[DEPRECATED] USD++, USDs on Ethereum diversified

USD++

Description

USD++ it’s an equally weighed allocation between different stable-coins on Ethereum.

Motivation

There is a variety of different stable coin on the Ethereum Network, some of those are centralized and rely on banks and custodian services, others are algorithmically managed and considered Decentralized.

Naturaturally, each project has different goals and different tradeoffs in terms of security.
Centralized solutions have historically done a good job in keeping the peg but might suffer from censorship as governments are becoming more mindful about the role of such coins.
The majority of stablecoins are currently under scrutiny by the Financial Stability Board, including popular ones as USDT, USDC, TUSD, PAX, and DAI. It’s reasonable to assume that centralized ones would be more likely to be stopped first.
Decentralized solutions might be more resilient to these issues but they are generally more complicated which presents challenges. DAI for instance, has a soft-peg to the dollar which means it sometimes trades at a premium or at a discount compared to the price of the dollar. Which has been particularly true recently as you can see in the DAI/USDC Coinbase market.

Proposal

Deploy a USD Stablecoin Only Pie which holds a set of different representations of USD in the Ethereum network called USD++ deployed as a PiePool (custom Balancer).

Benefits

  • Users who want to hold a cash position with exposure to USD on Ethereum can do that without relying on a single system.
  • No expected impermanent loss.
  • USD++ would stay liquid even in the case of the underlying asset froze transfer via admin keys.
  • There is not a stablecoin pool just yet in the Balancer ecosystem.
  • USD++ can become a core ingredient for other pools or project in DeFi.

Allocation

A proposed allocation based on trading volume.

Token Custodian Initial Allocation Total Supply Holders 24 Hour Trading Vol
USDT Tether 0.25 5,378,111,722 1,294,858 $ 6,040,000,000
USDC Circle/Coinbase 0.25 754,153,365 131,683 $ 495,436,409
BUSD Binance 0.25 190,748,648 800 $ 122,339,844
DAI MakerDAO 0.25 85,553,139 54,882 $ 72,704,278

Stablecoin Red Flags

USDT

While USDT is by far the most liquid stablecoin in the Ethereum network, it’s worth mentioning the two major pointa:

Tether’s Terms of Service is concerning the inability to withdraw USD. In the ToS there was an entry stating the company have no obligation to redeem tethers at the face value (1 tether for 1 USD). As for now, after the last update of the ToS https://tether.to/legal/) it’s been removed. Withdraw can be delayed at will although:

Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves.

USDT breaks the standard of ERC20 tokens

also…

DAI

DAI is widely used in DeFi, it’s a great project but it has a number of challenges.

  • Complexity
  • Reliability of collateral
  • Governance attacks
  • Unstable Peg
  • Price oracles

USDC / BUSD

Possible censorship and related issues to centralized administration.

Misc Resources


https://makerdao.com/en/whitepaper
https://makerdao.com/purple/

5 Likes

I worry about the ability to source BUSD at a reasonable price. Going through Binance means KYC for more that 2BTC a day. 1inch shows high slippage.

2 Likes

Quick question about use-case. Is USD++ meant to be like a meta stablecoin like Neutral Dollar, or is it meant more as a liquidity pool to earn extra yield while diversifying risk?

1 Like

While not without its own issues with maintaining peg and liquidity sUSD may be an additional option to explore.

Market Cap: 5,272,421
Holders: 8,137

1 Like

The latter more than the first, as value of USD++ would increase because of the swap fees.

1 Like

It’s a fair point. We could start without it and eventually add it if there is demand for it.

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Yes, the challenge with sUSD is Please note the inability to trade it without waiting at least 3 minutes for the Synthetix lockup period to expire before you will be able to mint USD++, which sometimes makes it hard for LPs to join with an atomic transaction for instance.

1 Like

Any opinion about the Coinbase USDC Bootstrap Fund?
My understanding is that it’s being run by:
https://twitter.com/nemild
https://twitter.com/danielque
https://twitter.com/petejkim

2 Likes

I think the diversified risk factor is more interesting than the trading fee gain. What if we make this a tradable 0 fee pool?

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I kind of like the idea, I wonder if LPs would be okay with it tho.

In that regard, we could even think to remove trading within the pool itself if the main usecase is diversified risk.

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The Curve BUSD pool is decently big.

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Still too small IMO. I’d prefer we be able to get to millions.

I’d also probably choose to keep trading enabled with a 0 fee, if only to contribute to the Balancer ecosystem.

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I think it would make sense to apply, being USDC an obvious choice as USD++’s underlying asset

2 Likes

why no sUSD? seems a much better choice than BUSD). 800 holders, that’s a dead stable

2 Likes

Yeah…we started making some considerations on this Spreadsheet

I agree for BUSD, while sUSD seems to have a limitation as recapped by Alexintosh above, given its lockup period which doesn’t allow for atomic transactions to take place.

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I think we should include PAX. sUSD has a lot of technical challenges and too small a market cap IMO.

Now if the Synthetix team can address those challenges, particularly the lockup period, I’d be less concerned.

2 Likes

I agree regarding PAX, definitely a great option even though not (yet) so DeFi relevant

Source

1 Like

So to recap the proposed USD++ would

  • Be using the exact same codebase as BTC++ (Capped Balancer Smart Pool)
  • Contain USDC, PAX, DAI, TUSD at equal weights (25%)
  • Has a swap fee of 0.02% (Just like BTC++)
  • Has trading enabled

Token Meta Data:

  • Ticker: USD++
  • Name: PieDAO USD++
  • Decimals: 18
  • 1 USD++ == 1USD in value at creation

If DAI is trading at a premium do we account for this when deploying USD++?

2 Likes

As a side note, PAX has a truly low exposure to DeFi, also bringing to the table the need for kyc. An alternative as BUSD (still managed by Paxos) may somehow look as a better alternative

2 Likes

A new proposal under consideration will be to adopt a weighing of USD++ underlying assets as per their historical inverse volatility, as an attempt to minimized the difference from 1 USD peg of USD++.

This model seems truly promising, here’s an interactive spreadsheet that can be used as reference within the ongoing discussion.

Any feedback are welcome!

1 Like