Recently I stumbled upon Sushi’s lending/borrowing platform Kashi, and discovered it allows for the creation of custom isolated markets. NMR is supported by this due to it having a good Chainlink oracle which is required by the Kashi protocol.
Anyway I was able to get NMR whitelisted by Sushi and multiple NMR pair markets were created. Some liquidity was provided by the community on the USDC/NMR pair—totalling ~700 NMR at time of writing—which is completely borrowed out at the moment.
I think the fact that the Kashi pool is maxed out clearly shows that there is demand for more borrowing opportunities. This, combined with for example the efforts by Numerai to enable NMR borrowing on Aave is reason for me to believe it is worth considering to provide NMR from treasury to a Kashi contract (I suggest USDC-NMR).
Borrowing allows Numerai tournament users to participate in staking NMR on their models without exposing themselves to NMR price fluctuations. When creating the borrowing transaction, NMR is borrowed at its current market rate (e.g. at $50). In order to do so, collateral has to be provided—USDC or some other stablecoin being the logical choice. Let’s say a collateral worth $1000 is provided. In all cases, one can only borrow against 75% of this collateral. So 15 NMR (750/50) can then be borrowed. An annual percentage rate (APR) is then charged to the borrower’s position and an almost equal APR is paid to the lender. This rate changes every 8 hours and is dependent on the supply/demand; the algorithm always aiming for a utility of the pool of 80%. See this page of Kashi’s FAQ for more info on the workings of their elastic rate.
Now whenever the borrower wants his collateral back, he can pay back the 15 NMR + interest. So as long as expected return on tournament staking > Kashi interest rate borrowing makes sense.
Note that as a borrower the risk of getting your collateral liquidated does exist; this becomes possible when the USD value of your borrowed asset (NMR) surpasses 75% of the USD value of your collateral. A liquidator can then swap your collateral for the borrowed asset in order to pay back the lender, plus collect a 12% fee [source]. Therefore it is probably wise to anticipate some increase of NMR price and only borrow against maybe 25% or 50% of your collateral (depending on your expected maximum increase in price for NMR, plus your willingness to pay the 12% fee in case of liquidation).
Put some NMR to work outside the tournament, while providing a valuable service to the community.
I propose to provide NMR from treasury to the USDC-NMR Kashi contract (