Enable A New Vault Type With USDC As Collateral

Summary

A new type of vault can be activated using USDC via Moonriver (xcUSDC) 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 after KINT suggested as collateral is a USD stablecoin - more specifically USDC. It is the stablecoin that we can enable the fastest which also has considerable liquidity on Moonriver (around $4.5 million) and has been requested by the currently active vaults.

USDC can be imported from Moonriver via XCM - which in turn imports USDC from Ethereum via the Multichain bridge (formerly AnySwap). Note: once a native (i.e., directly minted on Kusama) USDC deployment is available, it would be best to switch to that.

Please find below the parameter configuration proposed for the “USDC vaults”:

• Initial collateral ceiling: 1 million USD equivalent
• Secure collateral threshold: 160%
• Premium redeem threshold: 140%
• Liquidation threshold: 120%

For context, we run modelling and simulations for every new collateral type as well as many other references and points of comparison before we conclude on the collateral rates.

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, 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/QmWYCMNbeMrdujZZx19qN8t6re2NSDkeSE1JjUoAA4EZWB

Resources

• 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