Hi Compound community! We are Vishal Kankani and Spencer Applebaum from the Multicoin Capital team.
We are investors in Paxos through our Venture Fund and own COMP in our Hedge Fund. We would like to propose adding Paxos Standard (ticker: PAX) as a stablecoin on the Compound.finance platform.
As of 24th June 2021, as per CoinGecko:
- PAX is the 7th largest USD-backed stablecoin with a market capitalization of approximately $900 million.
- PAX ranks 5th in terms of number of global exchange listings (105).
- There are 4 stablecoins that have more exchange listings: USDT, USDC, DAI and TUSD—all of which are listed on Compound already.
Based on the above data, PAX seems to be the next logical choice for stablecoins on Compound.finance. We propose adding support for PAX. We welcome comments and participation in this proposal from the community.
Paxos Standard (PAX) was launched in 2018 and is a USD stablecoin that is 100% backed by U.S. dollars. Paxos issues PAX, and both the company and the token are regulated by the New York State Department of Financial Services (NYDFS). PAX tokens are minted/burned based on client demand. The process for minting and burning has been approved by the NYDFS and is regularly audited by Withum, an advisory, tax and audit firm. Full PAX attestations are completed monthly and posted to www.paxos.com/attestations.
Paxos raised $142 million in December 2020 in its Series C investment round, bringing their total funding to more than $240 million. As stated by the company, Paxos’ main 2021 goals include increasing tokenized assets under custody and trustworthiness. Paxos not only has a NYDFS state Trust charter but also is the first crypto-native company to receive preliminary conditional approval from OCC for a de novo national Trust Bank charter. Furthermore, Paxos was the first digital asset company to get SOC2 Type 2 verified for custody, exchange and stablecoin product platforms. This follows their SOC1 Type 2 certification, which was granted in December 2020. These certifications ensure users’ data is compliant with their company policies, controls and regulatory requirements.
PAX Adoption Across DeFi and CeFi
PAX is included in MakerDAO’s pool and is available for trading on DeFi Apps, including Curve and Uniswap. It is used for lending and borrowing on known CeFi institutions such as BlockFi and Celsius. Additionally, it is traded on many centralized exchanges, including but not limited to Binance, Bitfinex, Bitstamp, Huobi Global, and OKEx. PAX daily traded volumes are greater than USD $50 million across CeFi & DeFi.
We would like to extend PAX’s functionality in the DeFi space through listing on Compound.finance. We believe adding PAX to Compound.finance will provide users a trustworthy alternative crypto asset to post collateral and borrow. PAX is an excellent source of collateral because it is one of the most reliable, regulated stablecoins. PAX is valuable to borrow due to its trustworthiness and range of use cases, including store-of-value, settlement, collateral, trading, and peer-to-peer transfer.
Today, nearly 75% of the crypto assets deposited into Compound.finance are fiat-backed stablecoins, stablecoins partially backed by other fiat-backed stablecoins, and centrally wrapped BTC. Adding PAX diversifies Compound.finance’s exposure to any one centralized token issuer, while at the same time adding functionality and utility for a very trusted asset in the ecosystem. It would further diversify the menu of centralized stablecoins and stablecoins with differentiated utility on Compound.
We welcome comments and participation in this proposal from the community.
Price Feed Mechanism & Other Parameters
Currently, PAX is traded on Uniswap and Curve and we could use those price feeds. Also, if there are concerns around the daily traded volumes on these specific venues, we could start with a 0 collateral factor to mitigate short term concerns. An alternate approach would be to peg it to USDC as these two assets come with a very high level of assurances.
Initial Parameters (Open to suggestions)
- Collateral Factor: 0-25%
- Reserve Factor: 20-30%
- COMP Speed: None
- Borrow Cap: 80% of supply
- Supply Cap: None
- Price Feed ideas: Uniswap and/or Curve OR Peg to USDC
- Interest Rate Models: USDC
- Market Cap: ~$900 million
- 24hr trading volume: $50 - $100 million
- Exchanges: Binance, itBit, Bitfinex, Coinsbit, Atomars, etc