VIP-034 Revert max APR to the original rate of 80% for Bitcoin and Ethereum market

Proposal ID

Max APR at 80% will attract more users, increase locked Vires revenue and encourage users to pay back their BTC/ETH debt.

Transaction Payload

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  "version": 2,
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      "type": "integer",
      "value": 800
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      "type": "integer",
      "value": 800
  "senderPublicKey": "3gQ8QUfoGQW6YVuhUv3zuqsbmxbV5F2FAuDXJqVKD6C9",
  "fee": 50000000,
  "feeAssetId": "WAVES",
  "timestamp": 1673237000000

I commented on a similar proposal that looked at BTC only and it got defeated. Recapitalizing USDN with BTC and ETH is an excellent idea but offering high yields through Vires Finance does more harm than good. People who had entrusted their USDC/USDT deposits have been coerced to convert them to USDN. Same scenario could pan out with BTC and ETH too. Also the rationale stated above “encourage users to pay back their BTC/ETH debt” does not make sense as those that managed to borrow BTC/ETH using USDN collateral in the past have already left the Vires market with a toxic debt that does not need to be repaid. The theory behind this is called Gresham’s Law and you can read the analysis at this medium article.

Lastly if we’re talking about attracting new BTC and ETH deposits with a high APR, no borrower in their right mind would borrow at this high rate of interest when it can be cheaply borrowed from AAVE’s Polygon or Avalanche Networks.

However new BTC already being supplied to the market.

Hi Michal. Yes indeed new BTC has been deposited by some lenders but my point is this. The borrowing interest rate is too high. This gives a message to the community that, "provide your BTC and we will give you a high APY on deposit interest, yet no one in their right mind will borrow. Lenders will start questioning where the yield will come from. And if for any reason bad collateral (debased USDN/EURN etc) has been used for collateralizing the BTC borrowing position, that will end up in bad debt yet again.

My suggestion is to incentivize BTC and ETH deposits to get added to Neutrino Treasury so as to improve the BR. Vires Finance BTC and ETH depositors should be paid in USDN rather than the native BTC and ETH and it should not be used to lend it to Vires Finance Borrowers.

In this model we should also consider replacing the FCFS method of principal withdrawals. Example. If I lend BTC I should be paid say a reasonable 10-12% APY paid not in BTC but in USDN (which will create an alternative demand model for this ailing stable coin). And I should also be allowed to take my USDN in Legacy Deposits moved and locked to regular supply earning 12% or more interest rather than being locked and paid 3% interest. As long as I keep my BTC deposit in Vires, I should be able to enjoy a higher return. If I want to remove my BTC, then the equivalent amount of USDN in my regular supply could be diverted back to my legacy USDN deposit earning lower interest.

This game theoretical construct is fairer in my opinion and it was summarized in my 3rd Blog Post:

As always, the suppliers are the last ones in Vires.Finance, they can see their money blocked indefinitely, APY locked, lose what they contributed or have it exchanged for bad currency… If you ask to increase the interest limit, for example to avoid blockages or attract more suppliers, they tell you which is not convenient… We should go somewhere else.