Proposal to add TerraUSD (UST) pool

Background

TerraUSD (UST) is an algorithmic, seigniorage-based stablecoin issued by Terraform Labs (TFL). UST is one of the fastest growing algorithmically stablecoins to-date. Its market capitalization has grown to ~$270 million (TerraUSD price, UST price index, chart, and info | CoinGecko) since its inception on October 1.

TFL currently uses Shuttle (GitHub - terra-project/shuttle) to bring Terra assets, including UST, to Ethereum. At the time of this writing, the supply of erc-20 UST is roughly $70 million.

Additional details on UST can be found here:

Proposed reserve assets and weights
50% UST
25% USDC
25% USDT

What are the points of centralization/risk?

Our Ethereum bridge, Shuttle, is an EOA with the keys being held by Terraform Labs. We are currently working to migrate this control to a multisig operated by third party validators on Wormhole.

Most stablecoins have centralized issuers that guarantee value (e.g. USDT, USDC), and we believe sufficient time has passed since the inception of our assets for the community to evaluate risks (1+ years). There is also significantly less risk for an EOA bridge with Terraform Labs as the custodian vs. a centralized fiat-backed stablecoin platform which has additional risk such as regulatory seizure, non-transparency of reserve,etc.

What are the financial risks?

As with any stablecoin, the main risk to liquidity providers is the coin permanently losing its peg. Terra’s first stablecoin, KRT, has been operational for >18 months without breaking peg: https://www.coingecko.com/en/coins/terra-krw

UST has maintained its peg despite the significant increase in demand over the last month with the launch of Mirror Protocol. We believe this is a testament to the robustness of our stablecoins and to the maturity of our ecosystem.

How will this pool attract TVL?

The increasing number of use cases for UST (Mirror Protocol in Dec 2020, Anchor Protocol in Q1 2021), has and will continue to increase the demand for UST. Increasing demand for UST makes it attractive for UST liquidity providers in the Shell ecosystem.

What is the project’s vision and how does Shell fit into that?
The goal of Terraform Labs is to make our stablecoins more useful. We believe this aligns well with Shell’s vision of creating and fostering a more healthy stablecoin ecosystem, consisting of a basket of diverse stablecoin assets. Is it ironic that the vast majority of stablecoin volume comes from a few, centralized stablecoin projects.

Shell provides an important infrastructure layer which increases stablecoin diversity, which we believe will ultimately increase the robustness of the entire crypto ecosystem.

5 Likes

This proposal makes sense to me. Does anyone have specific thought for or against a UST pool?

2 Likes

Im in support of it. Terra are definitely one of the more solid, less hype driven projects out there.

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Would this pool receive any liquidity mining from Terra?

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Curve already has a UST pool currently getting 100% APY in CRV rewards. I only see people LPing for this pool if there was some kind of incentive. If it got some kind of rewards from Terra it may be worth thinking about otherwise it’s too niche imo.

3 Likes

We’re open to providing rewards, but we generally like to launch first and then allocate rewards accordingly. The reason for this is that we don’t want to incentivize the wrong behavior where users only provide liquidity to get rewards, and then liquidity gets pulled once these rewards stop - hopefully there is some inherent incentive for users to interact with the product

I agree about the higher APY part for UST given that the project is solid but still low visibility

However I don’t think Curve is giving out 100% APY for UST during this period even if we take in CRV boost factor.

I strongly support the UST pool, UST is one of the current stablecoins with the biggest growth coming from the Chai/Terra ecosystem and now also Mirror (synthetic assets on Terra) as well as Anchor protocol soon. The demand is crazy high on both Terra and Ethereum (Mirror also exists on Ethereum).

1 Like