Use Min DAO treasury funds to mint USDM and seed USDM/ADA pool - Poll

Temp Check Polls
1

This proposal advocates for the Minswap DAO to utilize its treasury funds to mint USDM, the first 1:1 fiat-backed stablecoin on Cardano, and subsequently establish a 50/50 USDM/ADA liquidity pool within the Minswap DEX.

This Proposal has several advantages such as: having the largest ADA/USDM Pool of all Cardano DEXs, Sustainable Yield Generation for the DAO, Greater Flexibility for Users, Enhanced Security and Stability through the fiat stablecoin system. You can read more here. The Proposal also has its risks, such as Peg Stability, Liquidity (meaning how quick USDM can be redeemed for 1$) and solvency so that there is at least 1 US Dollar (or equivalent in assets) backing 1 USDM. You can read a report by community member Marco covering how these are addressed here.

Regarding the implementation, a 3rd party (likely related to Mehen) would be minting USDM. Then, there would be a double signature transaction. The transaction would send ADA from Minswap DAO wallet to the 3rd party’s wallet and send USDM from the 3rd party’s wallet to Minswap DAO’s wallet. Then, both parties would review and provide the signature to the transaction. After that, the transaction body would be assembled with both signatures and submitted to the blockchain.

The funds would come from the DAO Treasury ADA wallet, which currently has 825,646 ADA or 521k USD. You can see a breakdown of all DAO Treasury Assets here. ADA would be swapped for USDM at the opening ADA/USD price of the day according to CoinGecko. Then, the equivalent ADA would be taken to provide liquidity on Minswap. The resulting LP Tokens would be staked for farming rewards.

The options for voting can be seen below. In the near future, a working group would be set up that would have discretion over the timing, sizing and management of these funds. For now, this responsibility would remain with Minswap Labs. Not all USDM would be minted all at once, it would be done through DCA over a 3-6 month period. All transactions would be shared transparently.

Options for voting

Option 1) Mint up to 40k Usdm and pair with equivalent ADA worth (15% of the ADA in DAO wallet)

Option 2) Mint up to 20k Usdm and pair with equivalent ADA worth (7.7% of the ADA in DAO wallet)

Option 3) Do not proceed with this Proposal

Note: I did have support from Minswap in creating this temp check.

  • Yes, proceed with on-chain vote
  • No, do not proceed with on-chain vote
0 voters
4 Likes
3

They posted initially in the wrong section of Proposals instead of Temp Check. This should be in Temp Check Poll by the way. Just first time using the new process…

1 Like
4

Moved The proposal to Temp Check Poll

2 Likes
5

Seems reasonable. I however see another risk not adressed by macro that arises directly because of the DAO structure. SInce the DAO does not have abank acount, Im not even sure if it can be considered a legal person, a system was developed where the mint of the assets came from a “third party” (as defined in the proposal). However if the DAO wishes to burn this USDM and get the dollars back there is no mechanism in play. Im sure Minswap wont be the only protocol that has this issue, since I dont believe many protocols have a bank accout. Is there any protocol that asures that this will be redimable at some point?

1 Like
6

Just as we can utilize a third party to mint usdm, we can agree with another one to redeem it. The redemption can, just like the mint, happen along an immediate exchange to e.g. ADA. So the DAO never needs to hold fiat USD itself. With the upcoming stable swap pools the DAO should also be able to exchange into an equivalent dollar pegged asset at any time fully non-custodially.

But in general I agree with you that this is part of the risk the DAO takes on. If the government deems making business with DAOs or any of their funds illegal, we won’t have an option of ever redeeming. The main benefit of a stable peg is achieved not by smart contracts but by putting our trust and ownership in the hand of the current law that mehen complies with.

2 Likes
7

Future utility for USDM will alleviate this issue, the key part here is that a dao be able to protect theyre gain within a stable product backed by USD. This is imperative to any Dao wanting to plan for the future, bear mkts arent going away and non-algo stables are a much needed shelter during those times. Moving into your fiat of choice is in our near futures:-)

1 Like
8

yeah exactly, but this third party is not guaranteed to exist. Therefore for me its a risk, also why would this third party provide KYC for us, exposing itself to government (which will have its data) and taxable events and such? Seems to me like we cannot count with it.

2 Likes
9

We can not count on having one, exactly. Their incentive of doing it will most likely be a fee for providing that service. We don’t know how much they are going to charge us in that case.

1 Like