Mars Protocol
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Mars FAQ

1. What is Mars Protocol?

Mars is a fully automated, on-chain credit facility governed by a decentralised community via a transparent governance process. All decisions regarding parametrization of the deployed Mars smart contract system are made by the Martian Council, composed of MARS stakers who put skin in the game to backstop certain kinds of protocol risk in exchange for a portion of the protocol borrowing fees. It offers two key services:
  1. 1.
    Enabling borrowing and lending through the Red Bank.
  2. 2.
    Enabling contract-to-contract (C2C) lending in the Fields of Mars. Other protocols can use the Fields to leverage smart contracts for different applications such as leveraged yield farming.

2. What is the difference between Mars Protocol and Anchor Protocol?

Put simply, Mars is a decentralised dynamic-interest-rate credit protocol, while Anchor is a Saving-as-a-Service (SaaS) protocol with predictable rates.
Anchor relies on yield from Proof of Stake (PoS) assets to provide fixed income to users, thus only allowing PoS assets as collateral. Mars can use any Terra asset as collateral, so the interest rates depend on demand/supply factors and Marsโ€™ dynamic interest rate mechanism.
As a savings protocol, Anchor is designed to achieve one overarching goal: making it incredibly easy to earn a relatively fixed rate on stablecoin deposits.
As a decentralized credit protocol, Mars is designed with a different goal: enabling the borrowing and lending of virtually any Terra-based tokens.
Together, they dramatically expand the utility of all Terra-based assets.

3. What is a MARS token? What are its utilities?

MARS tokens are used to govern the Mars Protocol. The guiding principle behind MARSโ€™s token economics is that of skin in the game: those making decisions should bear the consequences of those decisions, both positive and negative.
Unlike other governed ecosystems, Mars governance participants 'underwrite' the protocol risk.
MARS stakers receives xMARS in return, which has the following key properties:
  1. 1.
    Governance: Make decisions on asset listing, risk parameters, treasury spending etc., within the Martian Council.
  2. 2.
    Collect Fees: Mars distributes a portion of its fees to xMARS stakers on an ongoing basis through purchases of MARS.
  3. 3.
    Safety Fund: The Mars Safety Fund can be tapped by the Martian Council to compensate users for Shortfall Events attributable to governance failures.

4. What is the Martian Council?

The Martian Council โ€” a DAO of xMARS token holders โ€” governs the deployed Mars protocol. All members have the power to vote on proposed changes to the deployed Mars smart contract system and submit their proposals for changes.

5. What assets are available in the Mars Protocolโ€™s credit facility?

At the time of this writing, Mars' Red Bank supports ANC, LUNA and UST for borrowing and lending. Governance will have the power to add additional assets.

6. How are the new assets selected for credit facilities?

Assets are approved for listing by the Martian Council. This listing decision is based on the independent judgment of each xMARS holder. MARS contributors have developed a risk scoring framework to help guide listing decisions and lending limits. The riskier an asset is, the greater the limitations the protocol imposes on that asset.
Refer to this article for details:
Introducing Mars Protocolโ€™s Risk Framework
Medium

7. What is the Lending/Borrowing interest rate?

Rates are based on market demand for borrowing. To see the latest rates, visit the Mars application.

8. When can a user get liquidated in the Fields of Mars?

Red Bank borrowers are liquidated when their loan-to-value (LTV) ratios fall below the required maintenance margin, which happens when their collateral decreases in value relative to their debt. Similarly, if a user is engaging in leveraged yield farming in the Fields of Mars, they can get liquidated when the collateral they provide falls below the liquidation threshold for that asset. To avoid liquidation, a user can reduce his or her debt position (by paying back a portion of their borrowings) or add more collateral.

9. What is the Dynamic Interest Rate Model?

This model uses Control Theory to dynamically adjust to changing market conditions. This approach improves capital efficiency and helps to quickly determine the interest rates that balance supply and demand.
Dynamic rates, when approved by the Martian Council, will be handled by a โ€œPID Controllerโ€ or proportional-integral-derivative controller. The classic example of a PID Controller is the cruise control on a car. Maintaining a fixed speed is simple on a flat surface. But as soon as you hit a hill, the carโ€™s computer must adapt to changes in gravity. That means the car must apply more power when going uphill and less power when going downhill. Marsโ€™ dynamic interest rates will operate similarly. Thanks to an integrated PID Controller, the protocol can adjust rates based on changes in supply and demand to target an optimal utilization level.
Mars launched with a standard, two-slope rate model (similar to Aave or Compound).
Marsโ€™ groundbreaking dynamic rate model is expected to be deployed after market dynamics fully kick in. To learn more about dynamic interest rates, please see the Mars litepaper.
Note: Mars Protocol will launch with a standard, two-slope rate model similar to those used by Aave and Compound. The Dynamic Interest Rate Model can be deployed by governance after market dynamics fully kick in.

10. What is the MARS โ€œlockdropโ€? And how can Martians participate in it?

Users will be able to lock UST in Marsโ€™ Red Bank in exchange for an upfront distribution of MARS tokens which are claimable once Mars launches. The locked UST deposits will help Mars bootstrap liquidity for one of its most important markets: UST.
For more information on the lockdrop:

11. When someone claims unlocked LP tokens, will they still receive Phase 2 incentives (i.e. a share of 10 million MARS)?

As long as they don't unstake from the pool they'll receive MARS incentives.
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On this page
1. What is Mars Protocol?
2. What is the difference between Mars Protocol and Anchor Protocol?
3. What is a MARS token? What are its utilities?
4. What is the Martian Council?
5. What assets are available in the Mars Protocolโ€™s credit facility?
6. How are the new assets selected for credit facilities?
7. What is the Lending/Borrowing interest rate?
8. When can a user get liquidated in the Fields of Mars?
9. What is the Dynamic Interest Rate Model?
10. What is the MARS โ€œlockdropโ€? And how can Martians participate in it?
11. When someone claims unlocked LP tokens, will they still receive Phase 2 incentives (i.e. a share of 10 million MARS)?