[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): https://gov.indexcoop.com/t/iip-58-launching-pulse-aggregate-yield-pay/1969.

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?