Add support for the $USDC market on Liqwid

Summary
This is a proposal for creating a new liquidity market to support USDC token for lending and borrowing on the Liqwid protocol.

Project and Token Overview
USDC will be brought through the Wanchain bridge on Cardano. (More information here: BTC, ETH, USDC and USDT come to Cardano | Wanchain)

USDC Market Reasoning
The USDC token is listed on many CEX/DEX, has a good reputation and a total market cap around $26 billions. (source: https://www.coingecko.com/en/coins/usd-coin and https://defillama.com/stablecoin/usd-coin)

It means that if the USDC tokens would be sold on a DEX or any CEX, following a bridge back from Cardano to Arbitrum or Wanchain, we are confident that liquidators would find enough liquidity and the slippage would be low because of these arbitrageurs.

Risk Considerations
USDC is existing for many years and has a great success until now. Thus, no major event or information could let us think that this token is exposed to any unknown risk(s).

The Wanchain bridge has been built with IOG and tested successfully. Wanchain is already operating many bridges and did not encounter any issue until now. (Website: https://www.wanchain.org/)

The current bridge is accessible there: https://bridge.wanchain.org/

Suggested USDC Market Parameters
In comparison with the DJED market, the proposed USDC interest rate model is having a steeper slope after the kink.

Interest rate market parameters:

  • BaseRate: 2.00%
  • RateNormal: 4.00%
  • RateJump: 400.00%
  • Kink: 65.00%

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  • Income Factor: 20.00% (80% of the interests paid by the borrowers are given to the suppliers).

The remaining part is split as following:

  • Reserve Factor: 5.00%
  • DAO Factor: 5.00%
  • LQ stakers: 10.00%

[Edit: 14 August 2023] $USDC is not accepted as collateral. The $USDC will be like the $iUSD.
The proposed USDC risk parameters are:
- Collateral factor ( maxLTV): 72.19%
- Liquidation threshold: 77%
- Liquidation discount: 10%

Specifications
The Liqwid Labs developers have already completed the technical requirements to list any tokens. Following this temperature check, the team will work on USDC preparation work including: 1) testing the proposed interest rate model, 2) completing the off-chain updates to support multiple collateral asset loans and 3) configuring the oracle price feed.

Conclusion
The Core Team recommends the adoption of this proposal and to add $USDC token for supplying and borrowing on Liqwid with the proposed market parameters. We note that $USDC will not be accepted as collateral (edit 14 August).

  • Yes, I support the adoption of this proposal
  • No, I do not support the adoption of this proposal

0 voters

Voting no as i fear bridged assets pose a risk to liqwid of used as collateral imo.

What happens to the value of eanchsin wrapped assets if wth side deposits are hacked?

4 Likes

I voted no and I’m completely against this. No knock on Wanchain, I think it’s important to have here and an achievement, but I’m against any bridged asset as serving as collateral.

If the bridge gets hacked, which happens all the time in crypto, the contagion within the Liqwid protocol itself will be devastating to users and investors, if not destroy the protocol.

3 Likes

Bridged assets as collateral?

What could go wrong?

100% no.

I’d go as far to say that if USDC is added as a collateral asset on Liqwid, I’ll probably just pull my own liquidity out. Not worth the risk anymore.

EDIT: Some background: bridges literally killed the whole Harmony ecosystem last year, and knocked back Wingriders significantly as well.

4 Likes

I think USDC is generally a reliable product, but I would start with a lower collateral factor on a bridged asset. If we got below 50% I would be more comfortable with Liqwid’s position in a situation where contagion was involved. After 6-12 months we could increase it as the bridge reached security milestones.

3 Likes

I think there is no need to allow any bridged asset as collateral now, the risk is too high. eventually, in the future if the demand for these assets is high it could be considered the protocol exposure to this risk, but not now. if this is approved I will pull out my liquidity, I don’t like to lose money in degen moves

2 Likes

nomad bridge hurt users especially Charli3 holders. most of whom are still tied to the ERC coin which is worth less and unable to sell or move tokens else they’ll likely lose the chance to reclaim Cardano side.

when we have only 4 markets and many CNT’s proposed no idea why bridged assets even popped up this soon tbf

3 Likes

This is the second proposal you’ve put up that makes no sense to me. Definitely voting no with every LQ I hold. Why would we want to expose the protocol to bridged asset risk with a fledgling protocol that is still clearing up technical debt even…? With the countless examples of “safe” bridges being exploited this seems like a high risk proposal. And we have fiat stables likely not too far out and algos available. Seems like a play to pursue cross-chain liquidity while putting our security and reputation at risk.

2 Likes

I only partly share the concerns expressed here regarding a possible hack of the bridge. Assuming one of the 8 Wanchain bridges is hacked, the damage for the wrapped Cardano token would be small, because you could still transfer the token back via the remaining 7 other Wanchain bridges (BSC, Polygon, ETH, Tron, Optimism, etc.). That all 8 bridges are hacked together, I see as almost impossible. Therefore, Wanchain is the more secure bridge compared to other bridges like Nomad.

One of the biggest concern brought in this thread is about the security surrounding the WANbridge. Therefore, we could propose to offer the USDC as supply and borrow on Liqwid, but not as collateral (similar situation as iUSD).

By doing so, the Liqwid protocol would not bear any loss after a potential bridge hack, and the Liqwid users can decide which stablecoins they want to use by themselves. USDC or DJED or iUSD.

Diversification of Stablecoins is needed and the on ramp of USDC will greatly help mature the ecosystem … I CONCUR this proposal

2 Likes