Money Market Module

Interest rate setters and collectors

Relevant smart contracts:

• TaxCollector

1. Overview

The Money Market Module contains the components that governance (or an autonomous rate setter) can use to set and collect stability fees.

2. Component Descriptions

• The TaxCollector imposes fees on all collateral types and distributes them to various parties. Each collateral's stability fee is composed out of a globalStabilityFee (a base fee applied to all collateral types) and its own, unique CollateralType.stabilityFee.

3. Risks

Smart Contract Bugs

A bug in the TaxCollector would make it so that the system could no longer accrue surplus (which is used to settle bad debt and pay for other system operations) and thus components that depend on a constant stream of fees would likely stop working properly.

Improper Maintenance

The TaxCollector depends on external actors that call taxSingle or taxMany in order to collect stability fees. Protocol token holders are incentivized to call the collector as often as possible, although in the early days of the system the calls may be more infrequent. The main caveat is that any SAFE that is opened and closed between two fee collections will not be subject to taxation.

Another major risk is related to malicious governance setting extremely high or extremely low stability fees. If the fees are extremely high, SAFEs may be unjustly liquidated. On the other hand, if they are too low, the system may not be able to collect enough fees to become sustainable.

4. Governance Minimization

The TaxCollector is part of the Level 1 Gov Minimization.

Bounded Stability Fee Control

Governance can choose to keep bounded control over setting rates by clearly specifying upper and lower values. For example, the ETH-A rate may only be set to a value between 1-3% per year.

This is to ensure that the protocol offers more advantageous rates during some periods while it can also collect more surplus when needed.