This is a proposal for creating a new liquidity market to support AGIX token for lending and borrowing on the Liqwid protocol.
Project and Token Overview
AGIX is a Cardano native token focusing about artificial intelligence. (More information in https://singularitynet.io/).
SingularityNET is an AI marketplace designed to allow anyone to “build, share, and monetise” Artificial Intelligence services. It is designed to connect and repurpose existing AI tools to suit the purchasers’ needs. These tools can be shared, bought and sold on SingularityNET’s decentralised marketplace.
According to the team: “Off-the-shelf AI generally isn’t fit for purpose, and only tech giants can hire teams of engineers to customise the software. SingularityNET is building an automated process that allows any business to connect existing AI tools to build the solution it needs.”
After ADA token, the AGIX is the most Cardano native traded tokens across all CEX and DEX platform.
The token price has seen a really big increase of volume and valuation over the 90 days, which led to a total average volume of $ 47 millions, with 2 all-time-high trading days of $123M and $ 86M on July 14-15 2023.(see https://www.coingecko.com/en/coins/singularitynet/historical_data)
AGIX Market Reasoning
The AGIX token is listed on many CEX/DEX, and many external parties are performing the arbitrages between these platforms. This means that if the AGIX tokens would be sold on a DEX, as part of a liquidation process following a defaulting loan where AGIX is the collateral, we are confident that liquidators would find enough liquidity and that the slippage would be low because of these arbitrageurs.
Therefore, we propose to add the AGIX token as eligible collateral on Liqwid.
Risk Considerations
Despite being one of the oldest Cardano tokens (launched on January 2018), the project has not yet fully deployed its smart contract platform for artificial intelligence purposes.
The project has many promises (Ecosystem - SingularityNET) but is still in its infancy, which led to a conservative approach regarding its maximum authorized collateral factor.
Suggested AGIX Market Parameters
Usually, the USD risk-free rate (US T-Bills 1Month) was considered as the benchmark, and every risky asset was priced with a risk premium added on top of this rate, which was historically around 2%. Following the 2008 crisis and the negative interest rates that came with that, the market has now adjusted and asks currently above 5% for 1-Month US T-bills.
To reflect this change, we are now updating the rates for the Liqwid market, starting with AGIX. The proposed AGIX interest rate algorithm parameters is starting with a base rate of 4% instead of the usual 2% for the other current Liqwid markets.
Interest rate market parameters:
- RateBase: 4.00%
- RateNormal: 25.00%
- RateJump: 600.00%
- Kink: 65.00%
Income Factor: 20.00% (80% of the interests paid by the borrowers are given to the suppliers). The remaining part is split as following:
- Reserve Factor: 5.00%
- DAO Factor: 5.00%
- LQ stakers: 10.00%
The proposed AGIX risk parameters are:
- Collateral factor (maxLTV): 37.5%
- Liquidation threshold: 40%
- Liquidation discount: 10%
Specifications
The Liqwid Labs developers have already completed the technical requirements to list any tokens. Following this temperature check, the team will work on AGIX preparation work including: 1) testing the proposed interest rate model, 2) completing the off-chain updates to support multiple collateral asset loans and 3) configuring the oracle price feed.
Conclusion
The Core Team recommends the adoption of this proposal and to add AGIX as a token for lending and borrowing on Liqwid with the proposed market parameters.
Could we enable a poll for this, as for the other proposals?