sCIP#39 - Add a DAI/USDP/LUSD the d3Pool

Summary:

There has been renewed demand for decentralised USD stables on Curve. Most recently, the DAI/sUSD pool was created, a moderately sized pool which has left some people wanting further decentralized options which had been lacking up until a few months ago.

Two new collaterized USD stables have grown recently, LUSD from Liquity and USDP from Unit Protocol which we thought could make a nice decentralized 3Pool along with DAI. Both held their pegs really well during the crash last week.

Motivation:

As there is increased regulatory pressure on custodian stable USD, it is important Curve keeps some fully non custodial options.

Specification:

DAI

Website: https://makerdao.com/en/
Address: 0x6b175474e89094c44da98b954eedeac495271d0f
Supply: $4b

USDP

Website: https://unit.xyz/
Address: 0x1456688345527bE1f37E9e627DA0837D6f08C925
Supply: $100m

LUSD

Website: https://www.liquity.org/
Address: 0x5f98805A4E8be255a32880FDeC7F6728C6568bA0
Supply: $485m

For:

More non custodian USD pools on Curve

Against:

USDP and DAI can be backed by USDC so what’s the point of even trying, we should just give up and embrace our centralized overlords. (Also please don’t dilute existing pool)

Poll:

https://signal.curve.fi/#/curve/proposal/QmPMkJwTTKxEAR49jAnhWwhHCF9kuNmcGCH2cebSCWAbj1

16 Likes

This will strengthen the Curve Protocol and lower the risk of stablecoins issuers acting malicious

Feels great to see CRV guidance choosing wisely to keep CRV decentralised. hip hip huraaay

I am supportive of this - it should also include FRAX though!

3 Likes

Hey guys, I definitely think the 3 protocols proposed are completely deserving of being in this innovative pool.

Full disclosure: I’m the founder of Frax so I obviously have a bias, but I’d be interested in knowing the steps we could take to be added/included in this pool going forward. I’m sure the biggest hurdle for us being included is that we are predominantly backed by USDC, currently 85% collateralized with it and 15% purely algorithmic/fractional. The USDC defeats the underlying purpose of this pool somewhat and I concede that upfront. Secondly, it should be noted that DAI is 38% backed purely 1 to 1 by USDC and rising quickly: https://twitter.com/jp_koning/status/1397188113118662658

I’m not here to propose removing DAI as I’m a huge fan of Maker and everything they stand for. I’m here to point out that we are dramatically lowering our reliance on USDC collateral while other protocols are increasing theirs, so I think that FRAX’s trajectory to shift away deserves some kind of consideration into this pool as a nascent gamechanging protocol.

The first thing to note is that we are a fractional stablecoin (the first that introduced this concept of partial backing) so if you’re not familiar with the FRAX mechanics AMO Overview - Frax ¤ Finance is a great place to get started. Essentially, FRAX is the first stablecoin designed from first principles to create the partial/fractional category using a market set collateral ratio. The collateral ratio is set by the market’s pricing of FRAX. If FRAX is under $.990, the CR goes up. If FRAX is above $1.01, the CR goes down. FRAX can always be redeemed for $1 of value from the system or minted by placing collateral into the system at the CR and burning the remainder in the governance token. This finds the optimum market desired collateral ratio that can support FRAX perfectly staying at a tight 1 cent peg between .99-1.01. The idea is to get to a very decentralized CR, perhaps substantially below 50% or lower than what Maker might be at with the current 38% USDC PSM. The design essentially allows the market to vote what the fractional backing of FRAX needs to be through their holding or selling of FRAX.

Lastly, consider our stats since numbers don’t lie. We have never broken our peg a single time since launch.

Additionally, Coingecko has also analyzed FRAX and shown that through 2020 Q1 we have actually had the tightest peg of any non-fiatcoin even though we are not fully backed by one.

Our current mcap is above that of USDP if we were added to this pool. We would not be the smallest protocol and are growing rapidly. Lastly, we also have a very successful FRAX3CRV metapool which we are a huge fan of and has consistently had 7 figure daily volume on average with respectable TVL. The performance of FRAX has been good enough to be the first algorithmic/fractional stablecoin added to Curve gauges :slight_smile: 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.

I spoke to Charlie, Michael, and Ben who weighed in on perhaps it not being the right time to include FRAX until the CR goes substantially lower so that it is not as reliant on USDC even though FRAX is partially algorithmic/decentralized already. I pointed out that it’s kind of a chicken and egg problem. Our reliance on USDC would dramatically go down the more we get into these kinds of pools and recognition for what we’ve been able to do so far would help us build even more Lindy effect. I think that we are making progress in the algostablecoin space faster than any other group, and while there is rightful skepticism of algostables due to their past performance, FRAX’s numbers look different. An objective look at our achievements without prejudgment of other algostables would be very appreciated. I believe that the market would set the CR of FRAX much lower than 85% if we were to make it into this pool which would increase our decentralization as an immediate positive sum effect. I believe the market could set our CR in the 70s or even the 60s in the near term if we are included in this pool. The goal would be to work with the Curve community and other protocols that have FRAX deeply integrated to continue to lower the reliance on other stablecoin collateral to under 50% and even approaching low double digits in the coming few months. But getting there could become achievable quicker if we have recognition of what we’ve achieved so far.

I wanted to take the time here to make sure we voice our opinion and make it known we are huge fans of Curve, love our FRAX3CRV pool, and also share the vision of this decentralized pool. We’d love to know what the Curve community thinks here and if we can find a path to inclusion.

Cheers,
Sam Kazemian

7 Likes

Yes please. This would be great on Polygon and FTM too.

1 Like

excellent proposal, the fear is imho

USDC: might be replaced by a Centeral Bank (FED backed) Stable coin

USDT: backed by varying currencies + Bonds (not US T-Bills)

this is an excellent proposal, well done team

very well said and so happy to see you engage in meaningful conversation, hope to see you in Mt Olympus :wink: 3,3

1 Like

This is a great initiative but I think other truly decentralized stablecoins should be considered, for reasons alluded to in the “against” section. FRAX has shown to be stable and resilient through market turbulence. Additionally, alUSD, just added to gauges, should be at the top of the list: strong peg through volatility, huge liquidity pool, partially collateralized (sometimes overcollateralized) by DAI (no centralized tokens).

4 Likes

I support this initiative. Trying to find more places to use LUSD. This is a great idea and will vote on chain for in.

Love the proposal, but indeed weird to not include FRAX in a decentralized stablecoin pool given it has held its peg probably better than any other algo/decentralized stablecoin over the last months.
While it might not be as decentralized as some of the alternatives yet, its concept strives for decentralization and usecases like this will allow FRAX to get there at a faster pace.

4 Likes

The proposal is excellent and the intent to keep curves as decentralized as possible puts me in a good mood. At the same time I am happy that 40% of the few replies received are dedicated to Frax. It is at least questionable that the stable coin that has best kept the peg during the crash of the last few days has not been considered.
I read the reply on twitter that says that stability in the short term does not mean safety in the long term. The long-term security of a protocol such frax finance also derives from collaboration with large entities such as curve finance. Defi is collaboration, I understand not to risk but including Frax is not a risk. The goal of the protocol is to be less collateralised by usdc as possible and this can happen thanks to integration like this one. Think about it!

Andrea

2 Likes

Great step towards decentralization, good job guys! And I’m confident Frax will be added to this pool or a similar one soon.

4 Likes

This is a great initiative to direct the whole space towards more decentralization. Unfortunately, as previous comments already pointed out, FRAX is missing. The fractional-collateralized stablecoin has never lost its peg and has been moving more and more towards decentralized collateral (from 100% to 85% within a few months). However, I fully support this new pool and hope this will have a lot of traction in the ecosystem.

2 Likes

Hey, Scoopy from Alchemix here.

I’m obviously biased, but I think that alUSD makes a lot of sense to add to this pool. We have a lot of liquidity already in curve in the 3CRV meta pool, and have been stable and healthy since our launch 3 months ago. According to parsec, alUSD has been the second most stable decentralized stablecoin, with only DAI being more stable. What’s more, that’s with an A value of 60, meaning we are a little more loosely pegged than coins with higher A values. And despite that, we still were extremely stable.

The alUSD3CRV-f2 LP was a demonstration of how powerful the curve factory metapools are. We have had the deepest factory stable pool by a large margin, with only the 3CRV pool itself being deeper than alUSD3CRV in all of Curve. Our pools have also generated respectable volume, with a rough average of $15m per day. I think the success of this pool has shown that Andre was right – the curve is the price, and opening these metapools has been a game changer for new projects. These pools have shown that utilizing them over other AMMs can make or break the design of a stablecoin. In my totally unbiased opinion, I think Alchemix demonstrated how valuable they can be.

alUSD performed extremely well even during Black Wednesday, an event that distressed several other decentralised stablecoins. alUSD briefly dipped to $0.995 but quickly came back up to $1 or slightly over it. It was our first real test and alUSD performed remarkably well. We believe that alUSD is positioning itself as a promising crypto dollar.

For v2 of Alchemix (expected to be released within 3 months), alUSD will accept practically any viable stablecoin with enough liquidity and yield on chain as collateral for alUSD, which will improve it’s stability across the various stablecoin pairs. We believe with that release, alUSD will continue to grow and become a major decentralized crypto dollar, and as such, it would make sense to include alUSD in a decentralized stablecoin pool.

Another added benefit of adding alUSD into the pool is that it has a large amount of liquidity in the alUSD3CRV pool, over 400m presently. This pair could also strengthen the peg of other shared assets in the pool by being a liquidity bridge to other tokens bundled in 3CRV.

Should this pool include alUSD, there is high likelihood that it would also be incentivised with ALCX rewards – subject to Alchemix community governance.

For an all-in-one rundown on Alchemix and Dashboards for key metrics, please check out this site:

https://dyor.fi/alcx

10 Likes

Ok I am not a veCRV holder but as a believer in the FRAX vision I propose that after this proposal gets added that another one is proposed to add FRAX to this pool.

Alright so that might be a little bold but let me explain my thinking. This pool is a smart move toward decentralization and is important to all of us and so is the yield but taking the short term approach is limiting veCRV hodlers from long term yield. By adding FRAX to this pool it helps bring more volume and liquidity which in term will bring more yield to veCRV hodlers.

Why - because new liquidity is entering the market and FRAX and other algos will benefit from this. We are better to group this liquidity together. Lets together bring cefi to defi and not just create an API for banks.

Oh ya forgot to mention FRAX held peg better then most other stables - that has to be the most attractive thing.

1 Like

I definitely agree with the addition of both FRAX and alUSD to this pool, unless there is a very obvious reason to omit them in this pool (in which case I would be happy to learn what such a reason might be).

The more these decentralized stablecoins are highly connected with each other, the more robust DeFi will be as a system against shocks like the most recent one. Also, increasing interconnectivity in the system will reduce operational barriers for users to put their currencies to use, which should encourage adoption and benefit both Curve and the ecosystem as a whole.

Disclaimer: I am an active member of the Alchemix community.

5 Likes