Debt Ceilings

The debt ceiling is the maximum amount of MAI that can be minted. Each vault type has their own debt ceiling, which is periodically raised in response to demand and the MAI peg. The goal of the debt ceiling is to prevent a large amount of MAI from flooding the market that could negatively affect the MAI price. The debt ceilings will be increased for each vault type based on factors explained below. Debt ceiling increases will be made with a minimum of 8 hours notice. This will be announced on our Twitter and shared on our Discord and Telegram. If the MAI peg is too high debt ceilings may increase with less than 8 hours notice.

Debt ceiling increase factors:

  • Depletion - Is there MAI available to borrow for a specific vault type? A vault is considered depleted if there is less than 0.05% of MAI available to borrow in relation to the value of assets deposited in the vaults. Example: if $1,000,000 worth of ETH is deposited in vaults, a MAI available to borrow balance of 500 MAI or below would be considered depleted.

  • Peg - Can the peg on a specific chain sustain increased sell pressure of MAI, and if so by how much? The primary role of the debt ceiling is to help maintain the MAI peg within 1% of $1. The increase in debt ceiling will take into account the price of MAI and the amount of liquidity for MAI on a specific chain (Polygon, Fantom, Avalanche).

  • Diversification - No collateral should have a significant share of MAI's backing. Debt ceiling increases will favor collateral assets that do not represent a large share of the protocol's overall collateral.

  • Liquidity - Each collateral will have a fluctuating max debt ceiling per chain based on the amount of available liquidity for that asset. Collateral assets should be able to be liquidated fully without major trading slippage.

Note: Stable collateral vaults:

Due to the low risk and high LTV ratio of stable collaterals, stable vaults are very attractive for high leveraging and their vaults are quickly depleted. This leveraging applies a lot of sell pressure on MAI. As a result, debt ceilings for stablecoin collaterals are limited to when MAI's peg is above its target.

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