Stablecoins are the center of the universe

The current dominant use of money markets like Compound/Aave/Cream is to match two types of people:

  1. Hodlers of a crypto asset like ETH who want to borrow stablecoins.
  2. Anyone who wants to earn yield on the stablecoin portion of their portfolio.

Some consequences of this pattern:

  • The common element is stablecoins. We should make decisions that provide greater stablecoin utility to both groups. This could mean supporting more types of stablecoins, such as Curve’s yUSD or mStable mUSD etc. Or it could mean restricting protocol incentives to the stablecoin pools.
  • Users are insensitive to yields earned on non-stablecoins. Their motivation is to use them as collateral to borrow, not earn.
  • Users are sensitive to yields earned and interest paid on stablecoins. Suppliers want to earn a lot and borrowers want to pay a little, so that is a tension. The way to make both sides happy is to keep the utilization of the stablecoin pools near 100%, as this minimizes the spread between the supplied and borrowed rates. That means paying attention to the interest rate model and how users respond to the model, which might vary over time. We should be monitoring this and be prepared to modify the interest rate model as needed.
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Very strongly agree with the above. I propose adding TUSD and sUSD but not BUSD (they are focused on BSC, hardly any utility in the ERC20 world), and incentivizing only the 5 stablecoins:

I strongly advise against incentivizing other tokens such as ETH with the current compound formula, as it is very easy for people to deposit 1000’s of ETH and take the lion’s share of the rewards, without providing much to the platform. People will deposit ETH anyway in order to borrow stablecoins, no need for extra incentives.

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I agree with @vfat although i think that BUSD deserves a spot. as a MM we should be market neutral and allow all sorts of stablecoins accrue interest here. no need to discriminate. if that market doesn’t grow due to the reasons you provided than so be it - they won’t get the rewards

@PercentFinance can we quickly add these stablecoins to the list of tokens earlier voted in via this poll?

I agree with you, most if not all of the user bases, whether here or elsewhere own ETH, and that’s imo the first asset they deposit, so to take out stablecoins, and benefit of these somehow.

Refining the new token poll here:

Currently, we support these stablecoins:

  • DAI
  • USDC
  • USDT

Other stablecoins with Chainlink feeds:

  • BUSD
  • sUSD
  • TUSD

Other stablecoins without Chainlink feeds:

  • yUSD (Curve)
  • mUSD (mStable)
  • PAX

Given limited dev resources, I argue against adding a non-Chainlink feed as part of the October token batch.

Which stablecoins should we add in October?
  • BUSD
  • sUSD
  • TUSD
  • None

0 voters

I agree with everyone here saying stablecoins, and in particular, supply of stablecoins, is what we should try to target with incentives.

I’d also support adding TUSD - it seems to have a sizable market on aave.

Implementing Uniswap TWAPS, as has already been proposed, seems like the next priority for us to do.

@PercentFinance can you please comment?

@pyggie Thanks! I agree with the idea of providing more incentives to stable coin markets in general.
However, I think it makes more sense to focus our rewards to incentivize few main stable coin markets instead of many less used markets. Because most people only use USDC, USDT and DAI which are already listed, this can already serve the dominant use of money market. Our PCT is limited and the APY will get less attractive if we dilute it to incentivize too many markets.

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@PercentFinance @pyggie should we post a simple binary vote on this?

I.e. add and incentivize more stablecoin markets
keep only the USDC, USDT and DAI and incentivize those with higher APYs

This is why I suggest against adding BUSD, dilutes the APY for no real benefit (no one wants to borrow BUSD). This may also be the case for TUSD at this stage, based on AAVE’s Market Size/Total Borrowed figures. sUSD however can be safely added as it has a much smaller total supply.

@vfat you may be right, but i know first hand a bunch of people using BUSD on Binance against using USDT and then venturing out to Ethereum in search of higher yield.

So maybe it makes sense in add it and then see how the market responds before actually putting incentives on top. what do you think?

BTW both Aave and Cream have it and it seems to be in demand.

Although, i like the idea of incentivising stablecoins, where we really need to standout as a money market (other areas i’ve covered in my Roadmap proposals) IMO, should be adding new tokens.

Uniswap TWAPS is something to research for sure in my opinion. Can we get a rough consensus on it, @moderators?

You’re right I saw there is only 2.5M of BUSD on AAVE so I am probably overthinking it.

I agree this is a perfect way to differentiate ourselves.

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I like this, we can decide by governance what to do. Let’s give it a start and we’ll see.

We would need @PercentFinance to give us a view, on how we would make this happen. This’ll differentiate us from the rest, and we open up the door for something new.