If the d3Pool is intended to evolve into the safest foundation of decentralized finance stablecoins I’d be comfortable including fully collateralized tokens with low smart contract complexity & risk like DAI, LUSD, etc.
While I respect FRAX as a project and hope it succeeds long term, fractional reserve stablecoins are inherently more experimental & subject to risks as we saw with the recent IRON+TITAN collapse (a fork of FRAX handled more recklessly, but with fundamental similarities to consider). Additionally, FRAX FXS collateral inherits a high degree of smart contract risk by allocating funds across Compound, Aave, & Yearn. Yearn fundamentals inherit among the highest risks in defi as its fund managers actively seek the highest yields in the ecosystem. A flaw anywhere in the tech stack of projects Yearn touches presents risk to FXS, which already balances a fine line as an experimental fractional reserve to FRAX.
That FRAX has held a stable peg for a few months is a promising start, but is that sufficient to bet your life’s savings on it holding its stability perpetually? If not, it may be premature to include in a d3Pool intended to provide the safest fundamental risk profile for defi stablecoins.
Less familiar with alUSD, but the recent exploit allowing unauthorized withdraw of $6,000,000 of ETH is an unfortunate oversight in software engineering best practices & unit testing that should have been avoided. If alUSD has similar downstream risk via Yearn that’s additionally a point against it from a stablecoin risk perspective. If alUSD relies purely on heavily audited / lower complexity stacks like Aave that’s potentially fine with Aave’s Safety Module, but it’s still higher risk than ideal for a stablecoin.
One potential solution for addressing the above concerns could be including FRAX & alUSD on the condition they are included with insurance from an entity like Nexus Mutual. Nexus Mutual already offers insurance for smart contract risk associated with Yearn. If they can additionally offer insurance on bank run risk with fractional innovations like FRAX+FXS, that not only lowers the risk profile significantly for d3pool participants, but makes a compelling narrative about the robustness of the next generation of defi stablecoins & their supporting ecosystem.
If professional underwriters like Nexus Mutual (or similar entities) are unable or unwilling to provide insurance here, that might be a sign the associated risks are not yet ready for prime time in a d3Pool.
Don’t intend to come across as overly negative, but didn’t see anyone else raising the obvious concerns of a stablecoin d3pool inheriting myriad risks via Yearn. I’d like to see all of these project succeed, and would love to see them included in a d3pool if the obvious risks can be addressed via insurance or some other solution. If the above risks can’t/won’t be addressed, I don’t see a few months of peg stability as sufficient reason to rush inclusion.
As Curve governance participants, if you wouldn’t personally risk your entire life savings in one of these stablecoins, the less informed defi user who trusts your expertise probably shouldn’t either. Overcollateralized options with low complexity are easy to support. Experimental options that inherit substantial downstream risk, not quite the same.
Disclosure: I’m not affiliated with any of the above projects or entities, don’t work for Nexus Mutual & am not trying to shill the insurance business. I’d love nothing more than to see all these project succeed long term, but patience & reasonable risk management are necessary steps to that goal.
and we’re very proud and honored of that achievement. To put it in perspective, FRAX has never, a single time, traded outside of its peg range on Curve, Uniswap, or anywhere since it launched in December 2020.
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