Reserve factor is the proportion of the interest paid by the borrowers to Wing project, and it is the absolute main force of the Wing project income. Currently, the number is 15% for all assets in Wing Flash Pool.
The Reserve Factor affects the Wing Project in many ways:
1. Reserve Factor is an integral part of the interest rate model.
A high Reserve Factor reduces the interest earned by users who supply assets, then de-incentivizing users from supplying assets.
A Low Reserve Factor increases the interest that users earn from supplying assets, which in turn encourages users to supply assets and grow liquidity;
2. Reserve Factor acts as the risk premium of Wing’s borrowing assets.
Wing can grow its reserves faster from assets assigned to a higher Reserve Factor. Since the reserves have the effect of lowering risks, the Reserve Factor should be set higher for assets with greater volatility and higher risks, and lower for assets with less volatility and lower risks.
Based on the above importance, I think we should re-evaluate our Reserve Factor.
I have played a lot of DeFi Lending projects, and generally know the relevant information about Reserve Factor.
Reserve Factor is also important in the business model of project. Sufficient reserves allow project to better grow the project and give back to Token holders. However, an excessively high Reserve Factor will make the project unattractive. Thus, It is very necessary to set a reasonable reserve factor to balance short-term and long-term benefits.
Wing’s reserves are used to support ecosystem development, reward contributors, stabilize the market, and lower risks.
Currently, in accordance with WIP-04, 50% of the reserves are being used to buy back and burn WING each month until 1 million WING have been bought back and burnt.
we have established a standardized model of Wing’s Reserve Factor. The model utilizes Wing’s Assets Risk Model to determine the volatility and risks of each asset.
Calculated by Wing’s Reserve Factor Standardization Model, the Reserve Factor of each asset should be as follows: