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Adding ARB as Collateral on Vesta: A Step Towards More Stability for Arbitrum

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On March 21st, the core team of Vesta, the stable currency agreement on Arbitrum, proposed to add ARB as collateral, with a liquidation ratio of 150%, an initial debt ceiling of 50

Adding ARB as Collateral on Vesta: A Step Towards More Stability for Arbitrum

On March 21st, the core team of Vesta, the stable currency agreement on Arbitrum, proposed to add ARB as collateral, with a liquidation ratio of 150%, an initial debt ceiling of 500000 pieces, and a liquidation penalty ratio of 15%.

Arbitrum stable currency agreement Vesta proposal discusses ARB as collateral

On March 21st, the core team of Vesta, the stable currency agreement on Arbitrum, proposed to add ARB as collateral, with a liquidation ratio of 150%, an initial debt ceiling of 500000 pieces, and a liquidation penalty ratio of 15%. This move is aimed at bringing more stability to the ecosystem by increasing collateralization levels and reducing the risk of liquidation.

What is Vesta?

Before we dive into the details of this proposal, let’s first understand what Vesta is. Vesta is a stable currency agreement that runs on the Arbitrum network. It is designed to provide a stable currency that can be used to make transactions and investments without being subject to price volatility. The Vesta protocol requires users to deposit a certain amount of collateral in order to mint the VUSD stablecoin. This collateral serves as a guarantee that VUSD can be redeemed for an equivalent amount of USDC at any time. The collateralization ratio is set at 150%, meaning that if a user wants to mint 100 VUSD, they need to deposit at least 150 USDC worth of collateral.

Why Add ARB as Collateral?

Adding ARB as collateral has several benefits. First, it increases the total value of collateral available on the platform. This, in turn, increases the stability of VUSD by reducing the risk of liquidation in case of a sharp decline in the price of USDC. Second, it helps boost the demand for ARB by making it more valuable to the ecosystem. This should lead to greater adoption of the token and a gradual increase in its price over time.

The Proposed Parameters

The core team of Vesta has proposed the following parameters for adding ARB as collateral:
– Liquidation ratio: 150%
– Debt ceiling: 500,000 pieces
– Liquidation penalty ratio: 15%
The liquidation ratio of 150% means that if the value of the collateral falls below 150% of the minted amount of VUSD, the position will be liquidated. This is done to ensure that there is always enough collateral to back the VUSD stablecoin. The debt ceiling of 500,000 pieces is the maximum amount of VUSD that can be minted using ARB as collateral. This helps to limit the exposure of the platform to any potential risks associated with ARB. Finally, the liquidation penalty ratio of 15% is the penalty that is levied on the liquidated position. This penalty helps to compensate the platform for any losses that may be incurred due to liquidation.

Conclusion

The addition of ARB as collateral on Vesta is a significant step towards increasing the stability and security of the Arbitrum ecosystem. By providing more collateralization and reducing the risk of liquidation, Vesta is helping to make the platform more attractive to investors and traders. As the adoption of ARB increases, we can expect to see a gradual increase in the price of the token, which will further strengthen the ecosystem.

FAQs

1. What is the purpose of adding ARB as collateral on Vesta?
Adding ARB as collateral is aimed at increasing the stability and security of the Arbitrum ecosystem by providing more collateralization and reducing the risk of liquidation.
2. How does the proposed parameter of 150% liquidation ratio work?
The 150% liquidation ratio means that if the value of the collateral falls below 150% of the minted amount of VUSD, the position will be liquidated.
3. What is the significance of the proposed debt ceiling of 500,000 pieces?
The debt ceiling of 500,000 pieces is the maximum amount of VUSD that can be minted using ARB as collateral. This helps to limit the exposure of the platform to any potential risks associated with ARB.
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