Added Collateral Types Proposal

We have seen the success of Terra adding BTC to UST collateral to increase confidence in UST and LUNA.

I propose we add other collateral types that can be used to mint USDN.

In keeping with the “wrapped WAVES” with a native APY theme, we can take a basket of PoS L1 native tokens, say the top 3 or 5 or whatever the community decides from this list and add this as a collateral type. Neutrino would be responsible for delegating or leasing their tokens to earn stake APY.

Alternatively we can choose the most proven crypto asset as a collateral type in BTC.

Obviously this is an idea that has already been done many times and the exact parameters should be discussed by the community. Having non-WAVES as collateral types for USDN may add stability and reduce pressure on WAVES in periods of extreme stress.

I understand the common objection would be that WAVES would lose bid pressure if other collateral types were added. This is true but USDN may benefit in the long run by onboarding members of other ecosystems. There can be parameters to require at least 50% of the collateral backing USDN be WAVES or some other condition to ensure USDN is tied to WAVES.

I look forward to community comments.

3 Likes

I’m not in favor of this proposal. Yes, Luna seems to be successful in adding BTC to their system as an additional security. But, by intention, it works a bit different than their usual backing mechanism.

The proposed change is quite complex, both technically and from a financial engineering point of view. Therefore, i wouldn’t really rush it.

I think we two very good fitting proposals now: the one from Inal for increasing max. swap size for NSBT hodlers (for which voting is already active) and your other proposal of removing the NSBT requirements for swaps when USDN is below a certain threshold. Let’s move on with this and see how it works. It is usually not a good idea to change to many things “at once”. Adding such a complex change, as proposed here, to the mix might make things ulgy, uncontrollable and hard to judge on, e.g., what really was the successful factor. Therefore, i would suggest to keep this proposal in mind, but first start with the other two and see how it works.

1 Like

This was not meant to be an immediate proposal.

If the complexities of having new collateral types in the strict decentralized sense are too high, we could do what Luna Foundation Guardian (LFG) is doing and just maintain a reserve of BTC and/or other coins to use in emergency situations like when USDN peg is severely off. This would reduce pressure on WAVES.

I support this proposal. I have always been in favor of having BTC > USDN swaps. I think to make waves swaps more lucrative we can impose a higher fee for such swaps. In essence, waves > usdn (2%) where btc > usdn (3%-4%).

The Neutrino protocol provides the possibility to stake USDN; using leased Waves as a currency reserve and providing yield to USDN stakers. By increasing the collateral through other means I assume the yield will go down and the leased Waves Currency reserve will be polluted. I think that’s not something we should want.

I would opt for another solution like creating a reserve treasury created from the fees from the smart contract swaps or a small % of the USDN yield.

This treasury reserve could be traded into other stablecoins (USDC/DAI/UST) that would be able to create yield as well through staking or by providing it as collateral to Vires or staking, providing yield back to Neutrino Nodes or NSBT stakers. This currency reserve can then be used by means of governance vote in extreme situations.

I agree that a centrally managed or DAO managed outside reserve “vault” of non-WAVES/USDN assets could be a good middleground to having natively accepted collateral types other than WAVES for minting USDN.

I don’t think we want other collateral than Waves to mint USDN, this is what is forcing Waves off the market, if we would take other assets this effect could be countered. Also this is what makes the algo and backing ratio for USDN tick, so quite unsure how this should work.
With the right NSBT swap settings we should be able to restore peg always.

A “vault” with other currencies should buy up USDN automatically when for example USDN is < 0.90. But I think your open swap proposal might be a better fit for this.

See how LFG does it: Bitcoin Reserve Pool - Governance & Proposals - Terra Research Forum

2 Likes

This might be even better. We could choose assets and setup a bot that buys these assets with funds generated by usdn staking (taking a percentage from that). bot can buy the assets and fill the vault. And how the vault funds should be utilized could be discussed after selecting the assets.

https://alexpupyshev.medium.com/neutrino-enhancement-proposal-base-tokens-augmented-bonding-curve-abc-79c7d45ea0a5

This post aged bad.

It is not a good idea to use as collateral an asset over which we don’t have absolutely any control. Also, it is quite useless because when there are multiple assets in a collateral, swaps tend to withdraw good collaterals and lock bad ones. So instead of collateral being an average of good and bad assets, it always tend t be the worst.