We all depend on centralized stables—whether we like it or not. When they fail, shit hits the fan across the ecosystem. Yet 95% of the centralized stablecoin market is USDC+USDT! Ethereum has a bus factor of 2 companies, posing a real systemic risk.
This Mission Request calls for mission teams to work on increasing the adoption of niche fiat-backed stablecoins within the Optimism ecosystem. Grant funds could, for example, be leveraged to incentivize the DeFi protocols to integrate more stablecoins, fund the creation of more token pairs on DEXes, and increase TVL for stablecoins within DeFi in general.
S5 Intent Please list the Intent your Request aligns with here:
Intent 1 - progress towards technical decentralization
200k OP (10-50k per stablecoin diversification initiative)
To be set by Grants Council
To be set by Grants Council
Upon being chosen for the grant
12 months after being chosen for the grant.
Intent 1, progress towards technical decentralization, is traditionally focused on protocol specific challenges and on client implementation diversity to reduce the critical risks associated with too much centralization.
There is, however, stablecoins are alse an important vector of centralization that poses a systemic risk. Today, 95% of the circulation stablecoins are managed by just two organizations: USDC and USDT. As a consequence, Ethereum has a bus factor of 2: if these two stablecoins are disrupted shit hits the fan, creating a major systemic risk. USDC’s depeg offered a small glimpse of that risk. When this one token didn’t do its job FRAX, DAI, LUSD all depegged, liquidity for many pairs on both Uniswap and Curve evaporated and the Aave DAO had to pass an emergency proposal.
So we need more stablecoin diversity. Vitalik agrees. The ideal ecosystem has multiple centralized stablecoins with widespread adoption, all of which are integrated in DeFi protocols, have strong liquidity on DEXes and are easy to on/off-ramp with minimal costs. Overcoming the powerlaw effect is not easy to achieve, hence we are calling for this mission request to be included in Season 5.
By increasing stablecoin diversity via Mission Request, decentralization goes up, while the risk of a USDC/USDT disruption resulting in an existential extinction event for the Ethereum / Superchain / Optimism ecosystems goes down.
- The teams participating in this mission should have the ability to influence the supply of one or multiple stablecoins in the ecosystem
- Team members should have experience interfacing with stablecoins on DeFi protocols
- Teams are required to submit a proposal, which should at minimum include:
- Stablecoin(s) supply to grow
- Methods by which the stablecoin(s) supply will increase
- Budget per method
- The main team members and their relevant past experience
- By June 2024, teams are required to submit a report detailing their work and the resulting outcomes
- Monitor participating stablecoins’ total supply
- Monitor overall stablecoin diversity on https://stablecoindiversity.org/
- Monitor stablecoin diversity on Optimism (dashboard coming soon)
- Assess the quality of the report presented by each team
- Measure the absolute and relative growth of participations stablecoins
- Study the stablecoin diversity as measured on https://stablecoindiversity.org/
- Study stablecoin diversity on Optimism specifically (dashboard coming soon)
- Assess mentions of stablecoin diversity as a topic on the internet and at conferences
Yes, Garm from Glo Dollar wrote this Mission Request, I made only small edits.
It was also reviewed by Cotabe, who suggested some minor edits.