Authorize the POL-Loan to borrow any stablecoins

Temperature Check
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Proposal Overview
This proposal seeks to authorize the Protocol-Owned Liquidity (POL) debt to be denominated in stablecoins, replacing the current ADA debt.

Reasoning
The original POL loan was used to borrow ADA to provide liquidity to the Protocol-Owned Liquidity (POL) position in Minswap’s LQ-ADA pool. This created a debt of 1.27M ADA backed by 1.91M LQ.

Following the latest vote on repurposing the POL, a new loan was opened using the LQ removed from the Minswap position after the recent POL vote.

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This proposal aims to borrow stablecoins, swap them for ADA to repay the first loan, and unlock the 1.91M LQ collateral. The result would be a single loan with all the LQ as collateral, with only stablecoins as the debt.

Risk analysis
The loan parameters are the same as voted previously, with the current maxLTV of 70% (refer to Vote 52).

The original vote also authorized the Core Team to add up to 500k LQ if needed to further secure the loan.

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In the event of liquidation risk, the Core Team can also initiate a vote to add additional collateral or use tokens from the treasury to repay the debt / increase the collateral, ensuring immediate response to rapid price swings.

Specifications
Liqwid Labs developers have completed the necessary testing and technical preparations required to implement the loan updates outlined in this proposal.

Conclusion
The Liqwid Core Team supports the proposal to borrow stablecoins for the POL loan, allowing the debt to be swapped from ADA into stablecoins.

Do you support this proposal?

  • Yes, I support this proposal.
  • No, I do not support this proposal.
0 voters
2

We note that the Core Team has converted its debt, previously denominated in ADA, to stablecoins (DJED, USDC, USDT), mitigating the risk of a significantly larger debt in the future.

The Core Team intends to follow the same approach for the POL loan. This proposal has been submitted exactly to authorize borrowing stablecoins, expanding beyond the current option of USDM.

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How team and community, adding to this, think about our POL position to be swapped to stables? Instead of $ada we split LP to LQ/Djed, LQ/USDC and LQ/USDM? We might help stables liquidity in # Cardano and it would benefit us too.

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Splitting the liquidity is likely to increase LQ price volatility due to the reduced liquidity, and it would also require implementing arbitrage mechanisms between the pools. Overall, I don’t see significant benefits for us.

Regarding the POL (Protocol-Owned Liquidity) position, it may make more sense to eventually hold it in an LQ/USDM pairing (further testing of the AMM mechanisms is needed for a more accurate assessment).

Additionally, after swapping the loan for stablecoins, the POL position is currently “Long” ADA with approximately $200k in ADA. In the event of a significant ADA price pump, there could be a favorable opportunity to leverage this. I’ll explore this further in the future.

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