Introduce LUSD as the next stable reserve asset in the form of reserve bonds and an OHM-LUSD pool on Sushi.
Liquity launched earlier this year in order to fill a market gap for a governance-minimized, Ethereum-native stablecoin. Liquity allow users to take out interest-free loans against ETH collateral in the form of LUSD. Users need to maintain a minimum collateral ratio of 110% on their loan. In addition to users’ collateral, Liquity’s design implements a stability pool that acts as collateral of last resort by exchanging depositors’ LUSD for liquidated ETH. In the 5 months since launch, LUSD has reached a market cap of over $600M. Liquity has withstood one major market downturn with little impact on its peg and liquidations operating as designed.
Policy and Partnerships Teams have been in discussions the past month evaluating different options for the next stable asset. A recurring theme in these discussions is the exposure many of these assets have to centralized stablecoins. While there are many implicit risks (ex: LUSD 3CRV pool), Liquity’s core mechanism does not rely on centralized stablecoins and will remain so indefinitely given its governance-minimized design. After evaluating several assets, the DAO Treasury team believes that LUSD is the best hedge against centralized stablecoin risk.
Integrating LUSD also provides several venues for earning yield for the treasury. A key element of Liquity’s design is the stability pool, which will receive LQTY staking rewards and allow our treasury to purchase ETH at a discount on liquidated troves. This is a natural extension of the recent ETH bond proposal and will provide a measure of stability to our ETH reserves while earning yield.
Finally, Olympus can run a Liquity front-end to allow optionality for users to take out loans against their ETH and bond the loaned LUSD. The profits from running a front-end would be accrued by the treasury, providing yet another source of yield.
Introduce LUSD reserve bonds to diversify the treasury and hedge against centralized stablecoin risks. Upper limit of 5% of circulating supply.
Deploy incentives in the form of $5k worth of LQTY per day (already secured via discussions with Liquity) and $5k worth of OHM per day to an OHM-LUSD pool on Sushi. Incentives will run for 35 days to bootstrap the pool
Introduce OHM-LUSD bonds to accumulate ownership of the incentivized liquidity pool
Liquity Docs - https://docs.liquity.org
Twitter - https://twitter.com/liquityprotocol
Discord - https://discord.com/invite/2up5U32
Update: Vote is live on Snapshot!