Konijntje - Sperax Community Manager.
April, 19, 2023
Simple Summary [TL;DR]
We have seen a “bankrun” that even caused a depegging of the most used stablecoin in the world of DeFi: USDC, and making other stablecoin’s, even USDS, also lose it’s peg for a short period of time. This topic is meant as a discussion to bring back volatile assets to the equation to back USDS, which holds several advantages, but also disadvantages.
Making USDS backed ~5% by volatile assets, such as ETH, and 0.5% by SPA.
Volatile assets bring new yield opportunity’s for USDS, and provide USDS with a more broader collateral portfolio, because even stable coins have not proven to be fully “stable”.
Furthermore, requiring a -very- tiny percentage of SPA to mint USDS, drives more value to SPA. Due to the volatility of SPA, 0.5% is chosen as a start and can always be changed by the DAO at a later stage.
Are stablecoins really that stable? With the central banks worldwide running at full printing speed, higher inflation seems impossible to prevent, therefore the main currency’s currently in circulation get diluted more and more, giving you less value for the same dollar/eur as time goes on. This proposal is to partly back USDS by assets that are meant as a save haven, even though they can be highly volatile. That means that we are adding, for example, 5% of the collateral of USDS in ETH. This is a good starting point that can always be increased or decreased in the future.
Not only does USDS benefit from this strategy, value will also be driven to SPA as it is once again part of the USDS collateral. Furthermore, various yield opportunities are available for ETH, giving USDS holders a extra source of income.
It must be clear for the DAO that the negatives are obvious. In case of a big selloff of the assets we add (ETH), USDS may depeg. However, with only 5% of the collateral being ETH, the depegging risk is low, especially after the crypto market took a huge beating already and seems it is in recovering shape, even though it will always remain speculative what the market is doing.
Add ETH and SPA to USDS collateral.
No snapshot yet, please discuss in this forum.