SIP-97: Multi-Collateral Loans

Allow users to borrow synthetic assets such as sUSD, sBTC & sETH against ETH and ERC20’s as collateral such as renBTC.

Multi-Collateral loans purpose is to augment the supply of Synthetix Synths, sUSD, sBTC, sETH etc to be used in DeFi & traded on kwenta.io and create another revenue stream for SNX stakers.

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Hey @clints thank you for making this happen. I have a few questions please:

  1. Would liquidation be enabled for the contracts where the underlying and the synth are in the same currency? Like the case of sBTC/renBTC?
  2. Would negative interest rates be possible?
  3. I am assuming interest rates configurable via SCCP? Or is there an interest rate model being proposed as well?
  4. Is there an liquidation open period for these, like the existing V2 contracts, or are these open-ended?
  5. One issue I noticed in the current on-going iteration, is that small loans didn’t make sense to be liquidated when they fell below the requisite c-ratio. Are there plans to introduce some kind of gas rebate, when loans being liquidated are below a certain amount threshold?

Thank a lot, looking forward to seeing this SIP happen.

Hi @KALEB,

  1. Yes liquidations will be possible on loans such as sETH/ETH and sBTC/renBTC. Since these loans accrue interest, it is possible for them to become under-collateralised.

  2. The current implementation does not support negative interest rates. Incentivising positions that reduce skew will be addressed in the upcoming multi collateral short SIP.

  3. So the model is i = mU + b, where U is the debt ratio, b is the collateral base rate and m is a scaling factor. Both m and b are configurable via SCCP. I’ll update the SIP to make this more explicit.

  4. Liquidation will be possible whenever a loan’s c ratio falls below the minimum required by the collateral.

  5. We haven’t considered this yet but I will look into it and get back to you.

Thanks,
Mike

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Thank you for those answers, understood them fully :rocket:

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@mjs12
One thing that is troubling me a bit about this SIP, in the sense that I’m worried about the incentives not being right to promote prompt liquidation, is that if you have debt in sBTC/sETH/sXRP… at one point in time… the most available asset with low slippage is sUSD, so the liquidator needs to get that, swap it on the exchange to the synth that should be liquidated (incur the fee) wait out the recl. period and then maybe someone doesn’t beat him to it… Which is kind of not worth the risk maybe (since he might need to revert back to sUSD, in case it doesn’t work out)… Are there plans to allow for liquidation in all of these in sUSD primarily? So you can liquidate directly in sUSD at the relevant exchange rate for any loan? Or maybe some other resolution to this…

@KALEB

Good point. I agree that allowing direct sUSD liquidations on loans of any currency would be the optimal UX for the liquidator.

For the initial release, we’ll only have sUSD, sBTC and sETH. The sUSD loans are fine obviously and for sBTC/sETH they wont realistically be eligible for liquidation for a long time, since the only thing that will put them under is interest.

This is something we will definitely look at working in as we add more synths.

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I was thinking that integration with vSynth would work great for this kind of process. So you can liquidate in sUSD, but you still need to pay fees + you might get reclaimed (it’s a good use case). Although the downside of this, that the barriers in liquidation will be slightly higher. Meaning it would take a bit more profit to incentivize someone to pull the trigger, but I feel it’s acceptable.

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