Josh Fraser (@joshfraser) • Hey
Founder Origin Protocol
Publications
- $OUSD holders have made over 10x more money in the last day than normal. This has driven the 30-day trailing to 8.28% APY and 7-day trailing to a whopping 18.33% APY. Risk and reward go hand in hand. Why did this happen and are the funds safe?
When we were first designing $OUSD, we knew we needed to be prepared for any of the backing stablecoins to depeg. We wanted to make sure the protocol would remain as safe as possible.
While stablecoins are generally stable, they have failed enough times in the past that we knew we had to prepare for the worst. $USDC fell to $0.92 on March 13, 2020. $USDT fell to $0.57 on March 02, 2015 and $0.84 on Feb 02, 2017.
The overarching security principle of $OUSD is to protect the funds in the vault over the interests of any single depositor.
Whenever a stable coin depegs, everyone rushes to swap it for more valuable coins. This means permissionless vaults are usually left holding a big bag of the least valuable coin. This predictably played out in real-time on @CurveFinance over the last day.
$OUSD automatically shuts off minting for any coin that is trading below $0.998. On redemptions, $OUSD returns a basket of stables in the same ratio as the current holdings. This lack of user optionality protects the vault in the event that any of the backing stablecoins depegs.
$OUSD uses Chainlink oracles to check the prices of $USDT, $USDC, & $DAI and refuses to buy them for more than null or sell them for less than null. These oracles can deviate by as much as 0.25% between updates. A 0.25% exit fee protects the vault in case the oracles are lagging.
$OUSD's exit fee is distributed as extra yield to $OUSD holders along with any profits from the pricing protections. These have been a major source of revenue over the past day as arbitrageurs have been busy.
We have alerting setup to notify the team if there is any sign of an impending peg loss. While most changes to $OUSD are required to go through a multiple-day timelock, the Strategists multisig is able to reallocate funds between pre-whitelisted strategies in case of emergency.
Yesterday, the Strategists followed established protocols to move funds from Convex to the safety of the vault, preventing the remaining $USDT from being swapped for $USDC & $DAI. They did not attempt to swap into $USDT as it was impossible to do so without taking a loss.
$OUSD is currently trading at a discounted rate as expected given the vault holdings. Hopefully, this is only temporary. There is presently a community-led vote on whether or not to do an emergency allocation. Please vote if you are an $OGV holder.
https://vote.ousd.com/#/proposal/0xa04c8bf3774fd940f00fc6720cce07e6839ba9e412ec423161f2c308c7e6f353
So far, OUSD's safety mechanisms have held up well under this major stress test. The protocol has been slowly increasing its $USDT holdings and the remaining stables are still deployed in Morpho, Aave, and Compound where they are earning extremely high yields.
Our heart goes out to everyone affected by the collapse of SVB. We wish Circle the best as they try and fill the hole in their reserves.
These recent events highlight the importance of transparent, permissionless, open financial systems that are governed by code and free of counterparty risk. We will continue to build towards that future.
- gm
- @stani.lens are there any tools for cross-posting on Lens & Twitter yet?
- Social media is far too important to be owned and controlled by any one person. Here's to freedom of speech and censorship resistance!