MIP-0028 Create a ARTH/LUSD Curve Gauge

Proposals
1

Proposal Details

This proposal seeks to approve the integration of $LUSD (Liquity USD) with $ARTH as an additional gauge for the MahaDAO ecosystem. The specifics are as follows;

1. Add $ARTH/$LUSD to MahaDAO Gauges for MahaX voters to decide on allocated rewards to the LP.

2. Add $ARTH/$LUSD to the MahaDAO Farming Portal for liquidity providers to earn yield on curve LP tokens.

3. Nominated trading fee of 0.25%

What is $LUSD - Liquity

$LUSD is a stablecoin deployed on the Ethereum Network that is back by a minimum of 110% in $ETH Collateral. Like $ARTH, users Mint $LUSD by providing collateral in the form of troves, and can redeem the underlying collateral on-chain.

The borrower and redeem fees are algorithmically adjusted based on frequency of redemptions and loans over time and volume relative to supply – such operations alternate around a target peg of $1.00 and sustain price stability via arbitrage incentives and fee changes. In addition, the protocol has a price floor and ceiling that determine min/max exchange price for minting and redeeming.

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Rationale for Proposal

  1. Reduce dependency on USDC – in light of SVB collapse regarding Circles risk exposure with collateral.

  2. The mechanisms for stability are inbuilt into the liquity protocol – since it has no governance, there is no expectation for its ability to change how it functions and operates.

  3. Allows for risk averse whales to provide liquidity without exposure to centralization risk, while still maintaining adequate protection against impermanent loss.

  4. Attract users by offering the first completely on-chain and decentralized stablecoin liquidity pool.

  5. Nominated trading fee of 0.25% is an approximation based on the greater market fluctuation to be expected with the oscillation of $LUSD, and value appreciation of $ARTH. In contrast, the existing ARTH/USDC pool incurs a 0.15% trading fee.

Reference Links

CoinMarketCap - https://coinmarketcap.com/currencies/liquity-usd/
Whitepaper - https://docsend.com/view/bwiczmy
Contract - https://etherscan.io/token/0x5f98805A4E8be255a32880FDeC7F6728C6568bA0
Dune Analytics - https://dune.com/dani/Liquity
SVB Collapse & USDC relationship - https://www.coindesk.com/markets/2023/03/10/scrutiny-falls-on-43b-usdc-stablecoins-cash-reserves-at-failed-silicon-valley-bank/

  • Approve
  • Reject
0 voters
8 Likes
2

So the initial decision to use ARTH/USDC and not something like the Curve’s 3pool is the fact that Tether (USDT) was in that pool and it was pretty shady to have USDT in our list of liquidity pools.

But now as we realize that USDC itself is bound to the same issues as Tether; we should start to at least support another stablecoin pair.

LUSD is a good candidate for us to consider because of it’s totally decentralized nature, however the main issue with LUSD is the fact that its market cap is too small as compared to that of USDC or USDT.

LUSD market cap is only 200mn$ as of writing as compared to USDC/USDT which is in the $30bn+

This means the available liquidity or market share for us to attract is fairly less.

Irrespective it’s a good option for us to have to support some of the decentralized maxi’s out there. It can also attract some users from the Liquity ecosystem as well into ours.

This will go for a vote this weekend. Thanks mike!

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