[PCP] Support USDS and/or sUSDS on Seamless

[richyRNG]

Summary
Proposal to add sUSDS and USDS for lend and borrow markets on Seamless Protocol on Base.

References
Project - MakerDAO | An Unbiased Global Financial System
Whitepaper - The Maker Protocol White Paper | Feb 2020
Documentation - https://docs.makerdao.com/
Github / source code - [Source code | Github](GitHub - coinbase/wrapped-tokens-os)
Base contracts - USDS Token (Base) 0x820C137fa70C8691f0e44Dc420a5e53c168921Dc sUSDS Token (Base) 0x5875eEE11Cf8398102FdAd704C9E96607675467a
Chainlink oracle - TBD
Audit - GitHub - makerdao/audits: Third Party Audits of Maker Smart Contracts; Smart Contract Audit - MakerDAO USDS Wrappers - ChainSecurity
Twitter - x.com

Paragraph Summary
This is a proposal to add USDS and/or sUSDS to Seamless protocol on Base mainnet. USDS is a re-branded DAI from Sky (formerly MakerDAO) and sUSDS is the tokenized representation of USDS deposited into the Sky Savings Rate (SSR).

Motivation
USDS and sUSDS was officially launched on Base today and so initial liquidity/volume information is unreliable, proposal is meant to allow Seamless to be a first-actor and therefore suggest the community acts quickly to implement some basic level recommendations from @chaoslabs and adjust based on evolving liquidity conditions.

Specifications

1. What is the link between the author of the AIP and the Asset?
   Seamless Community Contributor

2. Provide a brief high-level overview of the project and the token
   MakerDAO is one of the first DeFi projects in the entire space, with over 4 years of operating history and billions in TVL. DAI has been a reliable algo-stable for many years with deep liquidity across multiple chains.

3. Explain positioning of token in the Seamless ecosystem. Why would it be a good borrow or collateral asset?
   Represents a collateral asset that users will want to deposit and get loans against and/or an asset to borrow for users to get more leverage.

4. Provide a brief history of the project and the different components: DAO (is it live?), products (are the live?). Etc.
   Began as DAI and MakerDAO, became rebranded to USDS and Sky.

5. How is the asset currently used?
   As an asset to generate yield against collateralized debt positions. USDS (or DAI) is also used as a base trading pair in dexes, or as collateral itself to be borrowed against.

6. Emission schedule
   There is no emissions schedule. Users may mint via MakerDAO’s smart contract logic.

7. Token (& Protocol) permissions (minting) and upgradability. Is there a multisig? What can it do? Who are the signers?
   Onchain governance - details TBD.

8. Market data (Market Cap, 24h Volume, Volatility, Exchanges, Maturity)
   ~$5.1B market cap across all chains
   ~ $140M 24 hour volume across all venues

Depth of markets and markets available will be updated and discussed in risk analysis provided by Chaos Labs as the liquidity develops.
10. Social channels data (Size of communities, activity on Github)
Twitter and github shared above
11. Contracts date of deployments, number of transactions, number of holders for tokens? TBD

Technical Specifications
To be included in Chaos’s recommendation.

Security Considerations
TBD

Risk Analysis
To be included in Chaos’s recommendation.

[chaoslabs]

Overview

Chaos Labs conditionally supports the onboarding of USDS and sUSDS to Seamless.

USDS and sUSDS Information

USDS is the upgraded stablecoin of the Sky Ecosystem, replacing DAI and allowing 1:1 conversion from DAI and USDC. Additionally, with sUSDS, users can opt to stake for the Sky Savings Rate, which is set higher than the Dai Savings Rate for sDAI.

Users are able to convert DAI to USDS at a 1:1 ratio through the Sky.money platform using the SUDS conversion contract. The process is reversible: users are also able to convert the USDS back into DAI through the same contract.

Additionally, SKY serves as the new governance token of the Sky Ecosystem; SKY rewards are being distributed at a rate of 600 million SKY per year across participating USDS holders, with users who registered before the launch receiving double rewards for the first month. This helped promote USDS in the first month, though we have observed its supply level off since October.

sUSDS is the staked version of USDS that provides yield through the Sky Savings Rate. sUSDS does not have an sDAI to sUSDS conversion contract, but it uses the ERC-4626 token standard, and the conversion from USDS is atomic. 43.9% of USDS is staked as sUSDS on Ethereum.

Liquidity

Given that the token has not been launched on Base, we are unable to analyze its liquidity at this time. However, following observation, we will update this post with our findings and either provide supply and borrow caps or recommend pausing the listing.

Spark announced on December 10 that it had deposited 100M of sUSDS to Base, with 86.6% held in the ALMProxy contract and 12.4% held in the Base PSM, along with $1M USDS and $855K USDC.

Pricing the Assets

Given the atomic conversion contract and the unavailability of USDS/USD Chainlink oracles (except on Polygon), we recommend pricing USDS with the DAI/USD Chainlink oracle. We recommend pricing sUSDS using the same oracle augmented with the sUSDS exchange rate.

LTV, Liquidation Threshold, and Liquidation Bonus

Given the assets’ lack of history on Base, we recommend setting their Liquidation Bonuses to 7.5% to ensure liquidations are processed efficiently. Additionally, we recommend slightly lower LTV and LT values than DAI, setting them both to 75% and 78%, respectively.

Chaos Labs will review these parameters when recommending supply and borrow caps in order to better adapt to the asset’s liquidity.

Supply and Borrow Caps

Given the yield-bearing properties of sUSDS and its lack of DeFi use cases, we expect a significant lack of borrowing demand for the asset. Hence, we recommend making it non-borrowable.

IR Curve

Because of the recent increases to the Dai Savings Rate (11.5%) and Sky Savings Rate (12.5%), as well as market activity that has boosted global stablecoin rates, we recommend setting USDS’s Slope1 to 12.5% and aligning the other parameters to those of DAI.

Recommendations

Following the above analysis, we recommend the following parameters for listing the assets. Please note that these are conditional and subject to change according to the assets’ launch on Base.

Parameter	Value	Value
Asset	USDS	sUSDS
Isolation Mode	No	No
Borrowable	Yes	No
Collateral Enabled	Yes	Yes
Supply Cap	To Be Provided	To Be Provided
Borrow Cap	To Be Provided	To Be Provided
Debt Ceiling	-	-
LTV	75%	75%
LT	78%	78%
Liquidation Bonus	7.5%	7.5%
Liquidation Protocol Fee	10.00%	10.00%
Variable Base	0%	-
Variable Slope1	12.50%	-
Variable Slope2	75.00%	-
Uoptimal	90%	-
Reserve Factor	10%	-
E-Mode Category	N/A	N/A

[Ras]

Thank u @richyRNG for brining this proposal so fast. I fully support it

[daryl]

Thanks for the proposal. I am in full support of adding Sky. MakerDAO is one of the original DeFi projects in crypto - as OG as it gets. Adding USDS and/or sUSDS would give more choices for users to choose from. Excited about Sky’s decision to go to Base, and I hope Seamless and Sky can work together closely for joint success.