A proposal by the Mechanism.Capital team to create a Curve Metapool for Empty Set Dollar (ESD) and the 3Pool stablecoins (USDC, USDT, and DAI).
ESD has been one of the fastest growing algorithmic stablecoins launched to date. Its market capitalization has grown to over $65 million in the ~2 months since its inception (peaked near $100 million).
The unique mechanism design of the protocol makes it a strong candidate to become one of the largest stable collateral assets in the decentralized finance ecosystem.
Creating an ESD metapool would attract more liquidity to the Curve platform and lead to increased trading fees.
Learn more about metapools here: https://resources.curve.fi/faq/base-and-metapools
Empty Set Dollar (ESD) is a new algorithmic, seigniorage-based stablecoin that utilizes fixed protocol rules on supply expansion as well as a unique coupon creation + redemption model to incentivize trustless coordination between selfish participants that maintain ESD’s synthetic peg 1:1 with the US dollar all on-chain. Unlike other algorithmic stable coins like AMPL, ESD does not rebase all balances using non-standard functions, but instead adjusts supply through other mechanisms, allowing ESD to have the same composability as other standard ERC20 tokens.
Currently, crypto lacks a truly decentralized and censorship-resistant stablecoin. While DAI and sUSD come close, they currently have vulnerabilities in their architecture. The goal of ESD is to create a truly permissionless, scaleable, stable store of value, that can be used as superfluid collateral in DeFi.
Note: ESD currently only incentivizes the ESD/USDC Uniswap pool. In order to motivate more liquidity to flow to this Curve metapool, ESD holders would have to vote to upgrade ESD to incentivize this new pool. However, various ESD community members have already expressed their support for such a prospective proposal to reward Curve LPs.
Total Uniswap Liquidity as of 11/3/2020: $1.52 million
Avg. Daily Trading Volume (Last 14 Days ended 11/3/2020): $3.75 million
Token Holder Distribution:
As of 11/4/2020 there are currently over 853 unique addresses holding ESD. This includes 668 staked addresses.
Over 90% of ESD tokens were staked to the DAO as of 11/3/2020.
This is an opportunity for Curve to attract more liquidity to its platform and increase trading fees. It would also benefit the ESD community by increasing the efficiency of ESD turnover and accelerating ESD contraction & expansion cycles to further stabilize the price of the token around $1. Finally, accelerating the growth of ESD would enhance the antifragility of the entire DeFi ecosystem due to ESD’s unique characteristics relative to other stable assets.
This metapool would include ESD, USDC, USDT, and DAI. It is likely that the ESD protocol community would vote to incentivize this Curve metapool. It already does this for the ESD/USDC pool on Uniswap: https://emptyset.finance/#/pool/
This pool would bring more liquidity and fees to the the Curve protocol.
It would also help accelerate and dampen the volatility ESD’s expansion/contraction cycles, which are currently delayed due to the limitations of slippage on the ESD/USDC Uniswap pool.
Successful passage of this proposal would show the Curve community’s willingness to support new, innovative protocols – specifically those focused on open and permissionless access to DeFi.
ESD is a relatively new and experimental protocol. There are both known and unknown risks to explore as the protocol matures. These include, but are not limited to:
ESD is expected to trade within a narrow band around US$1.00, but has experienced short periods of significant volatility
A downward spiral in the instance of zero demand for new coupons (though in the current contraction period, over 26m coupons have been purchased)
Smart contract bugs (code is currently under audit); and
A design flaw that leads to an economic attack (see the recent Harvest Finance attack).
- Website: https://emptyset.finance/#/
- Twitter: https://twitter.com/emptysetsquad
- Source Code: https://github.com/emptysetsquad/dollar
- ESD token contract: https://etherscan.io/token/0x36f3fd68e7325a35eb768f1aedaae9ea0689d723
- EIPs: https://www.emptyset.xyz/t/eip-1-improvements-to-esd-coupon-redemption/32
- Medium: https://medium.com/@emptysetsquad
- Discord: https://discord.com/invite/vPws9Vp
- O’ligopoly Productions Writeup
- Defi Weekly Writeup by Kerman Kohli
- esd.tools (dashboard for tracking the state of the network)