Proposal to add USDR-am3CRV to the Curve Gauge Controller.
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Real USD (USDR) is a stablecoin backed by tokenized Real Estate that natively yields 8-10%. It was created by Tangible, a RWA tokenization protocol.
Backing a stablecoin with Real Estate has 2 key competitive advantages that we believe add significant value to the stablecoin landscape:
- Yield - The tokenized properties in the Real USD treasury are leased to tenants. This rental yield is paid out daily to holders in the form of a rebase.
In addition to this if Real USD ever falls beneath 100% collateralization ratio, 50% of the daily rebase is instead added to the treasury to recollateralize USDR.
- Real Estate price appreciation - When priced in FIAT Real Estate has a long predictable history of appreciation. Over the last 50 years, the average sales price of a house in the United States grew from $27,000 in Q1 1970 to $383,000 in Q1 2020.
This gradual and somewhat predictable appreciation in the backing of USDR allows for interesting design mechanisms.
This pool is the main source of USDR liquidity on Polygon and is also USDR’s main POL. The pool has steadily grown in size over the last 2 months alongside USDRs marketcap. With the pool size currently at $2.25m and USDR market cap at $7.3m. The pool generates decent volume and fees for Curve relative to its size.
With the recent deployment of Convex on Polygon and the fact the pool houses the protocol owned liquidity this pool+gauge is the optimal location for USDR to build deep liquidity in a sustainable manner.
Governance: Real USD, the treasury composition and changes to the design will be governed by locked TNGBL token holders, this governance is not yet in place but will be soon. 4 of 5 multisig
Oracles: We have our own oracles for properties at the moment, but are working with Chainlink to integrate, then true property valuations via 3rd party Hometrack.com can be reflected on chain in Real Time so the treasury values and the collateralization ratio are up to date, this also allows for “minting on gains” to work more effectively in real time.
Centralization vectors: The Real Estate obviously exists in the real world and is managed by an entity, Tangible Custody, this entity collects rent and converts to USDC and sends to the rent smart contracts. This however will not remain the case, within 24 months our goal is for 1 single entity to manage and supply no more than 10% of the Real Estate for USDR.
Real Estate agencies + Management companies will be able to apply via governance, to supply assets to be tokenized that can be purchased by the USDR treasury. In addition to this management companies will be able to apply to manage the treasury properties and to collect the rent and pay it up to smart contracts monthly. With each agency/management co essentially acting like a node in a decentralized network.
An on-chain governed decentralized stablecoin with off-chain yield sources with distributed distinct entities managing the off-chain assets. This is not impossible, though many might have you believe it is. We’ll be sharing further details on the plan for this progressive decentralization soon.
- Market History: Prior to the events of last weekend USDR had never lost peg. We did depeg over the weekend as DAI and USDC lost peg, quickly regaining it on Monday as USDC redemptions began to be met.
What is of particular interest in this case is the way USDR behaved under extreme market stress and heavy redemptions. 50% of the treasury is used to purchase Tokenized Real Estate and 50% is kept as DAI or added to LP on Curve. Real Estate on–chain is not yet that liquid, therefore in extreme market conditions cases can arise where Real Estate cannot be liquidated fast enough to meet redemptions. We have developed a solution to this issue (pDAI) This gives the treasury time to liquidate Real Estate in the real world whilst the market for on-chain real estate is still nascent. On Saturday am UTC the DAI reserves were depleted as people began to panic. We anticipated that people would begin to redeem for pDAI, and that on Monday am UTC we would need to create a liquidity pool for DAI-pDAI for those who wanted to quickly exit their position. However this was not required as we regained peg without the protocol needing to issue pDAI at all.
This risk however remains ever present and is the single largest downside to backing a stablecoin with tokenized Real estate.
We are mitigating this in 3 ways:
i) We are building a borrowing product for Real Estate TNFTs, that will allow users to borrow DAI/USDC against their Real Estate TNFTs, this allows users to leverage and achieve stable rental yields of 20%+. We believe this product will significantly bolster the demand for Real Estate TNFTs allowing the USDR treasury to quickly dispose of Real Estate TNFTs on chain in order to fill DAI redemptions when required.
ii) We are working on partnerships with various proptech companies that will list USDR treasury assets on their platforms to enable fast disposal when required. These proptech companies have large audiences and can sell properties within a few days. They are not crypto related and the actual properties will be listed on their platforms not the NFTs. These partnerships will also involve them supplying assets to the treasury.
iii) The pDAI mechanism alongside the fast creation of a liquidity pool for pDAI-DAI should help absorb some of the pressure that a large drawdown in market cap would create.