Custom Pools Proposal

DFX Proposals
1

Summary

The proposal is to create an “innovation zone” where the community can request/submit custom pools through a systematic process. These pools will appear in the regular UI but with an “experimental” label cautioning potential LPs about the increased risk of de-pegging. The regular swap UI will also support these new non-fiat-backed tokens.

Motivation

While DFX initially focused on fiat-backed stablecoins for reasons of stability and on/off-ramp access, there is massive demand for other non-fiat-backed stablecoins to take advantage of the efficiency of the DFX dynamic AMM bonding curve. There is no reason we can’t allow this, assuming we have proper messaging about the risks for LPs.

Specifications

Limitations

  • Only currencies with USD-paired Chainlink feeds are eligible. For example, we can integrate a JPYC/USDC pool because there is a JPY/USD feed.
  • The current smart contracts require deployment from the core team multisig. As a result, this will have to be a permissioned process until the next iteration of DFX. Likely, a vote (on Snapshot) will be required with a minimum quorum and supermajority threshold.

Risks

  • Non-fiat-backed stablecoins may not stick to their peg as well as fiat-backed stablecoins. Therefore, there is a much larger risk of impermanent loss for LPs in these specific pools. Sufficient warning and labelling will be required.

Proposed Process

  1. Community decides on potential pools (and on what chain) by forum post.
  2. 1st Vote on Snapshot to decide from list of potential pools.
  3. 2nd Vote on Snapshot, with 5% quorum and 50% majority, to confirm the winning pool.
  4. Core (or community in the future) uploads Assimilator* (with tests) to public Github repo.
  5. Deploy the Assimilator and verify on Etherscan.
  6. Deploy pool from core team multisig.
  7. Update frontend to accommodate pool.
  8. Seed liquidity into the pool.

*Assimilators are smart contracts that facilitate an adjustable bonding curve based on a Chainlink price feed.

If Proposal Passes

Pros

  • Increase in attention from other stablecoin communities
  • Increase in TVL and potentially volume
  • Increase in community engagement
  • Increase in options for the DFX AMM

Cons

  • Increase in risk for LPs of custom pools
  • Fragmentation of liquidity
  • Fragmentation of rewards (if we decide to reward these other pools)
  • Loss of focus on stablecoins with on/off-ramps

If Proposal Fails

Pros

  • Safer for LPs
  • Prevents fragmentation of energy, liquidity, and rewards

Cons

  • Opportunity cost of onboarding non-fiat-backed stablecoin communities
  • More forks of DFX may arise from others who want to support non-fiat-backed stablecoins

Vote

Link to Snapshot will come after some discussion. For the meantime, please vote in the forum poll.

5 Likes
2
  • Yes
  • No

0 voters

1 Like
3

Fantastic idea and will open a lot of new worlds and avenues for DFX… Love it!

Thank you Adrian for taking the time to craft it and putting so much thought into it.

4 Likes