I think this is an interesting proposal, and worth discussing on its own merits and in the context of OHM overall, as decentralized reserve currency.
The first thing I'll share is how I view OHM in the context of the overall DeFi landscape, which is far from decentralized and censorship resistant.
One of the reasons for DeFi's vulnerability to regulators and governments is its reliance on centralized, censorship prone stablecoins. Fundamentally, an "alternative financial ecosystem" should not be so reliant on centralized, censorship prone assets that it ceases to exist or is irreparably damaged should legal and regulatory blackswan events come.
In that context, one of the reasons I'm a supporter of OHM is that it is seeking to be a crypto native, censorship resistant reserve asset that people in the crypto community can rely on as a fundamental building block of our alternative financial ecosystem.
Given this, my perspective on assets that should be utilized to mint OHM may be different from that of my colleagues in the DAO and many community members. Some look at competing protocols, which are not as careful as we are about the types of asserts we take in (valuing decentralization and censorship resistance), and are seemingly "growing" by leaps and bounds. But when those assets are looked at from a fundamental perspective, they are weak because a decision by centralized players to cripple them, in order to stop DeFi is as easy as turning a smart contract's ability to transfer or utilize the asset off. For example, consider what would happen to Curve's valuation (along with CVX and other protocols that rely on it) if Circle was forced to censor Curve's smart contract in order to comply with AML/KYC regulations?
In this context, I believe it is vital that every asset considered to be used to mint/bond OHM be looked at from several perspectives: decentralization, regulatory risk and censorship resistance. Currently, OHM is somewhat vulnerable to censorship and regulatory risk due to DAI's heavy reliance on USDC, and continued focus on utilizing real world assets to back DAI. (Interestingly, Maker's founder, and leadership team believe that the best way to protect DAI from censorship is to increase its exposure to real-world assets so that in effect it is too big to censor. For example, Maker has spoken about buying US Treasuries and using them in order to back DAI. I'll leave the a debate about the wisdom of this strategy to others.)
In recognition of this censorship risk, Olympus is slowly moving away from utilizing DAI as a primary minting asset toward more non-pegged assets such as ETH (and to a lesser extent, BTC, despite the concerns about wBTC), to protect against this risk.
**UST in the Context of Regulatory, Censorship Risks, Decentralization and Stability
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Many in the Terra ecosystem tout UST as a solution to DeFi's problems when it comes to relying on centralized, censorship resistant stablecoins. It is an algorithmic stablecoin that is superior in many respects to DAI, whose shortcomings are outlined above.
But, UST is not without risks.
-Stability: Many point to the fact that, unlike DAI, UST has not gone through an extensive period of non-stability due to a loss of peg as a reason to tread carefully when utilizing or relying on UST over the long-term. Specifically, if the value of Luna drops, UST can suffer extreme price movements, which can lead to its losing peg. This has happened several times over the last year.
-Regulatory: Currently, there is some regulatory/legal risk associated with Terra given that the the SEC may initiate legal proceedings against the protocol's founder for launching Mirror, which trades synthetic assets. In addition, the Terra's founders are suing the SEC, which may lead to a protracted legal battle, and have knock-on effects on Luna, which is utilized to back UST
In addition, the Terra ecosystem and infrastructure are based in South Korea which is an extremely FATF friendly jurisdiction and has taken highly conservative policy stances related to crypto in the past. It is unknown whether and how Luna and the Terra ecosystem will be impacted by regulatory moves made by the Korean government, especially if directed by their close ally the United States.
-Censorship and Custodial Risk: OHM would be taking in wrapped UST given that Terra is not natively on Ethereum. There are several bridges, including RenVM, which is in the middle of its decentralization push, but taking on UST increases custodial risk and adds some censorship potential depending on the bridge used to acquire wrapped UST.
While it is unlikely that UST itself will be censored, it is possible that its infrastructure and ecosystem will come under increasing regulatory pressure in the future for the reasons cited above.
Conclusion: Take UST Bonds?
Overall, I tend to be fairly conservative when considering new assets to utilize to mint OHM. I am especially careful about taking on more and more censorship-prone or regulatory risky assets in to support OHM's backing. My concern is that, over time, the composition of assets backing OHM can reach (in an aggregate share) a significant minority of OHM's backing, increasing smart contract, censorship and regulatory risks to the protocol.
**This is in contrast to others who may believe that Olympus is moving too slowly compared to competitors and is becoming "ossified" and "complacent." My feeling is that if we want OHM to become a systemically important asset, we need to make sure that it can be viewed as a safe haven asset, in the face of increasing governmental and regulatory pressures.
Given the concerns noted above, my feeling is that either:
-OHM not accept UST as an asset to "mint" against OHM at this time or
-OHM accept UST as an asset, but ensure that the amounts taken in (as a percentage of RFV and overall wrapped UST supply) are extremely small, to reduce risks to the protocol.**
