The Parrot has been overwhelmed by the strong community demand for more PAI. Our community building efforts have brought in many new parrots to join the party, but they’ve been blocked from using our product by the debt ceiling.
Here’s the temporary plan to increase the debt ceiling so new parrots can mint PAI:
- Global debt ceiling raised by $2M
- SOL debt ceiling raised by $1M
- USDC+earn debt ceiling raised by $500k
- MER LP+earn debt ceiling raised by $200k
- SBR LP+earn debt ceiling raised by $200k
- MER LP+earn 2500% collateral ratio.
- SBR LP+earn 2500% collateral ratio.
- All other PAI vaults raised to 1000%
This does not affect existing users. Vaults are SAFU. Stablecoin vaults still do not liquidate. If you have a SOL vault, the liquidation ratio is still 125%, so the liquidation price is exactly the same as before. Repayment to increase the collateral ratio is also the same.
This change means that new parrots coming in are able to mint much less than older parrots. This creates inequality in the Hatchling Incentives Program.
From August 11, 08:00am UTC and onward, the rewards calculation will change: the amount of PRT rewards you receive for minting PAI will be based on the value of your collateral rather than the amount of PAI you’ve minted.
Example: If you are an old parrot who minted $100 PAI from $101 of USDC collateral, you’ll be getting the same rewards as a new parrot who mints $10 PAI from $101 of USDC collateral.
Why a High Collateral Ratio is Necessary (For Now)
The fact of the matter is that PAI’s price relative to USDC is a balancing act. If there is too much PAI going to Saber & Mercurial, the oversupply of PAI causes its price to fall below $1.
The current price for PAI:USDC is 0.9977 (August 11, 2021), which isn’t so bad. If we raise the debt ceiling too much too quickly, however, the price could drop faster as the pool becomes more imbalanced.
One major factor that causes the imbalance is that the hatchling incentives had a design flaw where it encourages users to deposit USDC to mint PAI (get rewarded), swap PAI for USDC on Saber/Mercurial, and deposit more USDC to mint PAI. This leverage cycle drains the stableswap pools of USDC. As long as the hatchling incentives are still ongoing, this problem exists, and it would get worse even if we raise the rewards for Mercurial or Saber LP.
(Note: Leveraging up by swapping PAI for USDC, and using that USDC to mint more PAI, IS a valid use case. Just that the Hatchling Incentives is currently the main reason why this is done.)
After the Hatchling Incentives Program ends, we will create another incentive program to stimulate demand for PAI, rather than merely the supply of PAI.
For PAI to see long-term adoption and growth, we will need to create more demand. The Parrot team is working with many DeFi projects to adopt PAI as a productive crypto asset and create trading pairs using PAI.
Join The Parrot Party!
As the demand for PAI grow, the debt ceiling will keep rising, and you can mint more PAI.
It’s never too late to join the party.