UST Goes Interchain: Reasonable Strats Part Five

Disclaimer – We are members of the TFL team.
Authors: Zon, Fontez, JY

Over the past 3 months, UST market cap has seen redonkulous growth, moving from 8.7B to 14.7B today. The UST interchain expansion must continue to new realms. Below are details of new strategies the Terra Community Pool should enact to further utility on other chains.

The Terra Community is in many conversations with projects on each of these chains and will be able to create integrations and partnerships with these projects after initial liquidity is set up on chains where UST does not yet exist or have a strong presence. Some include: Dopex and Vesta on Arbitrum and Perpetual Protocol and Lyra Finance on Optimism.

Further, new plans for bolstering UST liquidity on Ethereum in a much more collaborative, mutually beneficial, and efficient method via a partnership with Frax Finance and Redacted Cartel are in the works and will be detailed in a future Agora post. After a trial run of a few months, if this is successful, we will enact it on more chains.

Curve and Convex (Fantom, Avax, Arbitrum, Optimism, Ethereum)

The Curve UST-3Pool on Ethereum has become a primary location to obtain UST with low slippage, it has over 1.25B in liquidity and continues to have roughly $50m in daily volume - consistently placing it within the top 3 most used pools on Curve. Just today this pool had over $150m in volume, holy hecc! Clearly strategy enacted in past proposals has proven to be extremely effective in bolstering liquidity.

The Terra Community should enact similar strategies on Curve pools (and other native stableswaps) across every major chain to be one of the primary ways users across crypto can access UST with low slippage.

Further, the Terra Community should switch to using UST instead of Luna as Votium incentives, this is a simple way to get UST into the hands of more users rather than using Luna which may not have strong liquidity on every chain.

The strategy on each chain entails:

  • Spinning up a new pool with UST and other popular stables
  • Seeding these pools with a base amount of initial liquidity for 1 year, at which point the Terra Community can decide to extend or withdraw the funds unless a vote is made to withdraw them earlier
  • Obtaining a gauge for each of these via a Curve governance proposal so these pools may earn CRV rewards
  • Allocating a share of the Terra Communities CVX power to each of these pools
  • Allocating new Votium incentives for 6 months to each of these pools to further grow liquidity

For context: Since this strategy has been enacted on Ethereum mainnet the UST-3CRV pool is one of the largest curve pools in existence at 1.3B with roughly 40% growth in each gauge vote. The APY on the pool via Convex is currently sitting at ~10% which is the highest yielding stable pool on Curve/Convex paid out in CRV/CVX even after these tokens are down 70% since their highs. The Terra Community Pool holds roughly 338,600 CVX, together with TFL’s 1.3m CVX, which marks Terra as the second-largest DAO holder of CVX. This has continued to be an effective flywheel strategy because the 250m in liquidity provided by Terra Community Pool farms CVX, use it to vote for the UST-3Pool, claims it’s own Votium incentives and recycles them. For more on the CVX flywheel read this article written by Delphi Digital: Is the Convex Flywheel Sustainable?.

Bi-weekly updates on CRV and CVX harvested have been provided on the initial Agora thread.

Avalanche

At the guidance of the Avalanche Foundation, a new UST-USDC-USDT 3pool has been created.
The Terra Community should seed this pool with $5m UST, bridged through Wormhole, a gauge vote will be created shortly after seeding liquidity.
Allocate 15% of CVX power to voting for this pool.
Allocate $375k of UST for bi-weekly votium incentives for this pool for 6 months.

Fantom

A UST-USDC-fUSDT pool has been created and the Curve governance vote for a gauge has already passed.
The Terra Community should seed this pool with $5m UST, bridged through Wormhole.
Allocate 15% of CVX power to voting for this pool.
Allocate $375k of UST for bi-weekly votium incentives for this pool for 6 months.

Arbitrum

A UST-USDC-USDT pool has been created.
The Terra Community should seed this pool with $5m UST, bridged through Synapse, a gauge vote will be created shortly after seeding liquidity.
Allocate 5% of CVX power to voting for this pool.
Allocate $125k of UST for bi-weekly votium incentives for this pool for 6 months.

Optimism

A UST-USDC-USDT pool will be created after discussing with the Optimism team.
The Terra Community should seed this pool with $5m UST, bridged through Synapse, a gauge vote will be created shortly after seeding liquidity.
Allocate 5% of CVX power to voting for this pool.
Allocate $125k of UST for bi-weekly votium incentives for this pool for 6 months.

Ethereum

Currently, each bi-weekly gauge vote 4m of UST incentives via Votium are used for the Curve UST-3Pool. Since proposals were made at various times over the past few months to increase Votium incentives, the remaining allocated funds will last for 5.875 gauge votes ~ 3 months. To bring the runway up to parity with the above 6-month plan, this proposal requests an additional 24.5m UST such that 4m UST in bi-weekly gauge vote incentives on Ethereum can continue for 6 more months. This proposal also asks to keep the 250m in liquidity provided to Convex from the Terra Community Pool deposited for an additional 6 months to match.

As mentioned earlier a new strategy with Frax and Redacted is in the works to create an even more efficient incentive plan with these funds than just being allocated for the UST-3Pool on Votium.

To make the assets we have sitting in the community pool even more productive, a future agora post will be made to deposit more liquidity into the Convex pool to further strengthen the Convex flywheel until it is needed elsewhere.

*Exact CVX power and votium incentives per gauge may change but this is the general framework.

Total Curve / Convex funds: 20m UST seed liquidity + 12m cross-chain votium incentives (1m per vote * 2 votes per month * 6 months) + 24.5m to extend runway of Ethereum votium incentives to 6 months = 56.5m UST

Synapse (Arbitrum, Optimism)

A new bridge partner approaches. Synapse is a universal cross-chain liquidity network that connects blockchains by providing an extensible cross-chain communication protocol that supports assets, smart contract calls, and more. Synapse has facilitated $7.5b billion USD in bridging volume and has nearly $1 billion USD in TVL. Synapse will soon enable Terra support, meaning UST can be bridged to 14 other EVM chains. Synapse will help bring UST to chains that don’t currently support it including Arbitrum, Optimism, Metis, Boba, and Cronos. Synapse uses specific pools on chains where Wormhole UST liquidity already exists to avoid creating UST fragmentation via issuing a new version of UST on Avax, Eth, Ftm and a couple of others.

Platypus (Avalanche)

Platypus is a new native stableswap protocol on Avalanche that has secured over $1B in TVL. It is the first of its kind AMM that uses open, single-sided liquidity pools to eliminate liquidity fragmentation, resulting in lower slippage. The main pools are live with USDC, DAI, USDT. UST will fall under the “secondary pool” category, which is set to launch by the end of March. The Terra community pool should seed this pool with $5M UST. When gauge voting is live in a few months, the Terra Community should participate in the $PTP wars.

Total Platypus funds: 5m UST

Aave (Ethereum)

Aave needs no explanation. UST has just gone live on mainnet Aave however to begin it has a collateral factor of 0% and thus can’t be used as collateral. Due to this fact deposits are not heavily incentivized and thus to kickstart borrowing demand on Defi’s largest money market and 6th largest dApp by TVL the Terra Community Pool should seed Aave UST with $5m UST.

Total Aave funds: 5m UST

StakeDAO (Ethereum, Terra)

Stake DAO curates the top strategies, staking protocols, and more, into one intuitive dashboard, offering users an easy way to earn more from their assets. Every strategy has a carefully weighted risk score, enabling everyone to participate on their own terms and risk appetites. From strategies based on stablecoins to Bitcoin and a comprehensive range of ERC-20 tokens, the platform has everything users need to secure returns on their crypto.

StakeDAO is the 40th largest dApp on Ethereum with over 370m TVL. StakeDAO would like to spin up a few products for the Terra Community. Firstly StakeDAO provides a range of validators on different PoS chains along with an easy-to-use UI for staking with them (Staking | Stake DAO), they will be creating a Terra validator and attracting users through that. Secondly, StakeDAO provides passive income strategies on Curve LPs that offer boosted SDT rewards. To help bootstrap this strategy the Terra Community pool should seed 2.5m in initially UST liquidity to this passive strategy for 1 year.

Further StakeDAO is releasing Liquid Lockers and veSDT which has governance rights over the protocol and more (Introducing Liquid Lockers & veSDT | by Stake DAO | Feb, 2022 | Medium). Additional collaborations on this front could be enacted with the Terra Community Pool through an offer from StakeDAO for a 500,000 SDT for equivalent LUNA DAO Swap. Please discuss in the forums below if this is something the Terra Community is interested in.

Total StakeDAO funds: 2.5m UST

Ondo Finance (Ethereum)

UST-as-a-Service (“UaaS”) is an offering from Ondo to make it possible for projects issuing tokens to increase the liquidity in their native tokens on decentralized exchanges by providing liquidity themselves. With UaaS, a project can deposit its token into an Ondo liquidity vault with flexible duration. Ondo and the Terra Community Pool will match those deposits with an equivalent amount of UST to form a liquidity pair. In exchange for providing UST, the Terra Community will receive a fixed APR return on its provided liquidity while also establishing new UST pairs with various assets.

Through Ondo’s system of vault tranches, the fixed tranche (UST side) is always protected and the variable tranche (protocol token) gets to keep the upside but absorbs losses if the value of the token decreases.

Liquidity-As-A-Service is incredibly helpful for projects since they essentially borrow UST to create Pool 2s without having to conduct a raise or sell holdings to create enough stablecoin liquidity, solving a problem many protocols may have.

Ondo already has Frax-As-A-Service and Fei-As-A-Service offerings and is looking to expand into UST-As-A-Service with a couple notable partners already lined up to participate in UaaS.

This proposal asks the Terra Community Pool to allocate up to $20m UST for initial UaaS partnerships. Unused UST will be returned to the community pool in 6 months and UaaS may be expanded in the future if proven to be successful.

Total Ondo funds: 20m UST

Debt DAO (Ethereum)

Debt DAO is the debt marketplace for Web3. DebtDAO creates flexible and capital-efficient debt products. This is made possible via their P2P loan and Spigot smart contracts. The P2P loan contract is a modular smart contract that codifies all components of a loan facility. The Spigot smart contract enables the collateralization of future revenue streams.

A Debt DAO x Terra partnership would:

  1. Increase the velocity of UST by getting UST in the treasuries of more DAOs and the wallets of more users
  2. Increase UST usage on the individual dApps/protocols themselves
  3. Ensure that UST is being lent to trustworthy groups with appropriate revenue streams

In a follow-up post on Agora, DebtDAO will include details on a few potential lending opportunities the Terra Community Pool may engage in.

This proposal asks the Terra Community Pool to allocate up to $20m UST as the first wave of DebtDAO loans, all of which of course have methods for repayment and loan terms built into the smart contracts themselves. Unused UST will be returned to the community pool in 6 months and the DebtDAO partnership may be expanded in the future if proven to be successful.

Total DebtDAO funds: 20m UST

Excalibur Exchange (Fantom)

Excalibur Exchange is a Fantom-based DEX, built with a focus on sustainability, capital efficiency, and supporting new projects.

Excalibur is a formidable newcomer to the Fantom ecosystem, and is prioritizing

1/ making UST the native stablecoin of the exchange, and

2/ pushing for UST adoption on Fantom by making UST-pairs the most incentivized liquidity pools.

The Terra Community would be looking to enact the proposal that has already passed but did not request the funds via a Community Pool Spend proposal. Please read it for more details on Excalibur and the use of funds.

Total funds for Excalibur: $255k UST for 3 months of incentives

Beethoven (Fantom)

BeethovenX is a Balancer-fork on Fantom and offers multi-asset pools for users to invest and trade against.

Leveraging on the unique ability to create multiple-asset portfolios on Beethoven, the Terra Community should bootstrap UST liquidity on BeethovenX by creating and incentivizing the following two pools for 3 months.

  1. LUNA/FTM/UST pool ($100k/month) to increase LUNA and UST liquidity. The incentive will double boost LUNA and UST liquidity. The incentives will be matched by BeethovenX.
  2. USDC/FRAX/UST ($50k/month) to allow more frictionless swap between the stablecoins. USDC and FRAX are 2 of the Top 4 stablecoins on Fantom, and the liquidity pool will enhance UST liquidity and accessibility in the Fantom ecosystem. Not to mention that the pool will also be co-incentivised by BeethovenX and Frax, bringing it to ~$150k/month. The co-incentivisation should bring the pool to one of the juiciest BeethovenX stablecoin pools, attracting liquidity and UST adoption.

Total funds for Beethoven: $450k over 3 months

Edit 1: Pangolin and TraderJoe (Avax)

Pangolin and TraderJoe have been a primary way to grow UST liquidity on Avalanche. Pangolin specifically has made UST the base quote asset. The moon rises over the mountains. Wormhole UST only exists on Avax Curve while Axelar UST exists on Pangolin and TJ - this causes plenty of confusion when trying to use xAnchor since it only uses Wormhole UST. To help spread Wormhole UST liquidity on Avalanche this proposal asks to incentivize Wormhole UST pools on Pangolin and TJ with 500k in UST incentives on each.

total funds for Pangolin and TJ: $1m over 3 months

TLDR

  • Creating and incentivizing UST Curve pools on Fantom, Avax, Arbitrum, Optimism, and Ethereum: 56.5m
  • Seeding Platypus stableswap pool on Avalanche: 5m
  • Aave: 5m
  • StakeDAO partnership and UST passive income strategy seeding: 2.5m
  • Ondo Finance “UST-As-A-Service”: 20m
  • DebtDAO UST partnership with various DAOs: 20m
  • Excalibur Exchange UST based DEX incentives on FTM: 255k
  • Beethoven UST incentives: 450k
  • Edit 1 - Pangolin and TJ: 1m UST incentives

Total funds: 109.705m UST
Total funds after Edit 1: 110.705m UST

The on chain votes for this proposal will be split into 2 separate votes: 1 for Curve and Convex related funds and 1 for Platypus, Aave, StakeDAO, Ondo, DebtDAO, Excalibur, and Beethoven.

fin

These strategies will help strengthen UST’s position and liquidity across the chains to help UST become the interchain stablecoin of choice.

All funds withdrawn from the Community Pool will be kept in the following multisig wallet: terra1jrhxdtwxrsxw3t2al6t3sga89974juhpccuxct

The multisig will be controlled by 5 members with 4/5 quorum required
@ezaan: terra1xtlkxkund5xxsj8uj94y6fmx2sf9unkc9l7lpg
TFL Finance: terra19epdm5jp8vdpm7mvfuflyzys4k0xk5vmgcv0xw
@JeremyDelphi: terra1zf8s0kq5uzcnm7zkmvjeqrlwfdapgfz007rpx0
@lejimmy: terra1dyn97p558vchcje0zycwfpex7xc67w4zl62nfy
@Papi: terra1mrutxf7adxg837jl6z85g83pwsn9a2jh3xu9yy

The equivalent Gnosis Safe on Ethereum is: 0x9538D438d506Fc426dB37fb83daC2a0752A02757. When new Gnosis Safes on other EVM chains are created they will be listed here.

17 Likes

LFG :rocket: :rocket: :rocket:

5 Likes

Spending 0.7% of current UST market cap on expanding usage? Support.

9 Likes

Game on!

3 Likes

Risk Harbor Research Team here. We think this is a great initiative that will help UST become more robust and take its rightful place as the king of Stablecoins.

One thing to note here is that many of the ecosystems mentioned in this proposal are relatively new, meaning the financial structures are still forming. Devoting effort and resources now to incentivize UST adoption will have long lasting effects on the formation of liquidity pool networks on other chains. This will mean UST is more likely to play a central roll as primary numeraire on other chains.

8 Likes

Seems great. For Avalanche, the Axelar-wrapped version of UST is the one with liquidity on Pangolin and Trader Joe. Will that be the version used on Platypus? For Curve, it is a bit more complicated since the main UST pool on Ethereum uses the Wormhole version. But, is there any concern about inconsistency between different versions of UST on Avalanche and would liquidity between the different versions need to be provided?

6 Likes

LFG! Love the expansion energy, this will bring lots of adoption!

2 Likes

Support.

2 Likes

Nothing but support here. Waiting for the governance vote now.

1 Like

It’s Wormhole UST since Avax xAnchor relies on Wormhole assets. We’ll set up and incentivize Wormhole UST pairs on TJ and Pangolin soon as well.

2 Likes

Genius!!

Which version of bridged assets will be incentivized on Fantom?

Really excited to see the partnership with FRAX and removing DAI from liquidity pools that we participate in.

^ here ser

1 Like

We would like to make the following proposal for Interchain UST: A multi-bridge future for Interchain UST: No Vendor Lock-in, Much Higher Security - Proposed by Celer Network

Glad to see this vote is finally live. It is clear there is continued emphasis on UST expanding across different networks, especially Fantom and Avalanche.

I am particularly excited about Aave and the alignment of two governance processes.

How do you identify and chose these protocols such as Beethoven and Platypus?

Great to see UST starting to take hold on Avalanche. I’m wondering why xAnchor is supporting only Wormhole-wrapped UST over Axelar UST given there is much greater liquidity for Axelar UST on Pangolin and Trader Joe at the moment? Any particular reason for this shift? Since there is already some confusion between the two forms of wrapped UST I’m concerned this would result in fragmented liquidity.

This makes me so excited I want to throw a scooter down some stairs

1 Like

Update March 31