Thank you for the proposal @Seini
DaoStewards would like to supplement your proposal with our analysis
Author(s): jengajojo for Bankless DAOstewards
Simple Summary
This is an RFC to temperature-check the idea of Binance USD (BUSD) as a collateral asset. A potential eIP would also include increasing borrow factors and decreasing reserve factors.
The proposed parameters are a collateral factor (CF) of 0.9, borrow factor (BF) of 0.9 and reserve factor (RF) of 0.05.
Motivation
BUSD is the third largest stable coin in DeFi by market cap and currently boasts a Mcap of $18B on Ethereum Mainnet. Since its inception in 2019, the stablecoin has never gone more than +/- 0.03$ off the peg and remains backed 1:1 by proof-of-reserves. With a 7D volume of almost $100M, with this proposal, we would like to bring the stability and liquidity of the BUSD stablecoin to the Euler Finance ecosystem. We think this will enable the creation of new markets and allow the protocol to further deepen its stable liquidity and collect more fees from the resulting usage.
Specification
** What is the link between the eIP author and the asset? **
None. The proposers are active core contributors to BanklessDAO.
** Provide a brief description of the asset **
BUSD is a stablecoin backed 1:1 with USD from crypto exchange Binance launched with partnership with Paxos.
** How is the asset primarily used? **
BUSD is used as a trading pair & holding asset
** Explain why the IP would benefit Euler’s ecosystem.**
BUSD is the third largest stablecoin with a reliable record of keeping its peg. Binance issues monthly reports with proof of reserves. Including this asset in the Euler ecosystem will bring liquidity and diversification of stables collateral to the Euler ecosystem.
** Where does the asset trade? **
BUSD primarily trades inside the Binance exchange but has significant liquidity on DeFi dexes with over $30M TVL on Ethereum Mainnet and almost $100M in 7D trading volume onchain.
What are the volumes and market capitalisation?
Market capitalisation is $22 billion, with almost $100 million traded in the last 7D
What is the liquidity like in the Uniswap V3 liquidity pool versus ETH?
The 1% BUSD/ETH Uniswap V3 pool currently sits at a TVL of $140k
What security/auditing reports have been done?
This report issued by the New York State Department of Financial Services (NYDFS) has pre-approved BUSD for its virtual currency licensees to custody and list for trading.
Risk Assessment by DAOstewards
Centralisation
BUSD is a custodial solution, which makes it score lower from a decentralisation point of view. Nevertheless, Paxos the issuer of BUSD is a reputable institutional solution with years of track record, which mitigates risks. Due to the centralised nature the issuer can mint or burn an arbitrary number of tokens. But this risk is mitigated due to the Regulatory compliance of Paxos trust Company. Paxos also issues monthly reports through an external accounting firm.
Distribution of Tokens: Top 10 holders hold 92% of the total supply but many of the holders are Exchanges like Binance (60%) and cross chain bridges.
Risk score : Euler Risk methodology : 0.4
: DAOstewards risk metrics 3
Volatility
BUSD is a stablecoin. Due to the relatively stable nature of BUSD no volatility score is assigned.
Events of Depegging Mar 13, 2020 $0.8861 to $1.04
Risk score : Euler Risk methodology : 0.9
: DAOstewards risk metrics 1
Liquidity
BUSD is the third largest stablecoin on DeFi with 22B in market cap. A significant amount of BUSD is locked in the Binance Smartchain ecosystem.
Risk score : Euler Risk methodology : 0.9
: DAOstewards risk metrics 1
Smart Contract Risk
WBUSD uses proof-of-reserve 1, which allows transparency over the custodial funds.
Oracle Grading
Due to the relative low volume on ETH/BUSD trading pair in Uniswap v3 TWAP is not the ideal Oracle, We propose the the use of Chainlink price feed adhering to the changes introduced by eIP 30
Conclusion
While scoring lower on decentralisation, BUSD ranks very high on other factors. We, therefore, recommend implementing the proposed eIP.
References
Project - What Is BUSD? | Binance Academy
Whitepaper - Binance USD (BUSD) - Paxos
Chainlink price feed : BUSD / USD | Chainlink
Github / source code - busd-contract/README.md at master · paxosglobal/busd-contract · GitHub
Ethereum contract - 0x4Fabb145d64652a948d72533023f6E7A623C7C53
Reserve reports- Binance USD (BUSD) Transparency Reports - Paxos
Twitter - https://twitter.com/PaxosGlobal / https://twitter.com/binance
Should BUSD be promoted to Collateral Tier
- Yay! let’s do this
- Nay! This proposal needs further restructuring
0 voters