Montagu from Citadel One here,
Thanks to the Noble team for putting this up.
The way I understand it, Noble is proposing to build a governance-controlled distribution module that will direct yield accrued from all USDN held on the Hub towards ATOM-aligned initiatives.
Some thoughts:
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Does this make sense for the Hub?
If approved, the proposal will ( unofficially) crown a canonical stablecoin on the Hub. And considering the upcoming permissionless VM, the drawbacks exceed the benefits as it will disincentivize other stablecoins from expanding/ launching on the Hub.
Take Tether’s USDT as an example: with a VM, there is a chance of seeing native USDT on the Hub. But that won’t happen with governance backing another stablecoin. -
Why would anyone choose to give away yield and hold USDN on the Hub?
The only scenario I could think of is if Apps building on the Hub adopt USDN over other stablecoins such as USDC for collateral/ settlement/ LPing… In which case accrued yield should be fully redirected to Apps instead as incentives.
Apps are the ones bearing the cost here, in term of adoption, liquidity as well as additional trust assumptions ( Wormhole and m0) so it makes sense that they capture most, if not all, of the upside.
To sum up, adopting a canonical yield-bearing stablecoin for a chain and redirecting the yield to the right actors is a powerful mechanism ( see Initia adopting Ethena’s sUSDe) but it makes the Hub opinionated.
That being said, if this is approved we need to make sure the yield goes to the right actors: the Apps.