Incentivise the USK/axlUSDC pool on Astroport. The purpose of this proposal is to create a deep stableswap pool to facilitate the swaps between USK & axlUSDC.
USK is a newly launched stablecoin on Kujira chain. The mechanism behind USK is one that is battle-tested. It is an overcollateralised stablecoin using a collateralised debt position (CDP) to maintain the solvency of the protocol minting the stablecoin. The CDP mechanism was created by MakerDAO, the team behind the DAI stablecoin.
In recent weeks, the Kujira chain has developed some very interesting dApps on its chain. Both Kujira & Terra communities has large overlaps due to the Kujira’s history of being one of the top dApps on Terra Classic.
The current axlUSDT/axlUSDC has over $8.3mil in liquidity with an average trading volume of $10k daily. That translates to about $5 fees a day on a 0.05% stableswap fee, approximately $1,825 fees over a year. The current ASTRO emissions is about 14.8Mil ASTRO/year, which approximates to $1.114mil at today’s ASTRO price. (ASTRO = $0.075)
That translates to about $610 of ASTRO emissions for every $1 fees generated from the stableswap pool.
The main reason behind the low trading volume is the lack of utility behind USDT. USDT is only swapped to arbitrage LUNA/axlUSDT pools in Phoenix DEX & Terraswap.
The lack of utility on Terra or Cosmos is wasting ASTRO emissions to incentivise a deep stablecoin pool. However, if we could route the ASTRO emissions to a USK/axlUSDC pool in Astroport, this could create a deep stablecoin pool that provides a low slippage swap between two stablecoins with high utility. Let’s jump into the utility for both axlUSDC & USK.
Utility of axlUSDC:-
- Most, if not all deep liquidity pairs on Astroport are paired with axlUSDC. See LUNA/axlUSDC, ASTRO-axlUSDC and VKR-axlUSDC.
- dApps on Terra or Cosmos predominantly transact in axlUSDC after the crash of UST.
Utility of USK:-
- Participate in the liquidations of ATOM on Orca.
- Alternative stablecoin on Cosmos for users that prefers a battle-tested & censorship-resistant stablecoin vs a centralised bridged version like axlUSDC.
So how does Astroport benefit from the utility of USK?
- With pools such as ATOM-USK & USK-axlUSDC established, Astroport users will be able to swap their axlUSDC to USK to participate in Kujira’s ATOM liquidation. (Fees from USK-axlUSDC swaps)
- Once ATOM liquidations happen, Astroport users can IBC discounted ATOM back to Astroport to swap their ATOM back to USK to earn the difference between market rate & discounted ATOM. (Fees from ATOM-USK swaps)
- USK IBC’ed back to Kujira to repeat Step 1.
With that said, ATOM-USK will need to be incentivised to allow the above loop to be feasible. Although FIN is natively available on Kujira, a deep ATOM-USK & USK-axlUSDC will provide a low, if not lower slippage compared to FIN.
How does this benefit the Kujira community?
- An incentivised ATOM-USK & USK-axlUSDC will increase the amount of USK minted. At 5% APR on minted USK, every $1 USK minted will provide $0.05 fees back to KUJI stakers.
- Increasing the utility of USK throughout Cosmos.
Copyright and related rights waived via CC0 1.