PDP18 New mUSD basket composition & feeder pool asset selection

Posted by a member of the mStable ProtocolDAO

Summary

In an earlier forum post it has been proposed to change mUSD from using the existing AMM with 1:1 swaps and max weights to a StableSwap implementation as is live already for mBTC. For those who supported this change (PDP17), this post is intended to serve as a forum for discussion over which USD stablecoins should be included in the new mUSD basket.

Following on from this decision, there is also a discussion to be had around the USD stablecoins which form the first mUSD feeder pools. Assets that are not included in the core mUSD basket from the suggested compositions will be automatically considered as feeder pool candidates.

mUSD Basket composition

The protocolDAO proposes 4 options for the new mUSD basket composition. This list of course is non-exhaustive, and community members should feel free to propose alternative basket compositions that they feel would be superior.

Suggested basket composition options

  1. USDC, DAI, sUSD
  2. USDC, DAI, sUSD, USDT
  3. USDC, DAI, USDT
  4. USDC, DAI

Feeder pool assets

Depending on the outcome of the mUSD basket composition discussion and vote, there will be a consequent decision regarding which USD stablecoins are used to create the first feeder pools. It should be noted that these feeder pools will be tightly integrated with mUSD and the UI, so users will effectively be able to “mint” mUSD with these feeder pool assets at 0% fee - the difference being that these assets will not affect the risk profile of the mUSD (which will be composed from the selections above). Current feeder pool USD stablecoins suggested by the ProtocolDAO for consideration by MTA token holders include:

  • PAX
  • TUSD
  • bUSD
  • STABLEx
  • Terra

As with PDP17, should this proposal not be subject to material change, it will be taken to snapshot vote in 24 hours. Voting will be open for a 5 day window to give adequate time for a concurrent discussion. Voters in this window can change their preferences on the mStable snapshot page. We look forward to discussing these proposed changes with MTA holders!

3 Likes

I think it is worth reiterating that any asset that is in a feeder pool and not in the main basket, essentially has all the benefits of being in the basket, without affecting the risk profile of mUSD. It is still possible to mint and redeem between an mAsset and feeder asset (fAsset). With regards to the core basket combination: security, liquidity and decentralisation are the top priorities. It’s worth noting also that in order for the upgrade to proceed, equilibrium weights must be achieved for the basket assets - if it’s possible to get sufficient liquidity in sUSD in order to perform the upgrade, then I vote that we go for selection 2, as it best balances the aforementioned properties. Given that TUSD and PAX have already been voted in as bAssets, I believe having them as the first feeder pools is a natural fit.

Additionally, I believe that it is worth pointing out that incentivising these feeder pools with MTA instead of third party pools like SUSHI would have much stronger circular effects for the mStable ecosystem and should also be put up for discussion asap.

1 Like

It does not make sense that PAX & TUSD are feeder assets because they have already been decided to be added to the main basket.

Any reason why they are being downgraded?

Is the gas efficiency of the contract affected by the number of coins in the basket composition?

1 Like

What is the rationale for removing TUSD from the primary basket? It holds peg well, is collateralized, and could be poised to flourish under its new ownership.

Just a few weeks ago there was a debate on reducing the max weight of USDT, or even removing it while its legal issues was being dealt with. No action was taken then.

1 Like

I find myself interested in the questions raised by both @dereksilva and @savannah.

I’d like to see the mUSD basket composed of the most liquid and traded stablecoins:

  • USDT, BUSD, USDC, DAI, HUSD, TUSD, PAX

Feeder pools stablecoins:

  • UST, sUSD

I would consider GUSD as a future addition to feeder pools once it will show more stability.

Why STABLEx?


Edit: because of the technical reasons detailed by @ScarceJim (limiting the basket to 4 assets is the best option), I revise my proposal as follows:

mUSD Basket:

  • USDT, BUSD, USDC, DAI

Feeder pools:

  • HUSD, TUSD, PAX, UST, sUSD
2 Likes

This is a great idea!! Perfect!
I’m not sure about HUSD as I’m not familiar with that coin. In that class of coins, USDN might be helpful. My gut says both of them should be feeder pools.

The only reason not to add BUSD would be if there could be a partnership opportunity with binance—but I feel like having BUSD if mStable also could be on Binance Smart Chain could be a big deal.

The snapshot vote you are referring to that included PAX in the basket was taken when the AMM being proposed was the ICSMM model and not the final Stableswap invariant that was implemented.

The AMM that was implemented introduced some technical reasons relating to gas costs and liquidity fragmentation that mean the basket composition needed to be reconsidered down to a maximum of 4 assets.

I’ll leave it to @alsco77 to elaborate on and more technical points here.

With regards to the downgrading of certain assets. It is in the best interest of the system to have at most 4 assets in the main basket. Security, liquidity, decentralisation and gas efficiency are the top priorities. With regards to gas efficiency, 2-4 assets most optimally supports trades between the main pool and other pools. With regards to the bAsset selection and previous whitelisting, all 6 of USDC, DAI, sUSD, USDT, PAX, TUSD have been cleared for use in the main pool. Given that USDC and DAI are most optimal in terms of the aforementioned properties, it seems like there are 2 remaining spots. PAX, USDT and TUSD are all centralised and fiat backed, and due to it’s enormous size and wide usage, it makes sense to choose the most liquid (USDT). Having a second decentralised asset with sUSD could make sense too. I think that any asset that has not been selected for the main pool should be a feeder pool at launch, given that they have already passed through governance - it’s worth noting that feeder pool assets can be used to effectively ‘mint’ mAssets, and the only difference is that they will not affect the risk profile of the mAsset. BUSD is a high priority pick too given it’s pickup in DeFI recently. I’ve touched on a few things there that relate to some points… hopefully that is useful.

2 Likes

In this case, I would support USDT, DAI, USDC only as they have by far the most usage. Do it with the goal of adding another non-fiat backed stablecoin if a suitable alternative develops. Only market caps of more than 1 billion USD should be considered for that precious space.

Was initially for USDC, DAI, USDT but happy to see sUSD in there now so its a more decentralised basket.

For incentivised feeders, I’m keen for:

  • busd
  • terra

Other possibles

  • stablex
  • pax
  • tusd