Collateral Reserve: Foundry Sustainability Upgrade
A key long-term success factor of the Iron Finance ecosystem is to establish a fine balance between income (revenues, fees, deposits) and outflows (dividends, distributions). To make another positive step in that direction, we introduce the Collateral Reserve. The highlight positive sustainability implication of the Collateral Reserve is that no more idle collaterals will be drained from the Minting pool. In other words, only profit-making income streams will now serve as the main source for dividend distributions to the Foundry.
Collateral Reserve income streams
The Collateral Reserve will hold funds coming from several income streams:
- Diamond Hand: 10% of DND supply (1,000 DND in total) will be distributed to the Collateral Reserve by exchanging DND for BUSD collateral. This upgrade does not have any effect on DND tokenomics or the Diamond Hand product in general but simply improved the flow of collateral funds. For detailed information on DND tokenomics, please refer to this article.
- Investment Vaults profits: as per our recently published roadmap, Iron Finance investment vaults will go live on 17th April. All realized returns profits resulting from investing will flow in the Collateral Reserve.
- In brief, product development, new features and other use cases.
New Foundry Utilization Rate definition
It is important to note that the definition of the Utilization Rate has changed with this upgrade.
Up until now, the Utilization Rate, described as the percentage of excess collateral in the Minting pool distributed to the Foundry each epoch, was set to 0.3%. The new Utilization Rate represents the percentage of funds in the Collateral Reserve distributed to the Foundry each epoch. As seen in the screenshot above, the new Utilization Rate is set at 16% and will be fine-tuned to maintain a healthy level of distribution and Foundry APR. It will depend on many factors, most importantly on investment vaults returns performance, Diamond Hand inflow and profit from some other upcoming income initiatives which we have not yet announced.
By the way, the Collateral Reserve and Foundry upgrades are already live ;)
PS: Our docs will be updated shortly to reflect these changes.
Diamond Hand: https://diamondhand.fi/
Diamond Hand docs: https://docs.diamondhand.fi/