USD++ Rebalance Proposal
Labels: #Rebalance, #PieDAO
Reporter: @Guzman_MassAdoption , @DanTop
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).
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:
With this in mind, we should explore a variety of options:
- Rebalance USD++
- Consider adding/removing certain stables for diversification
- Apply sustainable yield/interest-bearing strategies that will make holding USD++ appealing & worthwhile.
- Encourage & Embrace more use-cases for USD++ (e.g. USD++ on Curve, crvUSD++ yVault, etc.)
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
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.
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.
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:
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.).
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.