| SIP | Title | Author | Status | Track | Created |
|---|---|---|---|---|---|
61 |
Reduce Zero Origination Fee |
Sacro21 |
Ready for vote |
Parameter |
2024-01-27 |
If approved, this proposal will reduce ZUSD origination fee floor in the Sovryn Zero protocol from 13% to 8%.
Six months ago, the origination fee floor of Zero Protocol was raised to 99% with SIP-0066. Essentially, Bitocracy paused the minting of ZUSD by setting extremely high fees to maintain the DLLR peg. Two months ago, Zero was "reopened" by setting the origination fee to 13% with SIP-0071. This fee was deliberately set quite high in order to cautiously ramp up the system again and achieve the assumed balance between supply and demand for $DLLR.
Since then several key observations were made: • The total supply of ZUSD decreased from approximately 6.69 million (start SIP-0066) to 4.58 million (start SIP-0071) to 3.85 million (now). • Numbers of LoC’s declined from 150 (start SIP-0066) to 88 (start SIP-0071) to 83 (now). • The total collateral ratio increased from around 372% (SIP-0066) to 530% (SIP-0071) to 604% (now). • From SIP-0066 to SIP-0071 (8/23-12/23), Zero fee revenue was 15k USD. Since SIP-0071 (01/24) (total Zero fee revenue is 34k USD).
Despite reopening Zero, we can still see a decline in the metrics shown above. Large parts of the excess ZUSD supply has been removed. The current 10% interest rate of DLLR lending pool also indicates strong demand. Therefore, we believe it is a good time to make Zero more accessible and to increase protocol revenue. Individual users should make sure they understand the system and specifically, redemptions. If significantly more redemptions occur than expected, Sovryn can also use the increased revenue as a safety mechanism to incentivize the holding of $DLLR via $SOV rewards.
If approved, the origination fee will fluctuate between 8% and 100%. The following change will be made to the Zero Protocol base parameters:
- Updating "BORROWING_FEE_FLOOR" from 13% to 8% by calling `setBorrowingFeeFloor(uint256)` on the `0xf8B04A36c36d5DbD1a9Fe7B74897c609d6A17aa2` contract with the encoded data `0x000000000000000000000000000000000000000000000000011c37937e080000`.
Copyright and related rights waived via CC0.