eIP 39 Promote LUSD to Cross Tier

[eIP] Euler Improvement Proposals Voted Proposals
9

Gm, everyone hopes this is still timely.

I’m dropping the DAOplomats risk analysis for LUSD; We have committed to do this for all new collateral tier RFCs. Even though this RFC promotes LUSD as Cross Tier asset, I took the liberty to run LUSD through our gage. Read more on our Risk metrics in our general delegation thread

1. Smart Contract Risk

  1. Quality of smart contract audits
  2. Days of operation with/without a hack.
  3. Nature of the source code: the ability to inspect, modify, and enhance

The open source code of Liquidity and the LUSD token is audited two times, and the last code audit was done by Coininspect, who have also audited Ledger and Zcash. And have experienced any hacks or exploits. The protocol also scores points for being truly immutable without any admin key.

Score 1.2

2. Centralisation

  1. Distribution of the token across the stakeholders
  2. Ability to mint/burn arbitrary amounts of tokens
  3. Role of a DAO, if any

The LUSD token is a stablecoin with 5,607 total holders, according to Etherscan on 21.12, which is a fair number considering its 180M market cap. The ability to mint new tokens is immutable and controlled by a smart contract which ensures a 110% collateralisation of LUSD tokens with ETH. The absence of a DAO that can freeze or seize LUSD tokens makes this 100% censorship-resistant.

DAOstewards score: 1.9

Reduced score due to a low number of token holders

3. Volatility

  1. Price fluctuations over 70 days
  2. 30 Moving average
  3. EMA200
  4. TTV; total trading volume over 30 days and 50 days.

The above metrics are not applicable here since LUSD is a stablecoin. The USD peg is only dropped a couple of times, and the token tries to hold around the 0.99 -1.10 range.

ATL - $0.896722 Jan 27, 2022,

ATH - $1.16 Apr 05, 2021

Score: 1.7

4. Liquidity

  1. Relative Circulating Supply = Circulating Supply/total supply
  2. Total market depth.
  3. Relative market depth (token depth /depth of WETH/USDC)
  4. Distribution of volume across chains and pools

no Extra comments are required as the RFC covers liquidity risk in detail

Liquidity score 2.1

5. Oracle Risk

  1. Stable chainlink price feed
  2. Cost of moving Uni v3 TWAP.

Not graded since Euler will be using Chainlink oracle.

This aspect arguably qualifies to be a collateral asset. Still, it has relatively low utility to use LUSD as collateral to borrow other collateral-tier assets. The low number of holders makes it an ideal candidate for cross-tier assets.

Disclaimer
The information mentioned above is from publically available information. The sores given By @0xBaer is just for informational purposes only.
Bankless DAO, which has commissioned DAOstewards, has an active project building on top Liquity Protocol and is Running Liquity Protocol frontend in test net.[link to the project]

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