Proposal to add CHAI

Proposal to add CHAI

Proposal to add CHAI as an uncapped collateral to Interest Protocol.

Overview

CHAI is an ERC20 token developed by Dapphub that provides a tokenized representation of DAI that has been deposited into the DAI Savings Rate (DSR) module of the Maker Protocol. It accrues interest at the rate set by Maker governance for the DSR. At time of writing, that is 1%. CHAI is freely transferrable and redeemable, and is immutable with no special permissions.

Because CHAI is interest-bearing DAI redeemable with Maker, there is no risk of it becoming illiquid for its underlying (Maker issues new DAI when redeeming from the DSR). Additionally, Maker’s Peg Stability Modules (PSMs) contain billions of dollar-redeemable stablecoins that DAI can be converted to and from with zero slippage.

Currently, DAI deposited in the DSR yields 1% per annum. This rate is manually adjusted by Maker governance. The stable value of CHAI in relation to DAI (and USDC, USDP, and GUSD) makes it a highly secure asset that is also yield bearing. In times that Interest Protocol charges less than CHAI yields, it allows for users to safely arbitrage the rates, resulting in higher DAI, CHAI, and USDi usage.

Parameters

Token Address: 0x06AF07097C9Eeb7fD685c692751D5C66dB49c215
Capped Token address:
LTV: 98%
Liquidation incentive: 0.75%
Maximum Cap:
Oracle Address:
Primary oracle: 0x197E90f9FAD81970bA7976f33CbD77088E5D7cf7
Secondary oracle:
Price deviation: N/A

Liquidity

Market Cap: $309,753
Liquidity: Equivalent to Maker PSMs; >3 billion at time of writing
Volatility: Stablecoin
Coingecko 7-day avg 24hr volume: N/A
Notable exchanges: N/A

Technical risks

Type of contract: ERC20 wrapper
Underlying asset: DAI
Time: 1138 Days (Created November 29, 2019)
Value:
Privileges: None
Upgradability: None
Supplemental Information: An edge case could result in users not receiving the full interest accrued. The DSR contract (Pot) requires someone to call drip to update the contract’s internal accounting. This function is not bundled with exit function, which means a user withdrawing from the DSR (with or without CHAI) would forgo any accrued interest since the last time drip was called.

Relevant References

Two-day audit by Trail of Bits
Github documentation for CHAI
A front end for users to mint/burn CHAI
MakerDAO Glossary
DAI Savings Rate documentation

4 Likes

We’re a big fan of this proposal! Chai is a great way to get the liquidity of Maker yet is underutilized across other similar or adjacent protocols.

3 Likes

support as well. seems like a very safe collateral to support and no lending protocol supports this yet

1 Like