The first iteration of Ether collateral allowed borrowers to lock their ETH to borrow sETH. This SIP proposes to introduce borrowing and issuing sUSD against ether collateral (Multi Collateral Synths). This solution allows the synth sUSD supply to grow to meet demand and introduces leverage opportunity and liquidations. The result is a system that augments the Synth supply, enables easier and more efficient access to sX and does not dilute SNX value capture.
\nEther collateral v0.3 will allow Ether to be locked to mint sUSD. This sUSD debt will be backed by the Ether locked and over-collateralised up to 150%. This allows the supply of synths to be more flexible to meet demand for sUSD, keeping the sUSD peg closer to $1, and the ability for borrowing interest fees to be paid to SNX stakers.
\nThere are interest fees associated with opening an ETH backed sUSD loan, an interest rate (APR) calculated per second based on the block timestamp is calculated on the sUSD amount borrowed. The interest charged (sUSD) on the loan will be paid to SNX Minters into the fee pool when the loan is repaid.
\nThe ETH collateral backing the sUSD loan will be open for liquidations when the collateral value is 150% or less. There will be a liquidation penalty for liquidated loans paid to liquidators.
\nInitially there will be a supply cap / ceiling of 10m sUSD that can be issued and can be increased via governance and is based on the sUSD peg being maintained.
\nThe addition of Ether collateral sUSD loans extends the original Ether collateral trial to allow borrowers to issue sUSD and leverage against their ETH. The demand on sUSD synths in the Curve sUSD pool and other yield farming opportunities has seen a premium of 2-5% for sUSD ($1.02-1.05) above the peg over a number of weeks.
\nThe Synthetix protocol voted to reduce the SNX issuance ratio from 750% to 600% to increase the supply of synths to alleviate the peg deviation but has had limited impact on the $40m+ shortfall compared to the USDC / USDT pools in the curve pool which causes sUSD to be exchanged at a premium.
\nBorrowing sUSD against ETH collateral will allow the synth supply to grow by issuing more sUSD supply to meet the demand for sUSD. Having sUSD at a 2-5% premium affects the stability of the base asset for Synthetix Exchange, affecting traders who wish to exchange synths and also over-values other synths that are denominated in sUSD.
\nThe interest rate charged on the sUSD borrowed will be payable to SNX holders into the fee pool which ensures that SNX holders benefit from the growth in sUSD borrowed against ETH.
\nLoans will be open for liquidations when the ETH value (collateral ratio) backing the loan drops below the liqudation ratio. The default liquidation ratio will be at 150%. The ETH price will be read from the ExchangeRates contract which is using the Chainlink ETH-USD oracle.
The Collateral ratio of a loan can be calculated as: ETH-USD value * ETH locked as collateral / sUSD loan value + interest fees accrued.
When loans are liquidated they will incur a liquidation penalty taken out of the remaining ETH collateral.
\nThe rationale of implementing sUSD borrowing using ETH as collateral allows Synthetix to increase the supply of sUSD synths.
\nUpdating the existing Ether Collateral trial to issue sUSD allows borrowers to leverage their ETH for sUSD while maintaining price exposure to ETH. As the loan is denominated in sUSD instead of sETH, it is necessary to introduce a liquidation mechanism for loans that fall below the liquidation ratio determined by the ETH-USD value of the collateral. For example, a loan with a 150% liquidation ratio will require a minimum of $1.50 of collateral value for every $1 of sUSD borrowed.
\nThe liquidation mechanism ensures that the issued sUSD is always fully backed by ETH collateral and can be redeemed for ETH.
\nLiquidators can liquidate a loan when the collateral value drops below the liquidation ratio. The default liquidation ratio for ETH collateral is 150%.
\nThe liquidation penalty is payable to liquidators out of the collateral value. For example, when a loan of $1000 is liquidated, the liquidator will recieve $1000 * 1.10 = $1100 worth of the underlying collateral.
The remaining collateral can be withdrawn by the loan creator after the loan has been liquidated.
\nsUSD loans that fall below the liquidation ratio can be partially liquidated to fix the collateral ratio. The liquidation penalty (default 10%) will be paid out of the remaining ETH collateral to the liquidator who repays the sUSD.
The amount of sUSD loan that can be liquidated will be capped to the loan value that needs to be liquidated plus the liquidation penalty to restore the collateral value back to or above the liquidation ratio.
The amount of sUSD that can be liquidated to fix a loan is calculated based on the formula:
\n\\[\nS = \\frac{t * D - V}{t - (1 + P)}\n\\]
\nThe loan's collateralAmount and loanAmount will be updated after a partial liquidation to reflect the remaining collateral amount and loan amount that is outstanding.
multiCollateralSynth required)openLoan(uint256 _loanAmount) external payable function // Synth loan storage struct\n struct SynthLoanStruct {\n // Acccount that created the loan\n address account;\n // Amount (in collateral token ) that they deposited\n uint256 collateralAmount;\n // Amount (in synths) that they issued to borrow\n uint256 loanAmount;\n // When the loan was created\n uint256 timeCreated;\n // ID for the loan\n uint256 loanID;\n // When the loan was paidback (closed)\n uint256 timeClosed;\n // Applicable Interest rate\n uint256 loanInterestRate;\n // last timestamp interest amounts accrued\n uint40 lastInterestAccrued;\n }\nfunction depositCollateral(address account, uint256 loanID) payable functionfunction withdrawCollateral(uint256 loanID, uint256 withdrawAmount) payable functionrepayLoan(address loanCreator, uint256 loanID, uint256 amount) payable functionCloseLoan() functionliquidateLoan(loanCreatorsAddress, loanID, debtToCover) functiontotalIssuedSynths() - EtherCollateral.totalIssuedSynths() - EtherCollateralsUSD.totalIssuedSynths().FeePool.recordFeePaid(amount) external function to record fees to distribute for the open fee period.FeePool.recordFeePaid(amount)Test cases for an implementation are mandatory for SIPs but can be included with the implementation.
\nPlease list all values configurable via SCCP under this implements
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