Project and Token Overview
SUNDAE is the native utility and governance token of SundaeSwap, a decentralized exchange (DEX) on the Cardano blockchain. SundaeSwap enables users to trade assets, provide liquidity, and participate in the governance of the platform, making it one of the most prominent DEXs in the Cardano ecosystem.
SundaeSwap aims to create a decentralized, community-driven exchange that offers fair, open access to financial services. The SUNDAE token plays a crucial role in this vision, allowing holders to vote on governance proposals and earn rewards by providing liquidity.
The SUNDAE token has shown significant market activity, with trading volumes increasing steadily as the platform has grown. Over the last 90 days, SUNDAE has achieved an average daily trading volume of $1.2 million, with peaks reaching $3 million on certain days. These figures underscore the liquidity and demand for SUNDAE within the Cardano ecosystem.
SUNDAE Market Reasoning
SUNDAE is widely traded across various Cardano DEXs and has a strong presence on both centralized and decentralized platforms. The token benefits from robust liquidity, supported by active market makers who facilitate arbitrage between these platforms. This liquidity profile suggests that, in the event of a liquidation scenario involving SUNDAE, liquidators would likely encounter minimal slippage, ensuring a smooth process.
Given these factors, we propose adding SUNDAE as an eligible collateral asset on Liqwid. The introduction of SUNDAE as collateral will provide additional opportunities for users to leverage their holdings, enhancing the overall utility of both the token and the Liqwid platform.
Suggested SUNDAE Market Parameters
The proposed interest rate parameters for the SUNDAE market will be aligned with those of the ADA market, ensuring consistency and stability. The following parameters are recommended:
RateBase: 3.00%
RateNormal: 40.00%
RateJump: 600.00%
Kink: 65.00%
Income Factor: 80% of the interest paid by borrowers will be distributed to suppliers, identical to the ADA and stablecoin markets. The remaining 20% will be allocated as follows:
Reserve Factor: 0%
DAO Factor: 10.00%
LQ Stakers: 10.00%
Proposed SUNDAE Risk Parameters:
Collateral Factor (maxLTV): 60%
Liquidation Threshold: 65%
Liquidation Penalty: 15%
Supply Cap: $5 million
Borrow Cap: 50% of total SUNDAE supplied
SUNDAE will be supported as isolated collateral in the ADA market, allowing for controlled risk exposure.
Risk Considerations
Asset Evaluation Using the Risk Framework Quantitative Criteria
Volume: The average 24-hour trading volume for SUNDAE over the past 90 days is approximately $1.2 million. Over the last 365 days, this average is $1.5 million. Based on Liqwid’s scoring model, this positions SUNDAE in Tier 2, which corresponds to a score of 0.7 for this criterion. The lower volume over the past 90 days is reflective of market-wide decreases in trading activity, but it remains robust, showing strong liquidity.
Volatility: The standard deviation of daily price returns for SUNDAE over the last 90 days is 4.8%, while over the last 365 days, it is 5.1%. This positions SUNDAE in Tier 2 for volatility, reflecting moderate price fluctuations relative to other assets.
Maximum Drawdown: SUNDAE experienced a maximum intraday price change of -22% over the last 365 days, placing it in Tier 2. This indicates that while SUNDAE has faced significant downward pressure at times, it has remained within acceptable risk boundaries.
Primary Score Calculation:
The primary score for SUNDAE is calculated by averaging the lowest values of the volume, volatility, and maximum drawdown criteria over the 90/365 day periods. Given the data, the calculated primary score for SUNDAE is 0.7.
While SUNDAE is an established token within the Cardano ecosystem, the project and its token still carry inherent risks typical of DeFi projects. These include potential market volatility and liquidity fluctuations. The conservative collateral factor and liquidation parameters reflect a cautious approach to mitigating these risks while allowing users to utilize SUNDAE as collateral in a secure manner.
Specifications
Following the approval of this proposal, the team will undertake the necessary technical preparations, including:
Configuring the SUNDAE oracle price feed: This will ensure accurate and reliable pricing data for the SUNDAE token on Liqwid
Implementing risk parameters: The proposed collateral factors, supply and borrow caps, and interest rates will be configured.
Conclusion
The Cardano community recommends adopting this proposal to add SUNDAE as a collateral token on Liqwid with the proposed market and risk parameters. This addition will enhance the platform’s offerings and provide users with new opportunities to leverage their SUNDAE holdings, while maintaining a prudent risk management approach.
Support adding Sundae token as collateral on Liqwid?
- Yes
- No