Pillar protocol (https://app.pillarprotocol.com/) — a decentralized stablecoin system a la MakerDAO went live on the Zilliqa mainnet on Oct 13, 2021. Those unfamiliar with Pillar are encouraged to read through the docs on the Pillar webpage (Pillar Protocol).
TLDR Pillar: In essence, Pillar allows users to put ZIL as a collateral and mint PIL stablecoins. These stablecoins can then be used for leverage. In order to get the collateral back, PIL tokens need to be returned together with a certain interest.
Since the launch, the dapp has attracted over USD 600k worth of ZIL collateral and thereby has facilitated minting of around 125k PIL, a majority of which are on the ZIL/PIL pool on ZILSwap.
Pillar protocol is governed by gZIL holders. In order to participate in the governance process, gZIL holders must stake their token via the Pillar app. Every gZIL staker can vote on proposals, but only addresses that have a sufficient voting power are allowed to make a proposal. To this end, users may pool their votes via a delegation mechanism, where a user who has staked her gZIL, can delegate her voting power to another user allowing the latter to have sufficient voting power to make a governance proposal.
One of the key incentives for gZIL token holders to govern Pillar is through the Pillar interest rate. When a Pillar user repays her PIL to get the collateral back, the interest paid in PIL tokens gets distributed to all the gZIL stakers proportional to their stake.
In order to bootstrap the system and build sufficient liquidity for PIL tokens in the market, the interest rate at the launch was set to 0%. This allowed leverage traders to get interest free loans against their collateral.
An alert reader would notice that this was done at the expense of sacrificing the incentives for gZIL stakers. As long as the interest rate is set to 0%, gZIL stakers do not have any direct incentives. There are indirect incentives for gZIL holders via liquidation but there are no direct incentives when the interest rate is set to 0%.
New Interest Rate Proposal
This proposal presents a plan to change the interest rate while giving enough time to build sufficient liquidity in the market. The proposal is the following:
We as a community target a total liquidity of 1.5 mil PIL. The Pillar liquidity is currently at about 636k. Liquidity of 1.5 mil PIL should suffice at this stage of Pillar adoption and will put PIL as the top-10 liquid asset in the ZRC-2 token ecosystem.
We increase the PIL interest rate by 1% every week capping it to 5%.
|Target Pillar Interest Rate||Condition to be met|
|1%||1.5 mil PIL has been minted.|
|2%||Liquidity for PIL does not go below 1.5 mil PIL and 1 week has passed.|
|3%||Liquidity for PIL does not go below 1.5 mil PIL and 2 weeks have passed.|
|4%||Liquidity for PIL does not go below 1.5 mil PIL and 3 weeks have passed.|
|5%||Liquidity for PIL does not go below 1.5 mil PIL and 4 weeks have passed.|
As next steps, this proposal will be open for discussions on this forum, i.e., gov.zilliqa.com for at least 3 days. If after at least three days there is a 25% “For” vote in the forum poll it may then move to formal voting via Snapshot.
Please vote “FOR” or “AGAINST”.
PS: What happens to borrowers who have minted PIL when the interest rate was 0?
For those who have previously borrowed PIL when the interest rate was set to 0, they will have to pay the increased rate for the entire period once the change in the interest rate gets implemented.