Add Collateral USDS Market on ETH Mainnet

New Markets
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Summary

StableLab proposes the addition of a USDS market to Compound V3 on Ethereum Mainnet.

Project and Token Description

USDS is an upgraded version of the DAI token. Upgrading is optional. It is an ERC-20 token with permit functionality and EIP-1271 signature validation. The USDS token also enables two-way conversions between DAI and USDS tokens, using the mint and burn functions of both tokens. The conversion rate of the stablecoin is 1 DAI to 1 USDS. USDS has the added ability to earn token rewards and to access the Savings Rate.

Motivation & Benefits to Compound Community

Currently, Sky Savings Rate is at 6.25% while for Compound Finance’s Ethereum based markets, NetEarn APR for stablecoins are hovering at 3% to 5%, which makes Compound less competitive especially for users who are seeking to supply for rewards.

However, this issue can be resolved by Compound listing USDS and integrating Sky Savings Rate, which was already previously shown to be feasible when Compound integrated DSR (Dai Savings Rate), which allowed its users to enjoy Earn APR higher than DSR.

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Sky Protocol has an extensive history of collaborating with DeFi protocols. Therefore, we believe that this is the opportunity for both USDS and Compound to grow even further.

Point of Contact:

Proposed Collateral

We propose adding the following asset as collaterals for the market

  • ETH (Ether)
  • wstETH (Lido Wrapped Staked ETH)
  • COMP (Compound)
  • Chainlink (LINK)
  • Uniswap (UNI)

We invite the community to suggest and give inputs for any other collateral assets.

Price Feed Behavior

Is the price feed supported by ChainLink? If not, what entity is responsible for posting price updates? List names and addresses which may update the price feed?

No. We will use the official USDS price feed from Sky’s Oracle protocol Chronicle. Chronicle is a secure and decentralized Oracle protocol that has secured over $20B in assets for MakerDAO and its ecosystem since 2017. We believe in resilience in Oracle diversity, and would have Chronicle onboarding as part of USDS onboarding for Compound.

Chronicle USDS/USD Oracle

Contract Address: 0x74661a9ea74fD04975c6eBc6B155Abf8f885636c

List of Validators for Chronicle

MakerDAO

Validator Address: 0xa580BBCB1Cee2BCec4De2Ea870D20a12A964819e

ETHGlobal

Validator Address:0xcfC62b2269521e3212Ce1b6670caE6F0e34E8bF3

Nethermind

Validator Address:0x91242198eD62F9255F2048935D6AFb0C2302D147

Etherscan

Validator Address:0x71eCFF5261bAA115dcB1D9335c88678324b8A987

Infura

Validator Address: 0x8ff6a38A1CD6a42cAac45F08eB0c802253f68dfD

dYdX

Validator Address: 0x75ef8432566A79C86BBF207A47df3963B8Cf0753

MyCrypto

Validator Address: 0x3cb645a8f10fb7b0721eabae958f77a878441cb9

0x

Validator Address: 0xD27Fa2361bC2CfB9A591fb289244C538E190684B

Gnosis

Validator Address:0x60da93D9903cb7d3eD450D4F81D402f7C4F71dd9

Mantle

Validator Address: 0xFa6eb665e067759ADdE03a8E6bD259adBd1D70c9

DeFi Saver

Validator Address:0xd72BA9402E9f3Ff01959D6c841DDD13615FFff42

Euler

Validator Address:0x1DCB8CcC022938e102814F1A299C7ae48A8BAAf6

Chronicle Labs

Validator Address:0x950d6400238Cf4AF4f55020D61c201E905631356

Gitcoin

Validator Address:0x77EB6CF8d732fe4D92c427fCdd83142DB3B742f7

0xDA1d2961Da837891f43235FddF66BAD26f41368b

Validator Address:0xDA1d2961Da837891f43235FddF66BAD26f41368b

0xA8EB82456ed9bAE55841529888cDE9152468635A

Validator Address:0xA8EB82456ed9bAE55841529888cDE9152468635A

0xE6367a7Da2b20ecB94A25Ef06F3b551baB2682e6

Validator Address:0xE6367a7Da2b20ecB94A25Ef06F3b551baB2682e6

0x4b0E327C08e23dD08cb87Ec994915a5375619aa2

Validator Address:0x4b0E327C08e23dD08cb87Ec994915a5375619aa2

0xaC8519b3495d8A3E3E44c041521cF7aC3f8F63B3

Validator Address:0xaC8519b3495d8A3E3E44c041521cF7aC3f8F63B3

0x16655369Eb59F3e1cAFBCfAC6D3Dd4001328f747

Validator Address: 0x16655369Eb59F3e1cAFBCfAC6D3Dd4001328f747

0xFbaF3a7eB4Ec2962bd1847687E56aAEE855F5D00

Validator Address: 0xFbaF3a7eB4Ec2962bd1847687E56aAEE855F5D00

0x8aFBD9c3D794eD8DF903b3468f4c4Ea85be953FB

Validator Address: 0x8aFBD9c3D794eD8DF903b3468f4c4Ea85be953FB

0x8de9c5F1AC1D4d02bbfC25fD178f5DAA4D5B26dC

Validator Address: 0x8de9c5F1AC1D4d02bbfC25fD178f5DAA4D5B26dC

0xd94BBe83b4a68940839cD151478852d16B3eF891

Validator Address: 0xd94BBe83b4a68940839cD151478852d16B3eF891

How often will price updates be posted?

1 hour updates

At what price difference threshold will price updates be posted?

0.5%

Can the AggregatorV3Interface functions for this price feed ever revert when called?

No

Does the bytecode of the custom price feed match an audited version?

Yes

Relevant Statistics and Links

Website:

Twitter:

https://x.com/SkyEcosystem

CoinMarketCap:

CoinGecko:

MarketCap:

5.4 billion USD (DAI and USDS combined) https://info.sky.money/

Contract address:

0xdC035D45d973E3EC169d2276DDab16f1e407384F

Official Docs:

Platform:

USDS is built on Ethereum, as an ERC-20 token

The smart contract code for USDS token:

The smart contract code can be found in the GitHub repository for MakerDAO

A security audit report by a third-party security firm:

The audit reports can be accessed here

Next Steps

Adding USDS as a market to Compound V3 on Ethereum would offer users a decentralized and stable asset with unique yield opportunities through the Sky ecosystem. By supporting USDS, Compound would further diversify its offerings, attract new users, and enhance continued collaboration with the Sky ecosystem.

We invite the community to consider this application for listing the USDS market and welcome suggestions in this direction.

Community Check

The community should review the following items before approving a new asset.

  • Veracity of the info provided.
  • Correct configuration of any new contracts (oracle, custom price feeds, asset).
  • Documentation quality.
  • Favorable results in the execution of the token test suite or integration simulations.

Additionally, we look forward to the community to suggest

  • Collateral Factor
  • Reserve Factor
  • Borrowing Limit
3 Likes
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USDS is a high priority for the Growth team. A few months ago we were in process of pushing a DAI market jointly with Gauntlet, but decided to wait for the new Stablecoin from Maker/Sky after talking to the Maker BD team. With the launch of USDS, we’d love to proceed with listing the market on Compound.

WBTC and cbBTC will also be good collaterals for this market given their popularity on other Compound markets.

For the Price feeds, new Oracles need to go through a comprehensive approval process resulting in longer times for audit and risk analysis, which will take months with the current audit backlog. Given the high priority for USDS in the Compound Community, I prefer continuing with a price feed from an approved partner for USDS which will be significantly quicker in auditing. Chainlink has a price feeds for USDS.

2 Likes
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Thanks for the support Sharp, and indeed exciting to pursue various ways to collaborate.

Was a bit worry of WBTC as I saw there was also discussion of moving to cbBTC but will add them as feedback later.

USDS Chainlink pricefeed was not available at the time of application though was aware that it will eventually be available. But now that it is available and has the potential benefit of speed up integration, We will have internal discussions.

If there are edits based on feedback, they will be in a new forum post

1 Like
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Updated here

2 Likes
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[Gauntlet] Mainnet v3 USDS Comet Asset Listing

Simple Summary

In line with the recommendations for DAI Comet, Gauntlet would like to update the analysis for this comet to consider USDS, Sky’s new stablecoin. We propose the following initial parameter recommendations for the Mainnet v3 USDS Comet:

Risk Parameters

Asset Collateral Factor Liquidation Factor Liquidation Penalty Supply Cap
cbBTC 80% 85% 5% 150 cbBTC
tBTC 76% 81% 10% 285 tBTC
WETH 83% 90% 5% 50,000 WETH
USDe 70% 75% 15% 50,000,000 USDe
sUSDe 70% 75% 15% 38,000,000 sUSDe
sUSDS 88% 92% 4% 50,000,000 sUSDS
wstETH 82% 87% 8% 10,000 wstETH

Rationale

USDS utility

USDS can be swapped 1:1 for DAI through atomic swaps on Sky’s platform. Additionally, USDS can be minted against USDC, with USDS holders earning rewards in SKY tokens, which we believe will encourage faster migration from DAI to USDS. Beyond SKY token rewards, sUSDS (formerly sDAI) is also eligible for the DSR rate of 6% when staked.

Collateral Assets

Gauntlet suggests a few modifications to the initially proposed collateral assets. We do not recommend listing WBTC at this time due to ongoing concerns around its custodial processes, unless the community strongly prefers otherwise. Instead, we recommend listing tBTC and cbBTC as alternatives. Additionally, we propose listing wstETH and sUSDS, as these assets could facilitate levered yield strategies.

Supply Caps and Liquidation Penalty

Given USDS and DAI can be swapped atomically, USDS benefits from DAI’s deep liquidity. However, currently, there are no USDS-collateralAsset pools on DEXs which may add additional steps to liquidate collateral. Keeping this in mind, Gauntlet recommends setting caps which would incur slippage equal to the liquidation penalty against DAI pairs. We recommend setting caps for Ethena stablecoins to levels mentioned in the previous post.

cbBTC/DAI Slippage on 10/14/24

Screenshot 2024-10-14 at 10.52.41 AM
Screenshot 2024-10-14 at 10.52.41 AM1461×682 118 KB

wstETH/DAI Slippage on 10/14/24

Screenshot 2024-10-14 at 12.15.25 PM
Screenshot 2024-10-14 at 12.15.25 PM1461×682 175 KB

WETH/DAI Slippage on 10/14/24

Screenshot 2024-10-14 at 12.21.48 PM
Screenshot 2024-10-14 at 12.21.48 PM1461×682 145 KB

Collateral Factors

We recommend aligning the collateral factors (CFs) and liquidation factors (LFs) for cbBTC, tBTC, and wstETH with those in the USDC Comet. For WETH, USDe, and sUSDe, the CFs and LFs remain unchanged from the previous post. Regarding sUSDS, the ERC-4626 implementation eliminates the need for external oracles.

The visualization below shows the volatility of sDAI/DAI, which we assume will have a similar distribution. Given the ongoing migration, we anticipate periods of elevated volatility and therefore recommend a buffer of 2x the annualized log volatility, as outlined in our previous formula.

Screenshot 2024-10-14 at 5.04.30 PM

Would further transform to:

Screenshot 2024-10-14 at 5.04.56 PM

The Annualized Log Vol stands at 1.8%, with a 2x buffer, we therefore, recommend a CF of 88% and an LF of 92%.

sDAI/DAI Volatility

Screenshot 2024-10-14 at 1.10.18 PM
Screenshot 2024-10-14 at 1.10.18 PM1127×682 38.7 KB

Storefront price factor: 60%

Targetted Reserves: 20M

IR Curve Parameters

Gauntlet recommends aligning the IR parameters to those of stablecoin comets :

Parameter Recommended Value
Annual Borrow Interest Rate Base 0.015
Annual Borrow Interest Rate Slope Low 0.0333
Borrow Kink 0.9
Annual Borrow Interest Rate Slope High 4.0
Annual Supply Interest Rate Base 0
Annual Supply Interest Rate Slope Low 0.039
Supply Kink 0.9
Annual Supply Interest Rate Slope High 3.6

Utilization vs APRs & Reserve Factor

b23672bb9f86176b98413133a3c74aae828d6ed9_2_690x193

At 90% kink, the Borrow APR is 4.5% and Supply APR is 3.51%, the comet will have positive reserve growth when the utilization is >72%

Incentive Parameters

COMP rewards recommendations are designed to offer appealing distribution APRs when the comets are first launched and when supply caps are highly utilized.

Gauntlet is recommending supply rewards to incentivize a more significant inflow of supply tokens into the protocol. This is important in the early stages of protocol growth before borrowers can join. Daily COMP rewards are subject to change as TVL rises and the markets evolve.

Daily COMP Supply Rewards Daily COMP Borrow Rewards
25 25

With the above utilization and the present Interest Rate curve:

  • Supply APR: 3.51%
  • Borrow APR: 4.5%

Given the current COMP price of $45 at 90% utilization with $158M supplied and $142M Borrowed:

  • Supply Distribution APR: 0.26%
  • Borrow Distribution APR: 0.29%

This results in the following Net APRs:

  • Net Supply APR: 3.77%
  • Net Borrow APR: 4.21%
2 Likes
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Deploy and initialize cUSDSv3 market on Mainnet

PR - Proposal for Mainnet USDS market by MishaShWoof · Pull Request #942 · compound-finance/comet · GitHub

Actions

  1. Run Slither. Fails. :x:Proposal for Mainnet USDS market · woof-software/comet@8cd206c · GitHub
  2. Forge test. Success.:white_check_mark: Proposal for Mainnet USDS market · woof-software/comet@8cd206c · GitHub
  3. Gas Profiler. Success.:white_check_mark: Proposal for Mainnet USDS market · woof-software/comet@8cd206c · GitHub
  4. Scan. Success.:white_check_mark: Proposal for Mainnet USDS market · woof-software/comet@8cd206c · GitHub
  5. mainnet-usds Scenario. Success.:white_check_mark: Proposal for Mainnet USDS market · woof-software/comet@8cd206c · GitHub
  6. Unit tests. Success.:white_check_mark: Proposal for Mainnet USDS market · woof-software/comet@8cd206c · GitHub
  7. Eslint. Success.:white_check_mark: Proposal for Mainnet USDS market · woof-software/comet@8cd206c · GitHub
  8. Contract linter. Success.:white_check_mark: Proposal for Mainnet USDS market · woof-software/comet@8cd206c · GitHub
  9. Deploy. Success.:white_check_mark: Deploy Market · woof-software/comet@81b40a7 · GitHub
  10. Enact migration. Success. :white_check_mark:Enact Migration · woof-software/comet@8cd206c · GitHub

Description we use:

Initialize cUSDSv3 on Ethereum Mainnet\n\n

Proposal summary\n\n

Compound Growth Program [AlphaGrowth] proposes the deployment of Compound III to the Mainnet network. This proposal takes the governance steps recommended and necessary to initialize a Compound III USDS market on Mainnet; upon execution, cUSDSv3 will be ready for use. Simulations have confirmed the market’s readiness, as much as possible, using the Comet scenario suite. The new parameters include setting the risk parameters based off of the recommendations from Gauntlet.\n\n

Further detailed information can be found on the corresponding proposal pull request, deploy market GitHub action run and forum discussion.\n\n\n

wstETH price feed\n\n

For LSTs, the goal is to use full exchange rate price feeds. Thus, we treat that stETH:ETH is 1:1.\n\n

sUSDS and sUSDe collaterals\n\n

Gauntlet suggests having sUDSS and sUSDe collaterals. This proposal does not include them, because the price feed is under the audit. We suggest to start bootstrapping the liquidity without these collaterals and as the price feed is audited, we will add these collaterals. We discussed it with Gauntlet, and we received the approval to have such an approach.\n\n

Proposal Actions\n\n

The first proposal action sets the CometFactory for the new Comet instance in the existing Configurator.\n\n

The second action configures the Comet instance in the Configurator.\n\n

The third action deploys an instance of the newly configured factory and upgrades the Comet instance to use that implementation.\n\n

The fourth action configures the existing rewards contract for the newly deployed Comet instance.\n\n

The fifth action reduces Compound’s cDAI reserves and transfers it to Timelock, in order to convert it to USDS to then seed the market reserves for the cUSDSv3 Comet.\n\n

The sixth action approves DAI to DAI-to-USDS native converter.\n\n

The seventh action converts DAI to USDS with 1:1 ratio and transfers USDS to cUSDSv3 Comet.\n\n

The eight action updates the ENS TXT record v3-official-markets on v3-additional-grants.compound-community-licenses.eth, updating the official markets JSON to include the new Ethereum Mainnet cUSDSv3 market.

2 Likes
7

So will USDS deposited in CMP get the same APR as Spark/Sky eventually?

1 Like
8

Add sUSDS to cUSDSv3 on Mainnet

PR - Add sUSDS as collateral to USDS market on Mainnet by MishaShWoof · Pull Request #947 · compound-finance/comet · GitHub

Actions

  1. Run Slither. Fails. :x:. https://github.com/woof-software/comet/actions/runs/1179956881
  2. Forge test. Success.:white_check_mark: Add sUSDS as collateral to USDS market on Mainnet · woof-software/comet@236fad3 · GitHub
  3. Gas Profiler. Success.:white_check_mark: Add sUSDS as collateral to USDS market on Mainnet · woof-software/comet@236fad3 · GitHub
  4. Scan. Success.:white_check_mark: Add sUSDS as collateral to USDS market on Mainnet · woof-software/comet@236fad3 · GitHub
  5. mainnet-usds Scenario. Success.:white_check_mark: Add sUSDS as collateral to USDS market on Mainnet · woof-software/comet@236fad3 · GitHub
  6. Unit tests. Success.:white_check_mark: Add sUSDS as collateral to USDS market on Mainnet · woof-software/comet@236fad3 · GitHub
  7. Eslint. Success.:white_check_mark: Add sUSDS as collateral to USDS market on Mainnet · woof-software/comet@236fad3 · GitHub
  8. Contract linter. Success.:white_check_mark: Add sUSDS as collateral to USDS market on Mainnet · woof-software/comet@236fad3 · GitHub
  9. Prepare migration. Success.:white_check_mark: Prepare Migration · woof-software/comet@236fad3 · GitHub
  10. Enact migration with impersonate. Success.:white_check_mark: Enact Migration · woof-software/comet@236fad3 · GitHub

Description we use:

Add sUSDS as collateral into cUSDSv3 on Mainnet\n\n

Proposal summary\n\n

Compound Growth Program [AlphaGrowth] proposes to add sUSDS into cUSDSv3 on Ethereum network. This proposal takes the governance steps recommended and necessary to update a Compound III USDS market on Ethereum. Simulations have confirmed the market’s readiness, as much as possible, using the Comet scenario suite. The new parameters include setting the risk parameters based on the recommendations from Gauntlet.\n\n

Further detailed information can be found on the corresponding proposal pull request and forum discussion.\n\n\n

Proposal Actions\n\n

The first action adds sUSDS asset as collateral with corresponding configurations.\n\n

The second action deploys and upgrades Comet to a new version.

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Can I suggest the DAI in the compound treasury be converted to sDAI or sUSDS while we’re at it? I assume sDAI carries the same risk as DAI in that if one goes the other goes with it.

Also to add, if you are adding sUSDS why not also add sDAI? There is a lot more sDAI out there than sUSDS so it’s a larger market.

1 Like
10

It’s a good point to add sDai into the market. We will discuss it.

11

If Compound treasury can be changed to sUSDS, that would be great.

I think one aspect to consider is that sUSDS yields are higher than sDAI and they continue to be higher than sDAI

12

My suggestion was more based on the if you add the riskier sUSDS you should add the less risky but almost exact same sDAI especially as sDAI is currently a larger market (I think more than 10x more still?) and I assume the amount of work to add sDAI in addition to sUSDS is minimal. sUSDS has higher APR more as a promotion to increase adoption but I doubt that will last forever.

In general I support adding everything that is safe, has a large market cap, and takes low effort to add which is why I mentioned it. I assume there isn’t a limit to adding things, more that it’s reserved for things with large caps that are deemed safe.