About bnUSD
bnUSD is an algorithmic, crypto-backed stablecoin on the ICON Network. At time of writing, total bnUSD supply is backed by ICX collateral equating to 6x the value of all bnUSD.
bnUSD maintains its peg through a process called rebalancing. At time of writing, rebalancing ensures the purchasing power of bnUSD against ICX compared to centralized exchange never drifts by more than 2.5% for an extended period of time.
Statistics
Total Supply: 17,540,582
Liquidity: 25,474,319 across 4 pairs on Balanced, 14,000,000 in the sICX/bnUSD pool
Volume at time of writing: 4,148,428 across 4 pairs on Balanced
Trading venues: Balanced Exchange and p2pb2b
Oracle
In order to mitigate the risk of price fluctuations, I believe it would be safest for the Omm protocol to treat 1 bnUSD as $1 worth of value. Debt on Balanced, when calculating LTV, is also valued as if 1 bnUSD = $1. If the LTV is set to 0% as suggested later in the proposal, I believe fixing bnUSD value to $1 would offer the best and safest user experience for both Balanced and Omm users with little risk to the protocol.
After bnUSD is traded on more venues, has more liquidity and/or is offered on a reliable oracle solution I would propose we migrate this method to pulling data from an oracle solution such as Band Protocol.
Risks
If Omm uses a fixed price of $1 of value for 1 bnUSD along with 0% LTV (can’t use bnUSD to borrow), then I don’t see any new meaningful risks to the Omm protocol or its users.
Economics
I’d like to propose allocating from the IUSDC and USDS rewards to make the rewards even across all three stablecoins. Having a strong rate for the bnUSD pool not only helps Balanced and Omm, but the broader ICX community. Breakdown below:
ICX = 40%
IUSDC = 20%
USDS = 20%
bnUSD = 20%
I expect bnUSD deposit amount to be at least $20 - 30M if not more, on par with IUSDC and USDS, and believe that addition of bnUSD will increase the total deposit amount of Omm protocol significantly. As a result, it makes sense for bnUSD to have the same amount of OMM rewards as other stable coins.
As an anecdotal story, Anchor is a similar protocol to Omm on the Terra blockchain. It has an attractive stablecoin yield for their algorithmic stablecoin, UST. As somebody that had stablecoins (not UST), I captured that yield through the following steps:
- Deposit USDT to Binance
- Buy LUNA
- Withdraw LUNA from Binance
- Sell LUNA for UST on a Terra DEX
- Deposit UST on Anchor
I hope to see this same flow occur if the bnUSD yield is attractive enough. Traders seeking yield would buy ICX with USDT on Binance, withdraw the ICX from Binance, sell the ICX for bnUSD on Balanced, then deposit the bnUSD on Omm.
Omm rewards will help, and separately, I can start a thread on the Balanced governance forum to add some incentives from our DAO Fund or elsewhere to bolster the yield if necessary to stay competitive.
For the breakdown of supply vs. borrow rewards, I suggest keeping it in line with other pools at 50/50.
For LTV, I suggest setting the initial LTV for bnUSD to 0% until bnUSD is traded on more venues and has a more robust oracle feed. This mitigates risks associated with fluctuations in bnUSD price for the Omm protocol because Omm borrowers will not be allowed to use bnUSD as collateral. bnUSD can still be both borrowed and deposited, just not used as collateral.
