This release contains big updates to the Ooki Protocol: Dynamic Interest Rates, Dex Selector, new trading pairs, and new Flash Loan parameters.
All the changes in this release are currently live on Polygon, Binance Smart Chain, and also on Arbitrum. The changes will later be rolled out to other chains over the coming weeks.
New Dynamic Interest Rate Engine
The main goal of Ooki's interest rate mechanism is to ensure borrowers and lenders receive optimal rates when opening new positions on Ooki. Ooki’s approach to delivering optimal rates to lenders and borrowers uses a variable interest rate with a dynamically changing interest rate curve. The new dynamic interest rate system is preferable because it will allow liquidity pools to grow larger.
Ooki’s new dynamic interest rates will improve the experience for borrowers and lenders by introducing a variety of significant overhauls to how lending and borrowing rates are calculated. A few features that the new interest rate engine will enable:
- Removal of open position rollovers.
- Dynamically adjust rates to ensure borrowers and lenders receive optimal rates when opening new positions on Ooki.
- Target an 80% utilization rate and will keep pools optimally utilized.
- Variable rate model, indefinite term loans, instead of fixed-rate loans with 28-day rollovers.
- Dynamically changing rate curve.
No More Rollovers
Prior to this update, interest rates previously would roll over every 28 days. At each rollover, a small amount of the borrower's/leveraged traders collateral would be sold to pay for future interest rate payments. This would force the borrower to sell part of the collateral in order to pay interest rate fees.
Under the new interest rate system, Ooki does not sell any of the user’s collateral in order to pay interest rates borrowing fees. Instead, Ooki now has removed rollovers completely. Now the borrower’s loan size grows incrementally block by block instead of the user’s collateral being sold. This means the user’s collateral is only sold if the position falls below the margin maintenance requirements. This system is common in traditional lending institutions. E.g bank loans grow while collateral stays the same. As a result of this update, margin trading positions can be left open indefinitely as long as they remain within a healthy collateral ratio.
This new system is more efficient and preferable for a number of reasons. Previously, the rollover date could cause liquidations because collateral would be sold. This old rollover would reward anyone who triggers the rollover by refunding them for double the transaction amount, for both gas and also rollover costs in order to make triggering the liquidation profitable. This was not very gas efficient because borrowers would pay for gas, and gas sometimes can be huge and result in more expensive rollover costs, especially for smaller loans.
As a result of these changes to roll over now margin trade can be left open indefinitely as long as the position remains properly collateralized, making it much more efficient and less costly for users.
Dynamic Interest Rates
The second big update with the new Interest Rate Engine is interest rates will now fluctuate dynamically in real-time based on the pool utilization. The old system utilized a fixed rate system for calculating borrowing and lending rates.
The new dynamic interest rate system is preferable because it will allow liquidity pools to grow larger. In this new system, the rates depend on pool utilization. As pool utilization increases, the rates increase. This new rate calculation engine will be utilizing an innovative formula which will be detailed in a separate article but that is not currently being used in any other DeFi protocol. This system will give borrowers and lenders the best rates possible.
New Dex Selector
The next big feature Ooki is releasing soon is dex selector. The dex selector is a new tool that is being offered to margin traders to aid in better execution for trades. This allows users to specify and select different DEXes for where their trade will occur to get the best trading price.
This feature will be supporting the following AMM’s: SushiSwap, Uniswap v2 and v3, Pancakeswap, and Quickswap. Planned future supported DEXes are Curve and Kyber with their newly released aggregator. Initially, users will be routed to the default AMM, and later users will be able to manually select which AMM they prefer. The AMM chosen for execution will likely be driven by which AMM has the best price for that asset at that given moment.
Initially, the UI will only display SushiSwap and will only route transactions through SushiSwap. Later we will add support for the other trade execution sources such as Uniswap v3. The dex selector will initially be deployed on Arbitrum and Polygon only, and later expanded to other deployments.
Ooki protocol gives developers and pro users the ability to use flash loans. Flash loans are an uncollateralized loan option designed for developers. Flash loans enable users to borrow instantly and easily with zero collateral obligations, provided that the liquidity is returned to the pool within one transaction block. Use-cases include arbitrage, collateral swapping, self-liquidation, and much more.
When Ooki introduced this feature, flash loans did not charge any fees. With today's protocol update, Ooki has now started charging a fee for flash loans. As a result of this, Ooki stakers will also be receiving the profits from these flash loans fees.
The new fee for flash loans is 0.03%. Developers utilizing bots must take this new fee structure into account when designing their flash loan strategies, so they can make sure their flash loan is profitable.
New Trading Pairs
With this new release, Ooki will be adding new trading pairs for margin trading on Arbitrum. These pairs will include MIM + Spell. They will be available for trading on Arbitrum long or short on margin with up to 5x leverage on Spell and 15x leverage on MIM with leverage starting today. They will also be added on other chains soon.
Snapshot Proposals Added to Lobby
This release has also added a list of current snapshot proposals in the Ooki Lobby.
Another new UI feature part of this update, a new Ooki dropdown displaying the current OOKI price, supply, and links to stake, purchase and learn more about OOKI token.