🧊 [RFC] Degen Loop mUSD through Curve

The mUSD in mSave sits unused. Not only has JS spoken of his love of capital efficiency, but the following proposed strategy would help mUSD trade volumes hit close to the 2 million required for a chainlink oracle and thus mim integration. Other beneficial consequences include increased Save Yields and increased mUSD Supply.

Although ideally we would analyze slippage functionally to determine what would be the ideal exact assets to swap and what would be their ideal quantities, I currently do not have the time. But, I did take 6 snapshots of the swapping 0.5 million mUSD to USDT,USDC,DAI on Curve (the loses were $610 DAI to $686 USDT). Then swapping USDT,USDC,DAI to mUSD on mStable yielded a +$46, -$105, -$60 before protocol fees. Protocol fees are close to $500 on this size swap. If the fees to mStable could be waved then the cost of the transactions would just be $1960 in order to increase the mUSD supply by $1.5 million and increase trade volume by $3 million (if you include both Curve and mStable swaps).

Lower volumes could be used as a compromise, but gas costs are amortized better by larger and less frequent swaps. I stated at the beginning that a proper design should be implemented which uses the Afactors and Asset amounts in both the Curve and mStable pools to find the optimal swap allocations. The other aspect to optimize would be how much more mUSD in the mUSD/3Pool than 3Pool is ideal. This should utilize the mSwap fees as a moat and aim for close to parity when swapping for mUSD on Curve and on mSwap.

If the issue becomes that the sUSD balance isn’t growing quick enough, then coordination should be attempted to be reached with the Synthetix team.

Adding some pictures for fun.


USDT_mUSD

I propose that the losses are subsidized by MTA holders. This decision is for the long-term benefit of the protocol: higher trade volume, chainlink oracle, more integrations in the defi ecosystem, higher circulating mUSD supply, as well as higher save yields to mSave depositors which will likely lead to higher TVL.

Although the swaps would get increasingly expensive as the curve pool becomes more lopsided (the slippage on swaps would increase), it would create arbitrage opportunities and then smaller swaps can be made by the protocol and market makers can provide the remaining volume requirements. Given that mUSD is already on Coinbase, it wouldn’t require much arbitrage gain opportunity for volumes to greatly increase.

I would propose having the protocol spend $2,000 for 40 days for a total of $80,000 to boost these various key metrics. If this gains support, I will run through the equations for the optimal swaps and what we need from sUSD.

2 Likes

Can’t get any easier than that! I wish I had that kind of money to do it. Thanks for sharing.

1 Like

Sounds really interesting, would love to see some math on how much money could be made arbing this by the protocol assuming fees are waived. Looks like a great opportunity if done correctly

2 Likes