PIP-44 l Update Partial Automated Borrow Rates Adjustments

Summary: The proposal aims to update partial automation of borrow rates adjustments for PAR & paUSD, made on MIP-25 and introduced in MIP-23.

Context: Despite the current borrow rates of PAR & paUSD, the strong demand for PAR (especially) & paUSD persists. This has led to continued selling pressure on these assets, resulting in a depeg, especially for PAR. Although MIP-25 implemented some borrow rate adjustments, further measures are required to address the ongoing issue.

To counter this, the DAO approved the MIP-23, which introduced partial automated borrow rates adjustments and later, the MIP-25 has already updated the borrow rate. However, PAR and paUSD have too much demand, MIP-23 & MIP-25 have become too conservative. To solve the problem in a more efficient way, we propose a new way to adjust borrowing rates.

Rationale:

Current framework (MIP-25): The sole purpose of adjusting borrow rates is to keep the PAR price as close as possible to the EUR and the paUSD price as close as possible to the USD. This framework includes PAR and paUSD, on all the chains where they are deployed.

• Interest rates per annum must range from a minimum of 3.00% to a maximum of 45.00% per annum for all tokens allowed tokens as collateral.
• It will only be possible to modify interest rates every 72 hours minimum.
• Productive assets allowed as collateral must have a borrow rates 0.30% p.y higher than non-productive assets.
• Adjustment of borrowing rates must be between 1.20% p.y and 3.00% p.y, in slopes of 0.60% (1.20%, 1.80%, 2.40%, 3.00%) and subject to this table:

• paUSD borrow rates for non-productive assets to 18.00% p.y and 18.30% p.y for productive assets on both Ethereum & Polygon PoS before updating partial automated borrow rates adjustments.
• PAR borrow rates for non-productive assets to 24.00% p.y and 24.30% p.y for productive assets on both Ethereum & Polygon PoS before updating partial automated borrow rates adjustments.

Proposed framework (PIP-44): The sole purpose of adjusting borrow rates is to keep the PAR price as close as possible to the EUR and the paUSD price as close as possible to the USD. This framework includes PAR and paUSD, on all the chains where they are deployed.

• Interest rates per annum must range from a minimum of 3.00% to a maximum of 450.00% per annum for all tokens allowed tokens as collateral.
• It will only be possible to modify interest rates every 48 hours minimum.
• Productive assets allowed as collateral must have the same borrow rates as non-productive assets.
• Adjustment of borrowing rates must be between 1.20% p.y and 450.00% p.y, in slopes of 0.60% (1.20%, 1.80%, 2.40%, 3.00%) and subject to this table:

Set PAR borrow rates to 180.00% p.y on both Ethereum & Polygon PoS before updating partial automated borrow rates adjustments.

To determine the price of PAR and paUSD and adjust borrowing rates accordingly, the DAO multisig signers will use an aggregator (e.g. Odos) and simulate a $10,000 swap. Users & DAO members are able to follow borrow rates adjustments here. Means:

• Human Resources: Multisig signers will need to sign transactions to execute the proposal
• Treasury Resources: There will be no treasury resources needed to execute the proposal.

Technical implementation: On Ethereum, Parallel DAO multisig will call following smart contracts:

• PAR ConfigProvider contract:
  • Call ‘SetCollateralBorrowRate’ function with these parameters:
    • ‘_collateralType’ : [token address]
    • ‘_borrowRate’ : [borrow rate]
• paUSD ConfigProvider contract:
  • Call ‘SetCollateralBorrowRate’ function with these parameters:
    • ‘_collateralType’ : [token address]
    • ‘_borrowRate’ : [borrow rate]

On Polygon PoS, Parallel DAO multisig will call following smart contracts:

• PAR ConfigProvider contract:
  • Call ‘SetCollateralBorrowRate’ function with these parameters:
    • ‘_collateralType’ : [token address]
    • ‘_borrowRate’ : [borrow rate]
• paUSD ConfigProvider contract:
  • Call ‘SetCollateralBorrowRate’ function with these parameters:
    • ‘_collateralType’ : [token address]
    • ‘_borrowRate’ : [borrow rate]

Voting Options:

• Accept the Update
• Against/Rework the proposal
• Abstain

Authors: Jean Brasse from Mimo Labs