MIP-2┃Adjust WETH minimum collateral ratio

Summary: The goal of this proposal is to adjust the WETH 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: WETH is the wrapped version of ETH, the native currency of Ethereum blockchain. WETH is currently the most decentralized erc-20 token in the world.

We propose to adjust WETH minimum collateral ratio on Ethereum, Polygon and Fantom. To do this, we conducted a risk assessment of the WETH 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 1

Below are the results of risk assessments on each chain:

• Ethereum: 1325×118 8.28 KB Smart contract risk: A The WETH token on Ethereum was launched in September 2017. WETH is the wrapped version of ETH, the native currency of Ethereum blockchain. WETH is currently the most decentralized erc-20 token in the world. WETH has generated more than 99M transactions.

WETH contract: 0xc02aaa39b223fe8d0a0e5c4f27ead9083c756cc2

• Counterparty risk: A The process to wrap ETH is permissionless. Anyone can trade ETH with the relay smart contract to get WETH. Similarly WETH can be unwrapped to get the ETH back. There are currently 506k WETH holders on Ethereum.

• Market Risk: B+ WETH on Ethereum has a $13B market cap, one of the highest market cap and trading volume of erc-20 tokens. Furthermore the price is pegged to Ethereum’s as it is redeemable for it. For this reason we consider the risks of WETH mitigate by ETH.

• Polygon: 1323×116 10.2 KB Smart contract risk: A- The WETH token on Polygon was launched in January 2021. WETH is the wrapped version of ETH, the native currency of Ethereum blockchain. WETH on Polygon is the bridged version of WETH on Ethereum. The bridge used is the official Polygon bridge. WETH has generated more than 144M transactions.

WETH contract: 0x7ceB23fD6bC0adD59E62ac25578270cFf1b9f619

• Counterparty risk: A The process to bridge WETH 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 1.15M WETH holders on Polygon.

• Market Risk: B+ WETH on Polygon has a $1.1B 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 WETH mitigate by ETH.

• Fantom: 1323×116 9.94 KB Smart contract risk: B+ The WETH token on Fantom was launched in February 2021. WETH is the wrapped version of ETH, the native currency of Ethereum blockchain. WETH on Fantom is the bridged version of WETH on Ethereum. The bridge used is the Multichain bridge. WETH has generated more than 3.7M transactions.

WETH contract: 0x74b23882a30290451A17c44f4F05243b6b58C76d

• Counterparty risk: A The process to bridge WETH 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 17k WETH holders on Fantom.

• Market Risk: B WETH on Fantom has a $260M market cap, one of the highest market cap and trading volume of frc-20 tokens on Fantom. Furthermore the price is pegged to ETH as it is redeemable for it at 1:1 ratio. For this reason we consider the risks of WETH mitigate by ETH.

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 WETH minimum collateral ratio on each chain.

Voting Options:

• Accept the adjustment of WETH MCR’s
• Abstain
• Against the adjustment of WETH MCR’s