Should GnosisDAO implement multiple stablecoins on GBC - additional to xDAI

General Technical
1

Idea

I would like to engage with the idea to add more stablecoins (e.g. USDC, USDP, USDT, MAI) on a protocol level so that the Gnosis ecosystem can offer more possibilities to it’s users, centralized entities and developers in the future.
Native USDC, USDP, USDT and MAI would be seen as an extension of xDAI for paying network fees on the GBC. The decentralisation of the GBC is not to be questioned at any time.

Motivation

Using a stablecoin to pay network fees shows that the Gnosis ecosystem is on a path towards sustainability. This feature is one of the main unique selling points of the GBC and ensures that users’ transaction costs are not influenced by market speculation as it is the case on other L1 or L2 chains.

To make an impact, gain market share and establish sustainable presence in a very competitive and fast evolving web3 environment a vision and adaptability is needed. Therefore a combination of Interoperability and adaptability is more important than ever, as this is the only way to create a sustainable basis for future adoption of the GBC.

We should always have in mind, that when it comes to real world adoption of crypto protocols, smooth transitions is essential and end users should not always and do not necessarily need to know which protocol is being used in the back-end as long as their payment process is being executed successfully.

In terms of the GBC ecosystem and stablecoins, this means that companies such as Circle, Paxos and Tether as well as their partners and other market participants (e.g. protocols such as MAI) could be given the ability to use the GBC infrastructure in their own way. From the perspective of centralized stablecoin providers, GBC could be seen as a white-labeled infrastructure that is allowing them to reach their target audience without the need to interact with volatile cryptocurrencies to pay network fees with.

Having a multi-stablecoin environment on a protocol level enables new ways of interacting and building trust within the protocol. First of all users would be given the possibility to easily choose and use the stablecoin they like and trust most. Stablecoin providers could develop and deploy own dapps to their target group that is e.g. utilizing only their stablecoin, have the most secure or insured contracts, … .

Companies, banks and funds would have the possibility to interact on GBC in a more regulated way because they don’t have to buy volatile crypto assets to interact within the chain - just get onboarded by e.g. Circle or Paxos. More regulatory clarity would also provide a sustainable base for further (financial) application development.

Pros

  • Gnosis Beacon Chain as a service (white-label) for centralized stablecoin provider would provide new possibilities within the GBC protocol and could bring more real world adoption.
  • Strengthen the position and vision of the GnosisDAO within the web3 ecosystem that GBC is strongly commited to low and stable fees.
  • Other chains can’t copy the GBC stablecoin system with it’s grade of decentralization.
  • xDAI is not affected at all - tx fee system remains decentralized and can’t be censored and with MAI, GBC would become even more decentralized.
  • DAI and MakerDAO risks as single point of failture would be eliminated.
  • GnosisDAO would be in full control of the stablecoin coordination.
  • USDC, USDP, USDT and MAI are well known and established stablecoins within the whole crypto world.
  • GnosisDAO doesn’t has to reinvent the wheel, it could adopt parts of the framework MakerDAO is using.
  • To reduce risks, only GnosisDAO has the ability to accept centralized stablecoins. But even if a stablecoin depeggs e.g. 20% there won’t be any serious risk to the GBC protocol.
  • GnosisDAO could add stablecoins of AAVE, Compound, Curve to the GBC in the future. So GBC doesn’t lose the connection to the broader DeFi world on Ethereum.
  • GBC could become a stablecoin hub within the web3 ecosystem.

Cons

  • A modular stablecoin solution on a protocol level would be a significant change to the protocol.
  • Extreme depegging risks of stablecoins without the potential of recovering (e.g. UST).
  • There has to be some kind of oracle data from DEXes to ensure the correct amount was payed compared to other stablecoins (this depends on small, medium and strong depegging).
  • There is still a lot of reseach needed.

Specification

The framework to implement different stablecoins should be modular, so that new stablecoins could be added by just adding their contract. GnosisDAO should always decide wether a stablecoin is added or not. To reduce complexity, GnosisDAO could adopt parts of the framework MakerDAO is using to list new assets or just accept stablecoins MakerDAO is accepting in their PSM.

Vision

Adding multiple stablecoins could also be a first step toward accepting stablecoins of multiple currencies (USD, EUR, CHF, GBP,…) in the future - although further research is needed.

Temperatur check:
  • I like the idea
  • I like the idea, but… (comment below)
  • I don’t like the idea (comment below)

0 voters

3 Likes
2

RAI seems more align with the ethos of gnosis chain than centralize stablecoins like usdc, etc …

3

RAI seems more align with the ethos of gnosis chain than centralize stablecoins like usdc, etc …

how to make a Dai/Rai basked to have xDai ~= $1? Any ideas?
https://www.coingecko.com/en/coins/rai

Screenshot 2022-11-12 at 8.49.21 AM
Screenshot 2022-11-12 at 8.49.21 AM1708×1362 229 KB

1 Like
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Native USDC, USDP, USDT and MAI would be seen as an extension of xDAI for paying network fees on the GBC. The decentralisation of the GBC is not to be questioned at any time.

I would like to propose adding BOB as a second token to mint xDai native token https://www.coingecko.com/en/coins/bob#markets to the list of candidates. It’s a new multi-chain stable coin launched by the ex-xDai team. The stability model is inventory based, provided via one sided Univ3 pools of BOB to liquid stables, e.g. USDC/BUSD. All circulating supply of Bob is working for liquidity immediately, comparing to other stables where collateral is not benefiting directly to a protocol but rather acting as a face value or creditor of the last resort (e.g. USDC and USDT). Benefits of rehypothecation of theirs collateral is usually obscure, making profits only for issuers and rarely auditable. Bob is multi-chain, transaparent, optimized for governance and future DeFi use cases.

BOB will enable a long-awated optional privacy for xDai which is already live as zkBob on another network. Meanwhile, due to the new round of sanction on GC from OFAC https://forum.gnosis.io/t/serious-concerns-gnosis-chain-safety-tornado-cash-sanctioning/5789/11?u=igorbarinov, TC and TCN were rendered unusable on GC.

A more compliant protocol which is hard to use for bad actors will make GC ecosystem special for day-to-day use cases, such as payments, remittence, salaries and so on.

Everything to enable BOB on xDai bridge is already done on the xDai bridge. The second minter can be added by a governance decision at any time.

4 Likes
5

Not sure if I understand it right: Is this about accepting other stables as payment currencies for tx? Imo this would make the system more confusing for newcomers and therefor don’t like this idea too much although we should be prepared to change xDAI to something else in the case of DAI failure.

Or is it just about deploying a currency natively on GC? Isn’t this already possible?. E.g. I can mint $Mai without going through a bridge.

edit: or is it about making xDAI it’s own multi collateral stable? In this case bridging DAI from ethereum wouldn’t result in xDAI anymore?

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There are two sides of the bridge. On Ethereum side a user deposits Dai or another stable, e.g. USDC or BOB, on GC side he will get a stable native token 1:1. Face value and legal tender features are important for such stable token.

On withdrawal a user will decide in which stable token he wants to exit. If liquidity is not available for one token, the user will split into proportion. It’s similar how one can exit from LP positions e.g. in Curve from one or another stable. TBH I don’t see much confusion here and opportunities to bring new liquidity outweigh UX hassle.

Btw, “xDai” as a token name is not a part of blockchain. Same to ETH on Ethereum. Metadata can be updated to coin a new name, e.g. Gnosis Stallmünze.

2 Likes
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I agree, it wouldn’t make that much difference if one onboards from ethereum using another stable. The off-boarding however would be more troublesome due to the composition of the bridge as you mention. At least in my case, using mainly DAI/xDAI and need only DAI on ethereum mainnet (to payback my debt in the Maker vault).

So were are the benefits of such a system?

  • It would make xDAI (or however the gas token would be called) less depended on DAI
  • It makes it easier to onboard if your preferred stable isn’t DAI (one tx less cause you don’t have to change to DAI)

and the drawbacks?

  • It would bring the risks of other stables to xDAI on top of the risk of DAI and most likely needs more monitoring.
  • It makes it harder to offboard to your preferred currency (eventually several more tx, depending on the composition of the bridge pool or, if you do it the easy way, you pay the slipage)

And I don’t see why this should really bring more ppl/liquidity to gc cause besides DAI/xDAI most other assets can also be bridged.

BTW, would love to have $Bob here too, but I would prefer a 1:1 polygon/gc bridge, or even better direct gateway to gc using my zkBOB account.

1 Like
8

Excellent idea, zero downside. Options are always good.

Can the Bridge Validators simply vote this in via Governance? As long as the Bridge Validators concur, this would be similar to any other independent action on a public blockchain and not require a Gnosis Chain Governance vote at all, correct?

9

maybe zero downside for bridge operators? No: if they really change this without looking for consensus in the community they loose trust.

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Why? I disagree. This is simply adding a Stable Coin; it does not change anything on Gnosis Chain.

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If I went in with DAI to xDAI and like to go out with DAI I like to do this without slippage. If this will be possible I will not complain.

edit: and besides this, ppl might like to stay away from one or the other stablecoin for whatever reason. If all of xDAI is backed by a mixture that even might change by the sole decision of bridge operators this would make me leave a system that’s dependent on this.

2 Likes
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A broader governance multisig not bridge validators. Although, it’s should get an executive approval from the Vorstand first. Technically it’s impossible although decision reasoning on such decisions is not clear.

If I went in with DAI to xDAI and like to go out with DAI I like to do this without slippage. If this will be possible I will not complain.

Not a problem, especially if bridge fees or compounding are enable for all transactions. They will cover slippage on any liquid stable pair.

If all of xDAI is backed by a mixture that even might change by the sole decision of bridge operators this would make me leave a system that’s dependent on this.

the basket can act as an internal kitchen and users will get Dai all the time on exit. There should be some user experience research done first to determine what is really needed for bridge users.

2 Likes
13

That would be a solution, for sure. If it’s valuable for users depends on the fees necessary to cover this, curious about a calculation.

Right now we use MakerDAO to cook for us. Would be great if we (or the bridge operators or the Vorstand) can be a better chef, but imho also this needs some research before.

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During the lifetime, xDai bridges made millions of dollars on fees and compounding (and can make more but profit generating features were disabled by the Vorstand before Mainnet migration to PoS and were not enabled since then). No doubt bridge revenue can cover slippage on exit if needed (I don’t think 1:1 redemption is the roadblock tho, a healthy/growing ecosystem is more important)

2 Likes
15

I still need numbers to judge about this: how much would a bridging fee be to cover slippage (even in times of market turmoil). I guess it’s depending on the different tokens within the bridge-pool and different assumptions of depeg and volumes are necessary to make proper calculations, nothing one will do with rule of thumbs.

And right now I don’t pay any fees (besides gas) using the xDAI bridge and I wonder if it really will attract more ppl using it, if a fee would be (re)installed.

edit: but if there is a valid argument that this kind of bridge will attract a bunch of new users I wouldn’t oppose, not even if I had to pay a fee myself;-). But right now I see more drawbacks as benefits.

1 Like
16

I tend to agree with @refri on that there seems to be more drawbacks than benefits.

It seems we would be increasing the risk surface. Right now it is a 1:1 ratio between DAI in mainnet and xDAI in GC. If we have multi collateral for backing up GC stablecoin, then any depeg may alter this backing-up. I find the solutions in this thread still requiring some more work before being convinced they are better to today’s solution:

  • requiring more collateral (assets blocked in mainnet) would make it less capital efficient
  • People are one swap away from the stable coin of their preference (in mainnet or GC). Even if that stablecoin is BOB.
  • Even if fees are switched on or yield is generated through compounding, there is still a risk of price slippage of bridging out being more than the fees/yield generated. Plus, in a mass depeg event, users may be incentivized to arbitrage against gnosis chain: bridge in unwanted stable, withdraw prefer stable coin.
  • Covering slippage with fees is asking users to subsidize preference over a certain coin with their bridge fees.
  • Covering it with yield means subsidizing it with additional risk (lending platforms).

This is not to say there aren’t benefits for it, nor that the idea is not worth exploring. It is just that I am yet to be convinced benefits outweight cons and risks.
If onboarding is the key benefit, isn’t it possible to have a L2 over Gnosis Chain that operates with other stable coins for fees and then settles on GC?

2 Likes
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@refri I think there won’t be a lot of risk tbh. If there would be a basket of different usd stablecoins to pay fees within the network, the risk would be reduced a lot if it uses a delayed medianizer and a solution where a depegged (e.g. ±2%) stablecoin would be automatically deactivated - sure further reseach is needed.

@igorbarinov I really like the BOB approach and I think it is very valuable first stepe towards the right direction. I think it is important to partner with a major stablecoin issuer because GC/GBC is known as the stablecoin chain… so partnering with on or multiple stablecoin providers would be perfect fit and would drive adoption much forward imo (especially during this times). We could start with Mai and Dai… as far as I know there is still no real partnership between Gnosis- and MakerDAO… we should change this. Maybe GnosisDAO could stack up some MKR for strategic goals… like vaults on GBC - but this is another topic.

@Sisyphos At the moment this whole L2 thing is a mess imo and it will get worse. There are so many L2s on different chains and they all have to have their own optimized DApp forks, nodes and security approches (extreme diversity of variants - which is super expensive to maintain on the long run if they got deployed on multiple systems). I am pretty sure there will be a time where a lot of L2s are going to die.

2 Likes
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Even during the bear market the adoption of regulated stablecoins is moving forward.

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I really like the BOB approach and I think it is very valuable first stepe towards the right direction.

thanks. please DM me you zk Account and someone will send you some BOB for testing inside the pool

I think it is important to partner with a major stablecoin issuer because GC/GBC is known as the stablecoin chain

agree, but it will make a vendor lock and likely will lead to subjugation by a stable coin issuer. On the other hand, BOB is basically a promissory note for other stables with full on-chain transparency for assets/liabilities in the inventory pools of BOB to other stables. Just a thought.

I am wondering if another coin can be unwrapped on-the-fly to USDC to make the payment or USDC should top Apple Cash wallet first (most likely) similar to how we pay with crypto debit cards.

2 Likes
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Allow different stable coins to use them to deposit seems quite risky. If we e.g. allow 5 different stable coins to be used to deposit and mint xDAI the risk of xDAI depegging is roughly 5x larger than any individual stable depegging.
A better approach seems to be to let users use the stable coin they like and simply allow many tokens for fee payment. It is not really possible to have many “native” assets but it is our goal anyhow to make smart contract wallets (Safe) dominant on Gnosis chain and with those it is possible to use a large range of tokens (even beyond stables) for fee payment.

4 Likes