[Proposal] USD++ Revamp

USD++ Rebalance Proposal

Labels: #Rebalance, #PieDAO

Reporter: @Guzman_MassAdoption , @DanTop

Simple Summary

The stated objective for USD++ is to allow users to gain exposure to a more stable and liquid asset without having to deal directly with a centralized entity, organization, or exchange. At the moment, USD++ contains 4 different USD-pegged tokens whose weighting are based on respective volatility factors compared to their $1 peg. These weightings are to be rebalanced/adjusted on a period basis by the DAO (as mentioned in USD++’s methodology).

Abstract

Out of the suite of Pies offered by PieDAO (e.g. PLAY, DEFI+L, YPIE, DEFI+S, BTC++, DEFI++, BCP, and USD++), USD++ is by far one of the most under-utilized. We can see this assertion simply be analyzing each product’s market cap (shown below):

Market Cap at the time of writing:

$PLAY: $2,435,242.21

$DEFI+L: $2,862,244.32

$YPIE: $366,117.61

$USD++: $37,597.38

$BCP: $3,401,028.17

$DEFI++: $1,627,118.59

$DEFI+S: $1,309,226.99

$BTC++: $636,876.50

With this in mind, we should explore a variety of options:

  1. Rebalance USD++
  2. Consider adding/removing certain stables for diversification
  3. Apply sustainable yield/interest-bearing strategies that will make holding USD++ appealing & worthwhile.
  4. Encourage & Embrace more use-cases for USD++ (e.g. USD++ on Curve, crvUSD++ yVault, etc.)

Motivation

The primary goal is to offer USD++ token holders with the stability of holding a stablecoin while secondarily offering appetizing yields and external utility beyond PieDAO’s ecosystem.

Rebalancing & Diversification

Rebalancing

USD++ weightings should be rebalanced on a quarterly basis based on the TWAP of the respective stablecoins. Why TWAP? TWAP will be used as a volatility gauge; providing the opportunity to adjust weightings contingent on volatility risk factors.

Diversification

For now, the USD++ allocation should consist of: USDC, TUSD, DAI, and sUSD. The underlying basket will/should be revised on a quarterly basis to consider adding/removing certain stablecoins. As the stablecoin market continues to scale, we should encourage more unique assets such as: FRAX, DSU, ALUSD, LUSD, FEI, etc.

Yield Strategies

To reiterate, the objective of USD++ is to expose token holders to a more stable and liquid asset with a secondary objective of implementing yield/interest-bearing strategies to make USD++ self-sustainable.

Let’s look at a potential Yield Strategy with each asset’s corresponding ROI.

At the time of writing this proposal USD++ has a market cap of $37,597.38. Based on the allocation weightings, here are the dollar values of each underlying asset:

USDC: $17.689.5673

TUSD: $10,820.526

DAI: $7,681.14473

sUSD: $1,394.8628

Here are the returns of each asset if they were staked in high-yielding strategies:

USDC (staked on Aave v2: 6.16%): $89.91/month => $1078.92/year

TUSD ( staked on Aave v2: 2.89%): $26.33/month => $315.96/year

DAI (staked on CREAM: 10.88%): $69.66/month => $835.92/year

sUSD (staked on Aave v1: 35.30%): $228.20/month => $2738.40/year

Total Returns: $414.10/month => $1242.30/quarter => $4969.20/year

The interest accrued should be claimed on a quarterly basis; coinciding with rebalancing & diversification activities.

Although the returns are relatively negligible, it’s essential to keep in mind that the real use-case for USD++ will come from how it’s utilized outside of PieDAO ( exploring integrations with Curve, Element Finance, etc.).

Final Thoughts

USD++ should be one of the most held assets in the PieDAO ecosystem - offering two key attributes a well-diversified portfolio needs: (1) Stability, (2) (If this proposal passes) Yield Generation.

Expanding the underlying assets to confer exposure to other forms of stables (Algorithmic, Rebase, etc.) could/should be considered at a later time - contingent on the performance & satisfaction of USD++'s ROI.

5 Likes

I think BasketDAO is also doing the same thing and we need to be better than it no?

https://basketdao.medium.com/basketdao-money-market-index-7e0810c6cdc7

1 Like

Actually BasketDAO has setup a wrapper to all major stablecoins yVaults… the product here would be different from that. It resolves more around being used INTO protocols, not using protocols.

Back to the proposal, this is totally doable with what we have in place from a technical perspective.
Also, super-excited about the Element plan. Good work.

3 Likes

This is past overdue. I love it and I total support it!

2 Likes

Is this proposal suggesting that USD++ as part of its underlying mechanism?

This way the holders of USD++ will see their value increase over time?

If so, I think its a great idea.

Not exactly.

Explanation

This proposal is suggesting that the underlying assets be staked into High-Yielding markets/pools over the length of one calendar quarter (ideally a fiscal quarter, but whichever comes first is fine).

The interest earned throughout that period will be claimed at the end of the quarter and deposited into the PieDAO DAO Treasury. The community will then vote on the appropriation of these funds - will we:

Will we use the claimed interest to buyback $DOUGH?
Will we use the claimed interest to purchase more of the underlying token(s), hence increasing potential ROI in respective allocations?

Now, keep in mind, this is just for the underlying assets. Our goal with this is to not only make USD++ inherently sustainable, but also composable with other yield-earning opportunities (e.g. Ribbon Finance, Element, Curve, etc.).

This also falls in line with the suggestion of diversification. For example, Empty Set’s Digital Standard Unit currently has a live liquidity mining program where ESS (Empty Set Shares) is the farmed asset. As USD++ begins to expand and add these types of stables to its basket, we [the community] should consider participating in such programs.

In the long-term, USD++ should have a market cap closer - or hopefully surpassing - to $PLAY or at least $BTC++. On a treasury standpoint, applying the suggested proposal, USD++ can serve as a foundational asset for continuous revenue generation.

Composability

In the same breath of composability, look no further than to Index Coop’s & DeFi Pulse’s Pulse Aggregate Yield token ($PAY): IIP-58: Launching Pulse Aggregate Yield (PAY) - Proposal - The Index Coop.

A Pie/Index composed of both USD++ AND $PAY could be created where token holders are exposed to MORE avenues of yield accumulation - benefitting both communities (DP/IC & PieDAO) and Pie/Index token holders.

This sounds promising. I never really understood the point of USD++ before. With something like this I would be more inclined to hold some USD++ myself. Then it feels kind of like putting money into a superpowered savings account.

1 Like

Hey!

GIving here a technical feedback on this. The PieVaults natively support all of the opportunities to lend and earn yielding on the underlyings for the platforms cited here.
The plan to make a Curve pool need to be reasoned imo, as the curve pool will need to hold always the same assets (so we can’t rebalance the PIE to include/exclude stables in future). If we are okay with this, it is doable but needs some work in conjuction with Curve devs as pools need some modification for all yield bearing assets (see y, compound, aave pools).
Anyway composability is a good quality for an asset, so I’m totally positive on the idea to have an asset that can be used on a bunch of protocols.

Misc thoughts on an USD-pegged PIE:

  • We should think about having some sort of zapper for this asset. Most of the times users have only one stable to spend, and are not going to swap that to enter a pie (not efficient gas-wise)
  • This can be an awesome asset to have in a Rari Fuse market, heard something on this on the discord :slight_smile:
2 Likes

Agreed with all your points! Maybe for the interim, we go down the path of least resistance where implementing yield-bearing strategies via y, compound, and aave would be easiest. Based on the performance of this, then we could consider Curve along with any & all technical modifications needed.

A zapper would be awesome as it will enable users to single-side stake.

Regarding Fuse markets, now that Fuse Pools are permissionless this should be a fairly streamlined set up.

4 Likes

@Guzman_MassAdoption I assume these numbers are in thousands, correct? Worth clarifying

I like the idea, yet you’re mentioning 3 steps, and we should first rebalance and diversify, which could be a good opportunity to setup a rebalancing framework for USD++ as done with Play (looking at @gabo here). Rebalancing voting is out of discussion as already agreed before, so we may need to vote for the diversifying and yield actions to get sentiment.

Two more question from my end is: how is liquidity impacted if we stake them in yield bearing strategies? What’s the expected used of the protocols rewards, if any?

Hi! I got redirected here By Nico on discord when I was talking about how we could work together with pieDAO to create yield generation

The DAO I’m in is developing an algo stable and of of the ways we have to keep it’s peg is using a proxy yield aggregator very similar to USD++

this PYA in short works by deploying those stables into low risk protocols or aggregators, we collect a small fee and all yield generated then compensate users by giving them debt tokens greater than what the user farmed and the initial fees, as a result users get 2x the yield of just farming protocols (more detail https://dao.ubq.fi/fractional-reserves)

for a Tl;Dr
when TWAP<1 we use the collected yield to collateralize the coin and bring it back to 1
when TWAP>1 users redeem their debts for our stable, minting more tokens and bringing the price down to 1

while this would create a 2x yield for USD++ if it was implemented in its current form, but it would obviously be bad for diversification, which is an important part of it

as a result I have 2 initial proposals to solve this
1)simply allocate a variable portion of USD++ here to create a better possible yield without over-exposing USD++ to us or having to do any extra dev work on both sides

2)Develop a joint version of this so you allocate all into the PYA, to give an increase yield overall
we then buyback as much of the debts generated as possible (since those are a token designed to be traded for <1 on other markets) for the respective stables originally deployed by pie, this would solve the over exposure issue and would allow a better yield on USD++ than just farming the protocols themselves, this would generate an interesting situation for us since by owning our debts we own our liquidity when TWAP>1, creating a similar situation as the “DeFi 2.0” projects

obviously I would like to propose our stable itself to also be added into USD++, but as mentioned in the final thoughts that will come at a latter date

3 Likes

I think we really need something like this. As it is, I see USD++ has no value to me that I can see. I’d rather earn interest on my stables using a CEX like crypto.com, celsius, and blockfi to minimize my risk.

I would love for PieDAO to provide a way for me to make money with my USD.

1 Like

My dream for a USD++ Pie.

stable yield is a very competitive industry. I think we should build a product that highlights the unique abilities we have available, while taking advantage of modern narratives.

Curve has traditionally been the premier venue for stablecoin liquidity.
Convex has taken the role of premier Curve staking venue, it handles providing boost as service, reducing the barrier to entry of Curve farming by no longer requiring 4 year staked CRV to optimize returns.

Additionally there are two hip trends:

  1. Protocol Owned Liquidity
  2. Bribes

We can take advantage of all of these factors with our infrastructure that will be difficult for competitors to mimic.

I propose a USD++ revamp towards a Pie that:

  • Distributed across Convex staking pools with some requirements for diversification
  • A typical streaming fee for PieDAO treasury
  • An X% return captured by the pool for Pie Owned Liquidity, which captures convex returns for staking convex.

Staked CVX allows the Pie to earn Bribes and native returns, currently over 100% APR by my estimates. This will be allow the Pie to have an additional source of returns that other stable vaults do not currently have access to.

The timelock adds complexity in preventing us from treating CVX held by the Pie as a normal asset as it breaks redeemability. However if just owned by the Pie, its liquid returns can be rolled into principal farming, and add to the value of each token.

Questions:

  1. At present Pie’s do not rebase. Should USD++ rebase to better fit the 1:1 with peg?
  2. Should we use DOUGH to bribe for our own USD++ curve pool?
  3. Can Curve support a non rebasing USD++ that slowly drifts up in price with their newer metapools?
  4. What percent is appropriate to be captured for pool 2 farming?
3 Likes

Bonus points: KPI options for minting in first N months based on amount of Pie owned CVX by payout date. The more liquidity provided, the more CVX earned. The CVX adds permanent floor yield to the Pie enforcing a minimum bound of liquidity provided. The more the Pie earns in self liquidity, the higher the floor of yield. Self propelling more to be minted as that grows.

Kickstarting growth with a KPI could be really strong.

2 Likes

Great idea, the potential for this kind of product is what got me interested in PieDAO in the first place. I would definitely like to see more PIEs composed of interest-bearing assets. Convex is a good ecosystem for that too.

  1. How about using bonds for this ? Getting liquidity (LP tokens for USD++ pool on Curve I guess ) in exchange for DOUGH bonds would allow the treasury to farm CVX and use it to further incentivize the pool via vlCVX.
2 Likes

ya know what, bonds could be an appropriate method to build up some market liquidity and reduce the need for long term farm programs. I know we have been in some discussion with Olympus, will def see if getting on pro is a path we can take.

1 Like

Posting in support of taking CVX incentives. Also in support of adding protocols like FRAX, alUSD, MIM, and RAI as mentioned in Discord.

1 Like

Love this suggestion @BlockEnthusiast! I believe applying product owned/self-liquidity strategies with, not only USD++, but to eventually all PieDAO products will be the next optimal step towards a self-sustaining ecosystem!

Utilizing USD++ as the MVP product for this next iteration is fantastic IMO and I love the inclusion of KPI Options (perhaps taking a look at their Success Token product as well?).

Here’s my take on the questions you’ve posed:

  1. Not sure if rebasing would be appropriate for USD++ (but then again I don’t have the technical savviness to understand how this would be employed on the backend).
  2. I would further expand this question with another: Should we use SLICE to bribe for our own USD++ curve pool?
  3. With the recent listing of OUSD, I believe Curve does support rebasing and non-rebasing assets. To this end, if we decide to go with either/or I think USD++ will be fine.
  4. Great question!

Maybe to begin we proceed with staking/supplying the currently held assets (USDC, TUSD, DAI,sUSD) into risk adverse, battle-tested interest-generating markets (Yearn, Compound, Aave).

We can view this as a observatory phase (3 months) to see how the asset performs coinciding with the amount of yield accrued.

The bigger question is, what will we do with the interest earned?

My suggestion(s):

  1. The interest earned could be used to buy back USD++
  2. Interest earned could be used to buy back DOUGH >> Staked in return for veDOUGH >> Treasury held veDOUGH will now receive revenue in the form of SLICE.
1 Like

Very interested in pursuing usecases for success token. Will ponder.

Q/A

  1. I find that for pegged assets, rebase is better UI. It helps people buy on market when they want X dollars and are buying what they see as a dollar. Though perhaps exploring other stable pegs like Euro and JPY could be worthwhile pursuits of this Pie which might make that less relevant.
    In general though, if its framed as stable, stable to what, and if so, easiest for market participation to be able to say I want 100 and get 100 dollars rather than requiring UI’s to convert that. I think it encourages more use.

  2. We have some % of rewards that is for the DAO’s general purpose use, w/ some allotted to the treasury. For treasury allotment, better to just never pay, get slice, redeem slice, reinvest. Instead just don’t pass through that share, so wouldn’t have slice on hand optimally. Will ponder this and review what’s workable. Off hand think it might be difficult, and in general we have DOUGH issuance already which we could tap into, with limited markets for Slice.

Maybe to begin we proceed with staking/supplying the currently held assets (USDC, TUSD, DAI,sUSD) into risk adverse, battle-tested interest-generating markets (Yearn, Compound, Aave).

This could be cool. Perhaps upgrade to PieVault, and do that is a good starting point to start building into the position.

What do do with the interest earned?
not quite clear on which interest we are discussing, assume all external yield is to be rebalanced into principal outside of the designated chunk for farming CVX, which itself would have its earned external yield also converted to principal as a base yield for the pool

  1. This could be a very interesting option on harvests in an AMO like event. Help stablize the market flow by buying USD++ when at discount vs components, and minting, selling and breaking down components to principle when at premium. Woah. Would love to chat about this.

  2. oh did you mean PieDAO’s interest rate for existing… most direct would just be to add to Slice return without going through DOUGH. I’d rather not dilute returns for stakers by farming our own yield. Ideally the additional revenue boosts native return for staking DOUGH encouraging more purchases of the market to pursue that opportunity.

2 Likes

That’s a great description. I don’t hold any USD++ and the proposals above would make it far more attractive. The last few days I’ve been trying to work out my stablecoin strategy. Rumour is, I should have one ahead of the market getting bearish :teddy_bear:. I want high stability and good yield (10%?). Also, hack-safe which PieDAO has a good record for, unlike… umm… BasketDAO there? The problem is the time necessary to get my head around Curve, Convex, yields, lending and all that, plus the ‘smart contract risk’ of using something I trust less than PieDAO. Revamped USD++ could solve a lot of that.

If such a pie would be a good place to hold my ‘20% stablecoins’, that would be a great marketing fit/strategy. Very attractive. It would have to be easy in/out = high liquidity, low gas and fast-bake ovens available.

Also great if it can allow single-asset staking. So much easier.

Final thought: given the riDONKulous gas fees on Eth that have lasted for months, stop small fishes, and show no sign of going away anytime soon (inc with Eth 2.0), should we consider launching a Pie such as USD++ not just on Ethereum but also on an EVM-compatible chain that is faster and cheaper like Polygon or Avalanche? This could suit USD++ where many USD stablecoins are available on other chains.

1 Like