[Proposal] Add DAI back to the mUSD Basket

Summary:
Proposal to introduce DAI back into the mUSD-Basket.

Motivation:

  • DAI is one of the most decentralized stable assets we have in the ecosystem. We, as a decentralized protocol should foremost support and use other decentralized protocols in order to reduce the overall risk to mUSD holders coming from centralized parties.

  • DAI has been removed from the basket due to the frequent loss in peg. Over the last months, the Maker protocol has grown by a huge amount and more DAI than ever are now in circulation The price of DAI is now closer to the peg and has fluctuated much less than in the previous year.

  • When DAI was part of the mUSD-Basket, it was a very attractive asset for other users to swap, hence generating fees from swaps.

Therefore I believe that DAI would be once again a great addition to the mUSD basket. Further allowing mUSD and the Meta-protocol to grow, generating attractive fees and strengthening decentralization.

Pros:

  • More decentralized assets, less risk
  • Potential to grow the total locked value in the basket
  • DAI is a popular asset in the ecosystem
  • Generating more fees in swaps

Cons:

  • The potential loss of peg once again if the ETH price falls rapidly (but can also generate high fees when demand for DAI is high)

I think this can be a good move for Meta. The risks that were present last year when Meta was very new and the DAI price fluctuated heavily are now a lot lower. The Meta protocol stood the test of time so far and we should embrace decentralization.

Would love to hear your feed! Can you think of any other Pro or Cons?

Dimitri

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I think it’s a Great opportunity to revive this discussion, thanks @Dimsome for initiating it.

DAI could be added to the main basket with the new mUSD AMM, lots of liquidity in DAI and arb opportunities.

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I think the original problem with DAI was that it seemed to be always worth more than the other stablecoins and so people would immediately sell it and farm the profit, ultimately draining DAI from the basket. I think people had some ideas on how to counter this issue but not exactly sure how much effort was put into exploring these options.

I would add not only DAI, but also BUSD and PAX.

I would personally love to see DAI added back into the mUSD baskets, but I haven’t been here long enough to know why it was removed from the baskets in the first place. The benefits are certainly clear (high liquidity, high volume = more swap fees = more apy + collateral), but the drawbacks are much less clear to me.

Could someone with more history in mstable provide context as to why it was removed from the basket? Depending on the reasoning (and if it would still be an issue or not) may help push this to one side or the other.

Yes indeed, that was the original problem. The DAI price was mostly above the peg. Now the DAI price is much more stable and the Total Dai supply is much higher.

I think for the future an AMM model is planned, just like for the mBTC swaps. That would help with price fluctuations.

There is a discussion for that going on already here: /discussion-add-pax-busd-to-mstable-basket/86

Well, the problem was that the DAI price was above the peg. And all DAI was usually instantly drained. Now the DAI price is much more stable and the Total Dai supply is much higher.

An AMM-Model would also help to mitigate this. Currently it’s only enabled for the mBTC swaps.

Hi @Dimsome,
There will be some public communications soon about mUSD’s migration to a new AMM (as is currently live for mBTC) and the basket composition we will be migrating to. We expect the entire process to be wrapped up by the end of the month.

As we voted to only temporarily remove DAI from the basket previously (link here), it will be in the new basket post upgrade.

We’ll be sharing more information very soon, and hopefully we can loop this thread into the broader conversation. Great 1st post btw, thank you for initiating the conversation.

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