Listing bnUSD on OMM

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.

7 Likes

I agree with this 100%. In fact, this is how prices are established in traditional forex markets, which have an order of magnitude more trading volume than crypto markets. People speculate on rising/falling interest rates, which is a major driver in what one currency is worth relative to another one.

Right now, it’s hard to lend out bnUSD in order to provide/acquire that leverage on OMM, and much easier on other ICON stablecoins. This is putting an upward pressure on those coins, and a downwards pressure on bnUSD. I think adding this will help to stabilize prices in the ICON ecosystem, and am absolutely for this change.

2 Likes

Great proposal @benny_options! I’m 100% in support of this.

  1. bnUSD is the native stablecoin of the ICON ecosystem, so I believe it should be a duty for ICON DeFi platforms to support the native stablecoin as much as possible.
  2. Adding bnUSD will provide us with actual data on whether this additional use case for bnUSD will help maintain the peg and reduce rebalancing. Everyone seems to think so (including me), but it will be nice to back up statements with real data.
  3. Adding bnUSD will give a TVL boost to Omm, which is always nice for people who like up only metrics.
2 Likes

Thanks for the proposal, Scott. Sounds like a step in the right direction to me. For a healthy DeFi ecosystem on ICON we need more ways for people to put the value they hold in ICON native tokens to work. This is very much needed.

Each change we make to Omm or Balanced can have an effect on the flow of value and where it is stored, so caution and strategies to reduce risk are important. The limits you are suggesting for bnUSD address the main risks. The choice to tie the bnUSD value 1:1 with USD matches the way it is treated for loans originated on Balanced, so it will be a much better choice for stability rather than using the market price which would be vulnerable to manipulation.

Definitely a yes from me!

1 Like

It would be great for bnUSD to be implemented as described. Yes from me :+1:

1 Like

There was a live discussion about adding bnUSD with @benny_options: https://twitter.com/monksacademy/status/1451416193034768394

1 Like

Great plan for more use of bnusd, when will the voting start?