Could Centrifuge be a safety net for stables

[Lumination]

I have been thinking about this for a while and was curious if the team has considered using their drop and tin tokens as a hedge against stablecoin risks by allowing for investment and redemption in any stable dollar-pegged coin. In my view, this would be something that would certainly make larger institutions, which are scared of another ust, more comfortable diving into defi. Obviously, if assets default this could cause drop to go down but that would be the same as assets defaulting when invested with usd, so that part should be familiar to the larger institutions.

When I invest my dai into the pool I receive drop. If the issuer immediately redeems this for usd and invests in an asset uncorrelated to dai, as pool are already, and dai depegs, then as an investor I am in the clear since I no longer hold DAI, I hold Drop. In this case, I would rather redeem drop for usdc or another stable thus hedging my chances against devalued stablecoins. (this assumes liquidity always remains zero and there is no stable cash drag)

If the team were to consider including more stablecoin options for investment the same could be done for those as well, thus making APY not on stablecoin but rather my drop and with the offramp of any stable of my choosing. Just my silly thoughts, I think a conversation around this strategy would also speak volumes to dao treasuries.

[Tjure07]

Hi @Lumination

interesting idea indeed. There was a similar thought concerning stable coins by @Sherman who proposed to swap CFG-tokens in the treasury. The link to the post can be found below if you want to give it a read:

RFC: Increase Transaction Fees on Centrifuge Chain by 100x and Use the Fees towards a Token Burn

Hey @Tjure07 So basically, as CFG Token accrue in the Centrifuge Treasury, community could choose to Swap some CFG for a StableCoin (Ausd or else). This would allow us to preserve the Treasury from the inherent volatility of the CFG Token. Doing this will/should allow us to have better visibility on how much we have and what we could fund with the Treasury (Credit Group, Analytics Tools, etc etc …). Something that would be very nice to do with the part of the Treasury that would have been swap…

The possibility to see more stable coins in pools is not out of the roam of possibility. There is an ongoing proposal to open channels between Statemint (USDT), Moonbeam (USDC) and Acala (aUSD) and Centrifuge:

Centrifuge - Open HRMP channels to support USDT, Axelar USDC, aUSD

Hello Community We would like to share upcoming integration and several motions that will be: Motion #1 on Centrifuge Motion #2 on Polkadot / Statemint Motion #3 on Centrifuge Goal We want to open hrmp channels with: Statemint - to support USDT XCM transfers, the first pools currency on Centrifuge Moonbeam - to support Connectors v1 and Axelar USDC Acala - to support aUSD XCM transfers This articles describes all the steps and motions required to open hrmp channel…

[sirj]

I agree this is an interesting idea. I think it makes total sense and could bring more liquidity and safety around stables.

I think one of the problems is the amount of dev time it might take to make this possible, currently dev time is allocated on Centchain, Pools, and connectors.