sCIP#11 - Add Empty Set Dollar [ESD,[3pool]] Metapool


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:


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:


  • 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).

Primary Resources:


Additional Resources:



I like the idea, but question the timing. Is it important for this to be enacted now? Or would it be better to wait for another month or quarter for things to smooth themselves out.

Also, the current quote on Coingecko is a bit concerning.


The fact that the price is a bit off peg is exactly why we need curve pool for ESD as it will allow for larger trades that don’t knock the peg as far off. It’s been shown for multiple debt/expansion cycles that while ESD can trade above or below $1.00 (similar to other stablecoins), it does mean revert to $1.00 due to the incentive mechanics of the system. The curve pool would be able to reduce the magnitude of these osciliations.

I’m in favor, but I want a BIG RED BANNER on the deposit page saying that ESD is a highly speculative stablecoin and not backed up by collateral or matching USD reserves. Especially for folks adding 3pool or any of its constituent currencies.

Also this one needs a very low A.

I think that in the interest of safety, we should at least wait until the audit is completed.

Audit Report from CertiK

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I’m trying to wrap my head around the mechanics to this, and figure out if it does actually trend toward stability over time.

I understand you use a Uniswap TWAP oracle on the ESD-USDC pair to determine whether to incentivize market behavior. The price is weighted over an 8 hour epoch.

After an epoch, the average price is used to decide whether to issue coupons (if the price is <$1) or to mint new ESD (if price is >$1). An ESD holder can choose to burn their ESD for a coupon that promises them a discount on future ESD. The discount increases the longer ESD remains <$1. The limit is 90 epochs (a month) for redemption, so this is risky if the price does not return to $1 fairly quickly.

If the price is >$1, ESD is minted, with 80% going to governance stakers and 20% going to Uniswap LP’s as an incentive.

I wonder if there are ways this model can be gamed such that the peg is permanently broken? If there’s a rule that someone can exploit only by having enough capital to deploy toward their effort, eventually it will happen. I understand the oracle is time weighted, so some kind of manipulation needs to be extended over a longish time period. BUT, ESD only self corrects once an epoch, so I wonder if this “stablecoin” ends up being an anti-stablecoin. Whale groups leeching profit by making sure the price is always above or below the peg, and preventing an expansion of supply to keep the game manageable.