ICE airdrop has been brought up frequently from the community. While it would be ideal if Omm protocol can guarantee 100% ICE airdrop for each ICX deposited, borrowed sICX balance receiving ICE will prevent this as it is not possible to distinguish sICX borrowed from Omm and other sICX.
Unfortunately, there isn’t much guidance on ICE at the moment and the snapshot date hasn’t been announced yet. It may have already happened, may be few weeks later, or few months later. Omm protocol should proactively try to prepare for this unknown ICE airdrop, and the best way to prepare this is to get as much of borrowed sICX back to the protocol.
In order to achieve this, we would like to propose a combination of following three proposals:
1.) Disable sICX borrow (no one will be able to borrow sICX anymore)
2.) Remove OMM rewards for sICX borrow (OMM rewards will be shifted to sICX supply)
3.) Increase sICX borrow rates to 120% fixed interest rates per year
1.) Disable sICX borrow (no one will be able to borrow sICX anymore): it stops people from borrowing more sICX. Once snapshot date is announced, people may take advantage of it and try to borrow sICX from Omm for ICE snapshot, so this change will prevent such outcome.
2.) Remove OMM rewards for sICX borrow (OMM rewards will be shifted to sICX supply): Many people borrow sICX right now to earn OMM. By turning off OMM rewards for sICX borrow, people are discouraged to keep sICX borrow balance
3.) Increase sICX borrow rates to 120% fixed interest rates: this is the most controversial change as users who are borrowing sICX now have to pay very high interest and can potentially be liquidated if not closely monitored. This change would have to be highlighted on frontend once users first come to the website, so they are aware.
Other proposals have been considered, but most of them can be gamed, and a combination of above three proposal seemed most fair. Once this proposal is implemented, [(ICX total supply balance - ICX total borrow balance)/ICX total supply balance * ICX deposited amount] of ICE can be distributed to ICX depositors. As one can see from the equation, ICX total borrow balance getting closer to 0 will lead to 1 ICE per 1 ICX deposit.
Great to see it is actively worked on. I understand the situation and think OMM should do everything it can to get as much out of the ICE airdrop for their users as possible. So i 100% agree with all the proposed measures. I also think you can’t supply and borrow OMM because it’s a way to short the token, for ICX it’s the same.
Guy, will it be possible for the ICE airdrop to be dropped to both supply and borrower? and once ICE is airdropped. These ICE will become both supply and borrowing in the smartcontract. Wont this solutions much better?
I personally like the idea of disabling sICX borrowing and shifting the OMM emissions to supply.
I don’t like the idea of charging someone 120%. It’s just not morally right, especially if the can’t pay it back or get liquidated.
Something more reasonable like 25% (fixed) and removing OMM emissions should incentivise people to pay it back.
As the above can’t guarantee that people will pay it back, the only solution would be to disqualify anyone that has borrowed sICX from the airdrop (this should incentivise them to pay it back).
Just to be clear, the proposal here is to implement all three changes. The primary goal here is to get as much of sICX borrow balance back to the Omm protocol through these measures.
Regarding turning back sICX borrow on, that can be determined again through governance
The issue is that, once snapshot date or period is announced,
people may borrow sICX right before the snapshot date/period
people who deposited ICX may try to withdraw their ICX to get full ICE
people may not be able to withdraw a portion of their ICX because so many sICX is already borrowed
This is not an ideal scenario for ICX depositors and some people have voiced concerns around it. Thus, ideal scenario is to have most of sICX borrow balance returned back to the Omm protocol so that ICX depositors can get close to 1 ICE per 1 ICX deposited and not worry about withdrawing their ICX to get ICE.
This idea was actually brought up on Discord and there were some discussions around it. I actually liked this idea too, but there is an edge case where people may supply stable coin, borrow sICX for ICE snapshot, and pay back sICX/redeem stable coin before ICE is claimable.
For example, User A can deposit 1M IUSDC, borrow 200K sICX for the ICE snapshot. After the snapshot, User A pay back 200K sICX, redeem 1M IUSDC. ICE borrow balance can only show up once ICE are claimable and has certain market value. As a result, User is able to claim 200K ICE for free basically, and Omm protocol is in debt of 200K ICE, which results in ICX depositors getting less ICE.
Unfortunately, there is no way to disqualify anyone that has borrowed sICX from the airdrop. Borrowed sICX is not distinguishable from other sICX in the market. User can borrow sICX and deposit on Balanced for example.
120% is pretty high, but if you think about it, it is around 10% interest you are paying per month to have borrowed sICX borrow balance. People will try to speculate whether it is worthwhile to keep sICX borrow balance for ICE airdrop or pay them back. Those who have sICX borrow balance can now speculate when the ICE airdrop snapshot may happen and whether it is worthwhile to keep paying 10% interests on sICX borrow balance per month given certain market value of ICE. In order to prevent the speculation, borrow interest rates need to be high enough for people to be incentivized to pay back instead of keeping sICX borrow balance to speculate on ICE value.
Regarding liquidation scenarios, let’s assume the most common scenario of supplying ICX and borrowing sICX to earn OMM without much liquidation risks.
Even if they used 76% risk since they are supplying and borrowing same assets, with 120% interest rates per year, it takes close to 3 months of not monitoring one’s assets on Omm to get liquidated. Regardless of liquidations, it is still very high interest rates, and it should be made clear on the frontend.
I agree with the proposed measures. It’s well thought through and even though not perfect it is the best option.
It will be very important to start communication well in advance. Some people might have balanced their position to just mine OMM and therefore might not check in every day. Those people shouldn’t be subjected to taking on debt fast without knowing it.
I would delay phase 3 about 2 or 3 days after implementation of phase 2 (removing OMM rewards).
I disagree with the 120% interest to persuade users to return borrowed sICX. It’s unlikely to be effective in the time span required as a significant number of users may not be closely monitoring the protocol and will likely miss the change causing a much higher risk of liquidation.
I really think we should come up with a solution that doesn’t involve trying to stop people from using the platform.
Thanks for the kind words. It definitely took a lot of time and efforts to come up with the proposals that can not be gamed by users, but can hopefully satisfy users who don’t want to miss out on the ICE airdrop.
I agree that it is important to share these potential updates to the community throughout discussion and voting process so that they are not surprised by the updates.
As mentioned above, actual possibility of liquidation from these changes are on the lower end if you are simply supplying and borrowing ICX. It takes up to 3 months to get liquidated. If the community thinks 120% is too high, lower number can be discussed as well here.
However, a lot of time and thoughts went into coming up with these proposals, so we need you to provide another proposal that can satisfy everyone else if you have one. The discussion has been ongoing for past 1 - 2 weeks on Discord, and we can’t be discussing forever, as that may result in a scenario where some users may not be able to take out their ICX from Omm if too many users start borrowing sICX in preparation of ICE airdrop.
