**Ongoing costs for the running of high performance, scalable, and reliable public infrastructure for Interlay’s Kintsugi Network.**

OnFinality has been running API service resources for Interlay since the 1st of September 2021 - this proposal covers this period from the 1st/September 2021 to 31st/March 2022. Over this period we served a total of 514,371,649 responses through our API service and over 3 TB of data egress. Our highest day saw over 14 million responses in a single 24 hour period and at the end of the period the 7 day average is 8,955,955 responses.

[You can read the full proposal here](https://docs.google.com/document/d/1QIAb5yD2q1aW4iMyPSufCL1SxtXuIL4I4FpP7hlpEOI/edit?usp=sharing)

OnFinality - High Performance Public Infrastructure (Q3, 2021 - Q1, 2022)

### Summary

A new type of vault can be activated using KINT as collateral. More details below. 

### Proposal

Currently only KSM is accepted as collateral for vaults. One of the main goals for kBTC stability is to diversify the number of tokens that can be used as collateral. This has also been requested by current kBTC vault operators. 

The next asset suggested as collateral is the KINT governance token. It is the quickest to enable and has also been one of the main requests from active vaults. 

Please find below the parameter configuration proposed for the “KINT vaults”:
- **Initial collateral ceiling:** 1 million USD equivalent
- **Secure collateral threshold:** 700%
- **Premium redeem threshold:** 600%
- **Liquidation threshold:** 500%

For context, we run modelling and simulations for every new collateral type. We used the same methodology for KINT as for modelling KSM collateralization thresholds. The threshold numbers are higher for KINT due to the following factors:
- Lower liquidity compared to KSM and other assets/tokens
- Low correlation with BTC
- Not enough historical data that the models can use.


We will of course review the threshold levels once more data is available - and invite other teams/community members to contribute to the risk assessment. In particular, we need more data on how arbitrage bots will impact liquidations. Once we see arbitrageurs being effective in preserving system-wide overcollateralization, the argument for safely lowering thresholds would be very strong.

The next step is hence to activate this vault type with the above parameters via an on-chain governance proposal. 

**NOTE:** *In light of the current situation (high demand for kBTC, not enough collateral to mint), we would like to unblock vaults and users as fast as possible so that new kBTC can be issued. Hence we also would like to fast track the on-chain proposal if the community is not strongly against the vault type.* 

**Fellow Kintsugi innovators - as always, we appreciate your time reviewing this proposal and welcome comments and feedback.**
Please be aware that this is only a discussion post and a formal on-chain proposal will follow.  

We have also set up an optional off-chain poll here: https://voting.opensquare.io/space/kintsugi/proposal/QmcgAVvCMTyz5sWm1jzBCoBaUkV67GbxZBQLJSuLFg3yxP

### Resources

- kBTC Collateral Analysis For KSM: https://medium.com/interlay/kbtc-collateral-analysis-ksm-f481f66f8a5e
- Kintsugi Governance 101: https://docs.interlay.io/#/kintsugi/governance 
- Governance guides: https://docs.interlay.io/#/guides/governance (incl. how to make a proposal)
- Kintsugi tokenomics: https://docs.interlay.io/#/kintsugi/tokenomics
- Python code used for analysis of new assets proposed as vault collateral: https://github.com/interlay/collateralization-analysis 
