Stability Fund Mechanism

Proposal Discussion
#1

This idea originally came from @arch, and it’s something implemented by MakerDAO called the MakerDAO PSM. It’s a bit different than my original plan for a “stability fund”.

This proposed solution would take significant pressure off of the rebalancing mechanism to maintain the peg. It’s quite simple, but powerful.

The stability fund would have the ability to mint bnUSD in exchange for whitelisted stable assets, and vice versa, sell stable assets in exchange for bnUSD and burn it. Within the ICON Ecosystem I’d propose IUSDT, IUSDC and USDS for now. We would institute a 0.5% fee controlled by governance. I propose we start with the following limits for now for tail-end risk protection (I.e orbit bridge is compromised)

  • IUSDC: 2M
  • USDS: 2M

This proposal essentially allows any approved stable asset to be used to mint bnUSD, making it easier to absorb spikes in demand or supply. This, coupled with the future feature of multi-collateral, will greatly increase the stability and revenue of the protocol.

From my understanding this should be fairly easy to develop and could potentially release prior to the Java migration/continues rewards if circumstances call for it and the DAO approves. Looking forward to thoughts and feedback.

14 Likes
#2

This is a very good step forward. The more bnusd has avenues to absord liquidity and exit points across several assets the better. Timely proposal !

6 Likes
#3

I’m all for it. Stability in an unstable market shows strength in a project.

2 Likes
#4

Note - edited original proposal to add hard limits to protect against black swan events

Second edit- remove IUSDT and set limits to 2M

3 Likes
#5

Agreed. Push this one through fast with 1 hour voting time!

1 Like
#6

Edit - changed fee to 0.5% to incentivize dex trading

#7

Right now would be a good time to be able to bridge to Binance to reduce cost of bringing in new capital and access new capital. I would prefer to be able to bring in my USDT from Binance directly.
In any case I 100% support the proposal - as the old adage goes - what does not kill us makes us stronger and Balanced s getting stronger each time it is stress tested.

1 Like
#8

I like it alot. Will it be possible to mint bnUSD in a 1 to 1 ratio?

#9

Yep minus the 0.5% fee

2 Likes
#10

I think this is a very good idea. As far as I can see the trade-off is that bnUSD is dependent on other stablecoins (remaining its peg) but with carefully designed limits this is a trade-off I would be willing to make. When I get home from my travel tomorrow I will look some more into it but 2M sounds about right atm.

3 Likes
#11

Sounds good, thanks @arch and @benny_options and others.

Makes sense, thanks for pointing that out, so the risk is distributed between stables.

1 Like
#12

Naturally I still stand by my idea there. We have a need for more bnUSD in circulation, but it appears people are too worried to mint (rightfully so).

I think the stablecoin risk towards the DAO is a risk worth taking, and has a profitable upside. The contrast of this to stablecoin LPs is it doesn’t cost the DAO incentives to keep the LP stocked, and all fees go to the platform.

There is no harm or indeed many benefits in using an existing stablecoin to bootstrap bnUSD a bit.

5 Likes
BIP22: Deploy the Stability Fund Mechanism
#13

Yeah I think its a good idea to have the ability to mint bnUSD 1:1 with other stablecoins. Its so frustrating when the market turns down and you have to pay down your bnUSD loan only to see bnUSD trading at $1.1. This should alleviate that issue to a degree as we’d be able to bridge another stablecoin over and use it to pay down/off the bnUSD loan.

@benny_options - you mentioned tail-end risk protection (ie orbit bridge is compromised). Are you using that as an example? In other words, orbit bridge is currently not compromised, is it?

#14

Haha just an example, it is not currently compromised