MEV on Kintsugi

MultiChain

RPC nodes connect to networks like Interlay and Kintsugi. Providers like OnFinality and Dwellir offer these services. It's good to have two providers for backup. 
Kintsugi/Interlay Labs are not invoiced against the treasury. 
OnFinality charges the Kintsugi treasury for RPC node provision. 
Dwellir has set up nodes but is not charging the treasury yet. 
OnFinality and Dwellir have shared their proposals for future pricing. 
You can share your opinion in the poll and leave comments.

Future of RPC node providers

Kintsugi is a blockchain ecosystem that needs more collateral to grow. The limited supply of collateral is preventing the growth of the ecosystem. The current collateral options have high opportunity costs for vault operators. 

To solve this problem, yield-generating tokens from other products can be used as collateral for the bridge. 

In the short term, the ceiling for LKSM can be increased, vKSM and qToken can be added as collateral. 

In the mid-term, LP tokens can be added as collateral. 

In the long term, any yield-generating tokens can be used as collateral. 

There are additional risks for the vaults and the protocol, such as protocol risk, depeg risk, and liquidity risk.

Improve bridge capacity and efficiency

Interlay is launching a DEX and lending protocol for Bitcoin DeFi on Kintsugi. The DEX will have 6 pools with key assets like kBTC, KSM, and USDT. The lending markets will use secure and liquid assets like kBTC, KSM, and USDT. The community is considering allocating treasury funding towards liquidity programs to achieve deep liquidity for those assets. The max loan-to-value ratio enforces the maximum borrowable amount against a user's collateral. The interest rate parameters at launch will maintain a utilization close to the optimal rate of 90%.

Recommendations for Kintsugi's DeFi-Hub Launch

- Bifrost is proposing to use treasury funds to incentivize a kBTC/KSM pool on Zenlink.
- The proposal aims to increase exposure of kBTC on Bifrost and Zenlink and facilitate profitable liquidation for kBTC vaults.
- The launch of Kintsugi 2.0 will introduce more opportunities for cross chain activities, and a kBTC/KSM pool on Zenlink is one gateway to introduce more use cases and liquidity.
- The proposal suggests providing incentives for 2 months to attract necessary liquidity and ensure effective pool operation.
- The transfer of 3000 KINT tokens from the Kintsugi Treasury to Bifrost's designated wallet address will be used as incentives for the kBTC/KSM pool.

Use Treasury Funds To Incentivise kBTC/KSM pool on Zenlink (Bifrost)

- Interlay is making changes to their Kintsugi collators system to make it fully decentralized.
- Anyone will be able to become a collator by locking a certain amount of KINT and registering.
- The two parameters that need to be set are CandidacyBond and DesiredCandidates.
- There is currently no established incentive program for collators, but they will collect transaction fees from the blocks they produce.
- Interlay welcomes suggestions for how to reward collators in the future and is asking for support and input on setting the values for the two parameters.

Expanding Kintsugi Collators

- Kintsugi has yearly rewards for vaults and staking.
- The scheduled distribution of yearly rewards needs to be adjusted due to changes in runtime indices.
- The current out of date call will fail because it relies on the runtime indices.
- To fix this, a proposal needs to be made that clears storage and re-proposes all rewards from year 2 to year 4.
- Anyone can submit this proposal by following the recommended steps provided in the post.

Call for Proposal: Fix Vault & Staking Reward Distribution After Runtime Upgrade

Burning kBTC for 0 KSM

Kintsugi is a platform that uses KBTC as collateral, but they want to add KINT and USDC support. However, there has been a setback with USDC vaults because they cannot use Moonriver ERC20 tokens with XCM. They are reviewing alternatives, including using USDT via Statemine, aUSD via Karura, or other stables via Wormhole via Karura. Each option has its pros and cons, such as liquidity and centralized bridge risk. They need to decide what to do first and would like to hear thoughts and input before putting it up for a vote.

USD-pegged Vaults: Setbacks and Next Steps

Merge iBTC vs kBTC

SubSquare recently had an issue with their decentralized bridge where users burned kBTC for collateral of a Vault but did not receive any KSM in return. This happened because of an error in a migration that caused an imbalance of kBTC. The UI showed that 0 KSM would be returned, but two users still burned their kBTC and received 0 KSM in return. One user made a profit overall, so no refund is advised. However, the other user burned kBTC without receiving anything in return, so the community is encouraged to open a treasury proposal to reimburse them. A post-mortem was conducted, and it was found that there were bugs in the code that caused the cancel_redeem function to take the wrong code path, resulting in the user not receiving any funds. Additionally, there was a bug that caused some collateral to remain in the liquidation Vault. To restore the system to a valid state, they fixed the reward calculation for liquidation_redeem and wrote a storage migration. However, the storage migration failed to run, causing the liquidation Vault to contain 0.06 KBTC but no collateral.

Next Steps: Burning kBTC for 0 KSM

- A new type of vault can be used to create kBTC.
- Currently, only KSM can be used as collateral for vaults.
- The new vault will use KINT governance token as collateral.
- The proposed parameter configuration for the KINT vaults is shared in the post.
- The next step is to activate this vault type via an on-chain governance proposal.

Enable A New Vault Type With KINT As Collateral

- A new type of vault can be activated using USDC via Moonriver as collateral.
- Currently, only KSM is accepted as collateral for vaults.
- USDC can be imported from Moonriver via XCM and has considerable liquidity.
- The proposed parameter configuration for the "USDC vaults" includes an initial collateral ceiling of 1 million USD equivalent and liquidation threshold of 120%.
- The next step is to activate this vault type with the proposed parameters via an on-chain governance proposal.

Enable A New Vault Type With USDC As Collateral

Increase MinimumDeposit to prevent spam

- Kintsugi is a network that uses Vaults to ensure BTC remains locked on Bitcoin while kBTC exists.
- Vaults lock collateral to prevent misbehavior and take up liquidation risk.
- Vaults receive KINT as reimbursement for their risk and to protect themselves against hostile governance takeovers.
- The parachain is ready to start kBTC minting, and the next step is to activate Vault rewards via an on-chain governance proposal.
- Anyone can become a Vault, and rewards are distributed based on each Vault's share of the total BTC locked.

Vault rewards can be activated

- Kintsugi and Interlay are networks that are controlled by community governance.
- Token holders can vote on what happens with the networks by staking their tokens.
- The more and the longer you lock tokens, the more voting power you have.
- vKINT and vINTR represent your voting power and are not transferable.
- You can make a proposal and vote using the SubSquare platform.

Governance FAQ and Guides

- Kintsugi is a platform that requires users to stake KINT to participate in voting.
- Staking rewards are ready to be activated, which means users can earn more voting power by staking more KINT.
- Rewards are distributed based on voting power, which is measured by vKINT.
- Staking is already available on the Kintsugi Dapp, and the next step is to activate rewards via an on-chain governance proposal.
- Users can learn more about Kintsugi's governance model and tokenomics through the provided resources.

Discussions