TechFlow news: Abracadabra, the issuer of algorithmic stablecoin MIM, has released a new proposal in its community to adjust interest rates for CRV cauldrons.
The proposal suggests applying collateral-based interest rates to two CRV cauldrons due to the protocol's significant exposure to CRV risk. This means the interest rate on CRV collateral will include a base rate determined by the total outstanding principal across both CRV cauldrons. The effective interest rate will be calculated from this base rate and an interest multiplier, which depends on the cauldron's collateralization ratio.
If approved, all interest will be deducted directly from the collateral within the cauldrons and immediately transferred to the protocol’s treasury to increase the DAO's reserve factor. Once in the treasury, the collateral can be converted into MIM either via on-chain trades or through one of Abracadabra’s off-chain partners.
Under current conditions, with $18 million in outstanding principal, the base rate is set at 200%. At this rate, loans would be fully repaid within six months. As principal is repaid, the base rate will decrease accordingly.
If the collateralization ratio is 40%, the base rate remains unchanged. However, if the collateralization ratio reaches 45%, the base rate will be multiplied by five. Based on the current outstanding principal, this would result in full repayment within 1.2 months.
