are currently 17.1k WBTC holders on Fantom.

Market Risk: B WBTC on Fantom has a $1.2B market cap, one of the highest market cap and trading volume of frc-20 tokens on Fantom. Furthermore the price is pegged to BTC as it is redeemable for it at 1:1 ratio. For this reason we consider the risks of WBTC mitigate by BTC.

Following results of these risk assessments we propose to adjust minimum collateral ratio (MCR):

• Ethereum: 125%
• Polygon: 130%
• Fantom: 130%

Means:

• Human resources: If the proposal is approved, this will need transactions to update minimum collateral ratios.
• Treasury resources: There is no treasury cost.

Technical implementation: Update contract which manages WBTC minimum collateral ratio on each chain.

Voting Options:

• Accept the adjustment of WBTC MCR’s
• Abstain
• Refuse the adjustment of WBTC MCR’s

Quorum: 10M vMIMO