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.
Feel free to have your say!