A thread 🧵 on @mars_protocol 🔴 and why it could be the biggest interstellar value unlocker for the wider crypto landscape and a 💎 for Terra
$mars $luna
$mars $luna
Mars is a broader and more comprehensive companion to @anchor_protocol. While Anchor is limited to pos assets(yield generating) to ensure the sole focus of a fixed ~20% yield on deposits, Mars is more extensive in its offerings.
If you don't know how anchor works, I suggest this excellent thread by @FloodCapital
https://twitter.com/FloodCapital/status/1390386887592919046?s=20
@mars_protocol is analogous to @AaveAave and @compoundfinance where any asset can be listed, and the interest rate depends on the money market's utilization rate. But there are a few key differences...
- Offers uncollateralized lending (similar to credit in tradefi)
- First-ever dynamic interest rate model where rates evolve in real-time based on market conditions
- Incentivized and liable governance
- First-ever dynamic interest rate model where rates evolve in real-time based on market conditions
- Incentivized and liable governance
1. Uncollateralized Lending
Presently you can borrow only if you deposit with them.
"This is equivalent to saying, Airbnb only lets hosts stay in each other's houses."- @ZeMariaMacedo on @TerraBitesPod
To borrow, you need skin in the game. Mars changes it...
Presently you can borrow only if you deposit with them.
"This is equivalent to saying, Airbnb only lets hosts stay in each other's houses."- @ZeMariaMacedo on @TerraBitesPod
To borrow, you need skin in the game. Mars changes it...
Mars offers uncollateralized loans to SMART CONTRACTS.
Smart contracts are lines of codes. It can be verified, evaluated, audited, and determined whether risky or not, all without trust.
Smart contracts are lines of codes. It can be verified, evaluated, audited, and determined whether risky or not, all without trust.
Take a look till 7/ where @cptn3m0x explains it with an example.
p.s: I'm an admirer of his incredible work! Give him a follow if you haven't. And don't forget to come back here, I ain't finished...
p.s: I'm an admirer of his incredible work! Give him a follow if you haven't. And don't forget to come back here, I ain't finished...
https://twitter.com/cptn3m0x/status/1434183263631728642?s=20
Evaluating the risk of a smart contract requires a meticulous framework.
I'll be briefing the Mars Protocol’s Risk Framework
mars-protocol.medium.com/introducing-ma…
I'll be briefing the Mars Protocol’s Risk Framework
mars-protocol.medium.com/introducing-ma…
For an asset to be included in Mars, we first need to assess its risk.
The risk is defined into 3 categories and a score is assigned for each.
The risk is defined into 3 categories and a score is assigned for each.
Category 1/ Market risk - Liquidity and volatility of the asset
A score will be set accordingly
A score will be set accordingly
After determining the score for each variable, a final numeric score per category is computed. This score will be the average score of each of the category’s variables, according to the following table:
For eg: Asset X scores the following
- Max drawdown: C
- Volatility: B
- Avg 24hr vol: B
- worst 7d vol: B
Then, the final score would be: 0.4+0.7+0.7+0.7/4 = 0.6
- Max drawdown: C
- Volatility: B
- Avg 24hr vol: B
- worst 7d vol: B
Then, the final score would be: 0.4+0.7+0.7+0.7/4 = 0.6
Category 2/
Smart Contract (SC) Risk - Measures the riskiness at the technical layer
Honey pot: daily sum of the project’s TVL since launch. For standardization, the value is divided by 365B (1B per day for 365 days) to arrive at the Honey Pot coefficient
Smart Contract (SC) Risk - Measures the riskiness at the technical layer
Honey pot: daily sum of the project’s TVL since launch. For standardization, the value is divided by 365B (1B per day for 365 days) to arrive at the Honey Pot coefficient
Category 3/
Counterparty(CP) Risk: Measures the centralization risk of the asset.
After assessing the risk of an asset using the scoring methodology, the protocols risk parameters need to be set.
Counterparty(CP) Risk: Measures the centralization risk of the asset.
After assessing the risk of an asset using the scoring methodology, the protocols risk parameters need to be set.
Risk Parameters/
While all 3 categories are relevant, different weights are assigned depending on the parameter.
There are 7 risk parameters. I'll briefly mention them but for calculations, refer to the medium article of mars
While all 3 categories are relevant, different weights are assigned depending on the parameter.
There are 7 risk parameters. I'll briefly mention them but for calculations, refer to the medium article of mars
1. Loan-to-Value (LTV): Determines the maximum amount a user can borrow with certain collateral. If one has a collateral of $1000 and he borrows $500 worth of $mir, then he has an LTV of 50%. If the value of mir increases by $300, then the total borrowed becomes $800...
Now the LTV is 80% and there's a high risk for collateral to get liquidated.
2. Liquidation Threshold: The level at which a loan is considered undercollateralized and can be liquidated. The liquidation threshold will always be higher than the LTV for every asset, for safety
2. Liquidation Threshold: The level at which a loan is considered undercollateralized and can be liquidated. The liquidation threshold will always be higher than the LTV for every asset, for safety
3. Liquidation Bonus: The bonus a liquidator receives from the liquidated collateral.
4. Optimal utilization: The optimal ratio of borrowed vs. deposited assets in a given money market
4. Optimal utilization: The optimal ratio of borrowed vs. deposited assets in a given money market
5. Exposure Limit: Mars will set a deposit limit to assets with a certain risk level to minimize exposure. When limit is hit, its LTV becomes 0.
6. Collateral (Binary): Determines whether asset can be collateral. Maybe allowed to be deposited or borrowed, but not as collateral
6. Collateral (Binary): Determines whether asset can be collateral. Maybe allowed to be deposited or borrowed, but not as collateral
7. Kp (controller proportional term): Defines how quickly the interest rate reacts to changes in utilization.
Currently, interest rates vary according to the util ratio that is fixed.
In Mars, util is a dynamic parameter that can be adjusted by another parameter, thus making it reactive to external conditions.
mars-protocol.medium.com/exploring-mars…
In Mars, util is a dynamic parameter that can be adjusted by another parameter, thus making it reactive to external conditions.
mars-protocol.medium.com/exploring-mars…
It can be compared to the cruise control on a car. Maintaining a fixed speed is simple on a flat surface. But as soon as you hit a hill, the car’s computer must adapt to changes in gravity.
For Mars, this is essential for providing sustainable uncollateralized loans
For Mars, this is essential for providing sustainable uncollateralized loans
Incentivized and liable governance
@cptn3m0x has again explained it coherently. Read till 10/
@cptn3m0x has again explained it coherently. Read till 10/
https://twitter.com/cptn3m0x/status/1434183272120999943?s=20
I'm excited for Mars and you should be too.
Listing out my favs
@Josephliow @danku_r @tlagomi @crypto_inquisit @The_Babylonians @cptn3m0x @THORmaximalist @larry0x @WestieCapital @NicolasFlamelX @terra_money @JC_DeFi @derrybrown
Listing out my favs
@Josephliow @danku_r @tlagomi @crypto_inquisit @The_Babylonians @cptn3m0x @THORmaximalist @larry0x @WestieCapital @NicolasFlamelX @terra_money @JC_DeFi @derrybrown
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