[DISCUSSION] Collateral Oversight And Stability Team

Hub Proposals Proposal Ideas
1

Hi everyone,

COAST team here. We would like to share for discussion our stablecoin idea for the COSMOS ecosystem.

COAST is a stablecoin enforcer of crypto and real world assets (RWA) collateralization. We are proposing to build a 1:1 stablecoin on the Cosmos ecosystem - and that includes L1s connected to Cosmos Hubs.

The stablecoin is generated via effective collateralization of various crypto, and future RWAs. It should be redeemable anytime.

COAST is a fork of MakerDAO and we plan to make changes to the chain configuration (https:// github(dot)com/makerdao/dss-deploy-scripts#chain-configuration). MakerDAO is the best on-chain collateral system and its auction system and peg have performed exactly as wished during the most intense market turmoil. The key differentiator for COAST is it focuses on assets in the Cosmos ecosystem.

COAST consists of

  • an on-chain collateral system for coUSD (co representing Cosmos, Collateral and Coast)
  • a collateral monitoring system with oracle
  • A auction system for fair liquidation

Benefits for COSMOS?

  • This will unlock considerable liquidity in COSMOS that can fuel DApps usage. Imagine coUSD going into an NFT Marketplace to buy NFTs or become the liquidity for DeFi DApp trades.
  • Secondly, COSMOS will further strengthen its standing as an L1 that is strong in financial assets (replacing Terra) , eg: buy OIL using crypto. If done successfully, the derivative narrative can be built without users crossing into source L1 (say COAST is launched in COSMOS) as derivative assets can move from one chain to another.
  • Utility of various L1 tokens $ATOM, $JUNO, $EVMOS etc will increase as they can be locked up to generate coUSD.

Our feature

  • Low debt ceiling (vaults evaluated based on liquidity)
  • No collateralization of $COAST. (MakerDAO is proposing this)
  • High CR-ratio with low collateralization ceiling.

Our asset types

  • Asset type 1: BTC, ETH, USDC, DAI, USDT etc

  • Asset type 2: Cosmos tokens $OSMO, $ATOM, $CRO etc

  • Asset type 3: LPs of asset types above

Our question to the community.

  • Are you interested in COAST
  • Is anyone interested in collaborating? We are looking for
  1. Community manager (Well verse in Maker’s MIP/ecosystem, Cosmos’ CIP/ecosystem)
  2. 3rd party Collateral Auction tracker builder (Similar to daiauctions(dot)com and makerburn(dot)com?)
  3. 3rd party Auction Keeper engineers (Traders from market making teams perhaps Cronos?)

1m $COAST token will be generated and function only as a signalling token in the smart contract. $COAST will have governance voting power.

Looking forward to your comments and questions from both the COSMOS team and the community! Open for discussion.

@Maria @ebuchman

6 Likes
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@serejandmyself @Spaydh

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Thanks for tagging me. Few questions (please do not take it as critique, rather as curiosity at this stage):

  1. Is it possible to see the code? Is it open source?
  2. Tokenology of coast, especially when it comes to revenue streams other than inflationary rewards
  3. Why tie anything to the USD again?
  4. The maker dao model isnt that good in all honesty, why them?
  5. Why would the other L1 want to take part in this? They can just issue the same thing themselves
2 Likes
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Hello @serejandmyself,

Thank you for taking the time to read and for your thoughtful questions. Below are our answers.

Q1 Is it possible to see the code? Is it open source?

At this moment, the code is not available as it is still in progress. However, once it is completed and ready for release, we will open source.

Q2: Tokenology of coast, especially when it comes to revenue streams other than inflationary rewards

The protocol generates its revenues from two primary sources:

a) Interest revenues will be obtained from loans that are overcollateralized. To account for the portion of coUSD that is not backed by loans (generated from the Price Stability Module), a % of the total coUSD will represent the lending base. Across all scenarios, we will apply a constant Annual Percentage Rate (APR) of X%.

b) Liquidation revenues will be derived from fees charged on liquidated vaults. Regarding liquidations, we will project a certain percentage of the average total coUSD supply that will be liquidated and will result in a penalty fee of X%

Pasting link for the images because not allowed to post media images or links in the posts : https:// imgur(dot)com/a/EaGPUWm

Q3: Why tie anything to the USD again?

We are committed to maximizing decentralization within our platform, and it is important to acknowledge that the USD remains the prevailing global currency standard. As mentioned in our initial post, our objective is to introduce a wider range of financial asset derivatives to the COSMOS network, such as OIL, which are currently predominantly traded in USD.

Q4: The maker dao model isnt that good in all honesty, why them?

We highly regard MakerDAO as an exceptional on-chain collateral system, particularly its auction system and peg, which have demonstrated remarkable performance even during periods of significant market turmoil. We would greatly appreciate your suggestions if you have a model in mind that you believe surpasses the capabilities of MakerDAO.

Q5: Why would the other L1 want to take part in this? They can just issue the same thing themselves

Our plan is to deploy this initiative within the Cosmos ecosystem, thereby introducing additional utilities for tokens within the ecosystem. Consider the scenario where you have $OSMO, and you can use it as collateral to generate coUSD. This coUSD can then be utilized to acquire various derivatives on Cronos, or any other Cosmos-built L1 really. By implementing this approach, coUSD has the potential to serve as a stablecoin across multiple L1 chains through the Inter-Blockchain Communication (IBC) protocol, providing stability and interoperability within the broader Cosmos network.

Thank you for your time. If you have any more questions please let us know!

1 Like
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Hey team, I found this idea interesting.

A few questions from me:

1, How will you launch this idea? Will you follow @Stride’s step to join the ATOM Economic Zone and launch a consumer chain?

I believe it will be beneficial to ATOM stakers and the Cosmos community if you are planning to do that. As your reference:
Stride shares its various revenues with Cosmos Hub as follows:

  • 15% of liquid staking rewards
  • 15% of STRD inflationary staking rewards
  • 15% of maximal extractible value (MEV) revenue
  • 15% of transaction fees

2, You mentioned buying Oil with crypto. Will this collateral and derivatives platform be combined into one appchain? I assume buy oil here means minting synthetic oil tokens.

I would love to see what a Cosmos veteran like @jacobgadikian thinks about this.

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Hello @cosmrtn!

We are glad you find the idea interesting! In regards to your questions:

At the moment, we do not have any plans to initiate the development of our own appchain. Instead, our strategy involves in collaborating with an existing active appchain to facilitate the launch. However, we remain open join the Atom Economic Zone and launching a consumer chain, provided that we receive support from the Cosmos Foundation and the community.

While it is possible to work on the same appchain, our primary focus lies in launching the collateral system initially to accept Cosmos ecosystem tokens and generate coUSD. It would be ideal for our project if the derivatives platform can be launched by a third party.

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Hello @Lam_Crypto,

Regarding launching on an appchain, it would be great to have the community’s input in order to make an informed decision between launching an app chain within the Atom Economic Zone (AEZ) or deploying on the current active chain.

Considering Osmosis has the highest volume among IBC chains, would launching on Osmosis yield significant benefits? For example the potential exposure to a large user base. It would be helpful to have representatives from Osmosis to share their views and insights @sunnya97 @dogemos

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Is there any plan to utilize $IBCX as the collateral option? This will be the interesting use case for the Interchain index token.

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it is important to acknowledge that the USD remains the prevailing global currency standard

It remains so, cause people utilize it. Not the other way around.

Thanks for your response. So far im seeing a lot of confusion when it comes to generating value with digital assets when i read the above.

As for other models, well there are plenty - starting with Cyber in Cosmos and going to things like oracles on top of governance, investminting, having ETH as the base token rather than USD. This isn’t the answer you are looking for, but I can assure you that a good market research will provide the correct answers. There are plenty of different models out there. Some work better, some worse. MakerDAO works, yet its not a good model. The reasons are plenty. If needed we can go into that discussion off forum.

1 Like
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It is an interesting view.

Out of topic, but how about the $axlUSDC collateral on $IBCX? Isn’t it a pretty similar concept with different output?

Would the community prefer to have ETH as the base token rather than USD? Why not use ATOM instead?

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It will indeed be interesting to utilize $IBCX as a collateral option. We have been monitoring $IBCX since its launch and we believe it will be a great addition to COAST. At the same time, using $IBCX as collateral could enhance the liquidity and utility of $IBCX, as it would create more avenues for its utilization.

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Sounds good.

There is a new $stIBCX on @Stride, and i suggest the team to take a look on that.

1 Like
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Is there any update from the team?

15

Hi everyone, following up, we are also adding the following into the discussion:

Extension services which are as important but not core to the health of coUSD strictly speaking. They give coUSD great value and need to be built by third parties.

  • Buy and sell of derivative assets using coUSD (eg: Use 1000 coUSD long Gold Trust, if Gold Trust price appreciates/depreciates the value is compensated from the long position on DEX).

  • Allow cross chain derivative assets (eg: Users move Gold Trust to Cosmos to trade via IBC)

  • Always allow derivative assets to be redeemable on target chain, Cosmos, or the origin chain, e.g. Osmosis.

  • When real world assets are involved, a bankruptcy-remote vehicle can be an option.

  • To make things easier to understand, consider the scenario in which users can trade RWA assets on Cosmos (i.e., Osmosis), but the minting and collateralization processes are handled by other chain.

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Derivatives assets and RWAs are big targets.

Are you planning to build a platform similar to mirror protocol? Since you mentioned it is needed to be built by third parties, how to make sure they will accept your cousd?

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COAST will uniquely focus on the Cosmos ecosystem and aims to leverage its strengths. We also recognize the importance of widespread acceptance and adoption of the stablecoin, coUSD. To ensure acceptance by third parties, there could be multiple approaches such as:

  1. Incentives: Introduce incentives to encourage third parties to accept coUSD.
  2. Transparency and Audits: Conducting regular security audits and ensuring transparency in our operations will instill confidence in third parties and promote the adoption of coUSD. By being transparent about our collateralization mechanisms and risk management processes, we aim to gain trust from potential partners.
  3. Community Engagement: We value the input and feedback from the Cosmos community. Actively engaging with the community through open discussions, forums, and social media channels allows us to address concerns, incorporate suggestions, and build consensus around the acceptance of coUSD.
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What’s the plan for the incentive?

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Hello Coast Team,

This is Andreas, and I represent Function X (www.functionx.io). Our chain, f(x)Core, is built on Cosmos SDK and is also EVM compatible. In addition, we have developed f(x)Bridge, which enables seamless cross-chain functionality between different chains.

While browsing through the Cosmos forum, I came across this discussion that caught my interest. I noticed that you are still searching for a suitable chain to build your stablecoin project, with options like Cosmos or Osmosis on the table. I believe our tech and ecosystem could be a perfect fit as well since we also have a Subnet called MarginX, a dex for perp trading.

You can feel free to join our forum here: forum.starscan.io (can write your proposal ar the proposals section Function X Proposals - Function X Forum) to share your thoughts and ideas about your project.

What do you think?

Thank you!

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We are currently in the process of discussing the incentive plan with our team and how to utilize it best. Once the plan is ready, we will definitely share the details.

21

Hello Andreas,

Thank you for reaching out and sharing information about Function X. We appreciate your interest in our stablecoin project and the potential synergy between our teams.

We will take some time to thoroughly review Function X and its ecosystem to assess its suitability for our project. Then we can create a topic under your proposals section on the forum as you mentioned.

1 Like