[MIP-7] Adding USDC.wh, ETH.wh, WBTC.wh, BUSD.wh, and xcUSDT assets to Moonwell

Hey all :wave: – you may recall that I proposed MIP-1 to disable the Nomad assets. This forum thread is a form of catharsis, in a way, as I would like to propose we add assets to take their place.

See this sheet for yield and TVL for assets in the Moonbeam ecosystem relevant to this post.

Wormhole Assets

In the “Bridges: Path Forward” proposal, the community pushed for Wormhole wrapped assets to be considered as the defacto assets moving forward. This proposal passed, the Wormhole bridge launched on Moonbeam, and thanks in part to the incentives provided by Moonbeam Ignite, there has been a nice build-up of liquidity for the Wormhole-backed assets across the Moonbeam ecosystem. So much so that it’s high-time we add these assets into Moonwell.

In the attached sheet above, we see:

  • USDC.wh - currently $2.21m liquidity (half of $4.42m) in the USDC/GLMR pool on StellaSwap and $1.18m in the 4pool
  • ETH.wh - currently $2.02m liquidity (half of $4.05m) in the ETH/GLMR pool on StellaSwap
  • WBTC.wh - currently $1.94m liquidity (half of $3.88m) in the WBTC/GLMR pool on StellaSwap
  • BUSD.wh - currently ~$1.0m liquidity in the StellaSwap 4pool

These assets are starting to build a healthy amount of liquidity, and I understand from Moonwell contributors that Gauntlet Network is performing risk analysis on them. As a community, we should be able to receive recommendations from Gauntlet Network for safe collateral factors soon, once they have completed some risk analysis and simulations.

xcUSDT

Now that native USDT from Statemint is available on Moonbeam, it would also be great to add this as well!

Unfortunately, there doesn’t seem to be too much liquidity available: only ~242k$ in the 4pool on StellaSwap today. We probably need a bit more liquidity before we could increase the collateral factor to anything meaningful safely.

Conclusion

Please comment below with any thoughts or comments and considerations around collateral factors for these assets: USDC.wh, ETH.wh, WBTC.wh, BUSD.wh, xcUSDT. And I very much look forword to recommendations from Gauntlet Network as well.

Note: I have run this post by the Moonwell team to make sure that (a) all objective information I am sharing is accurate, (b) that the raw data was collected properly, and (c) that the computed data was evaluated properly. While the Moonwell team helped me with fact-checking, and I am an advisor for the company, the opinions expressed here are my own as an independent community member of the Moonwell ecosystem.

9 Likes

Yes definitely, thank you brother for this proposal :cowboy_hat_face:

3 Likes

Thank you for starting this important discussion about adding support for new assets.

Through Moonbeam Ignite, StellaSwap is beginning to build liquidity in these new assets. The GLMR liquidity incentives are quite generous, and this is attracting liquidity providers to help rebuild base level of liquidity on Moonbeam.

One thing that I wanted to make the community aware of is that native USDT recently came to Polkadot on the Statemint parachain. This is an XCM asset that can be transferred from Statemint to Moonbeam, however, getting xcUSDT is quite difficult right now due to a number of factors:

  • Tether can only be purchased if you have a Bitfinex account, which is not available to US persons.
  • Tether has to “mint” USDT on Polkadot/Statemint using the Polkadot Ledger app
  • The Polkadot Ledger app didn’t have support for XCM until Thursday, Nov. 3rd, when it was updated by Ledger
  • It still may take some time for Bitfinex to upgrade and test their signing Ledgers

All of the above has led the hot wallet balance on Polkadot for USDT to have only $4 in it, so there is no way for Bitfinex customers to even withdraw USDT to Polkadot right now. Contributors to Moonwell and the Moonbeam Foundation have been escalating this issue with the Web3 Foundation and Parity, as it is quite disappointing to see the lack of Tether liquidity on Polkadot.

If you have a Bitfinex account, please urge them to increase liquidity of Tether on Polkadot. Thank you!

1 Like

為了平衡xcUSDT誇張的流動性,五天前到Bitfinex完成了繁瑣的 KYC (取款USDT特別繁瑣).
跟 Bitfinex Support support@bitfinex.com 談了三天.
最後仍然取款失敗了

然而最低取款額是4.99 USDT :rofl:

最近一封回覆如下

Thank you for your understanding.
We will certainly let you know once the issue has been fixed.
Please bear with us.
Kind regards,

相信Bitfinex也在積極處理了,我會再關心他們的進度。

大家也許試著聯絡看看 Bitfinex Support support@bitfinex.com
他們可能會對潛在的新用戶感興趣 :cowboy_hat_face:

2 Likes

I am for this proposal, it will be good to see more asset classes to be added to moonwell Artemis. Important milestone to go ahead.

2 Likes

We should move forward with adding these assets ASAP. There is more than enough liquidity on StellaSwap, more than when we added Nomad assets.

1 Like

This is awesome, thanks for submitting this @bkase!

Unfortunately, there doesn’t seem to be too much liquidity available: only ~242k$ in the 4pool on StellaSwap today. We probably need a bit more liquidity before we could increase the collateral factor to anything meaningful safely.

I think this is a direct result of what @Luke outlined here

One thing that I wanted to make the community aware of is that native USDT recently came to Polkadot on the Statemint parachain. This is an XCM asset that can be transferred from Statemint to Moonbeam, however, getting xcUSDT is quite difficult right now due to a number of factors:

  • Tether can only be purchased if you have a Bitfinex account, which is not available to US persons.
  • Tether has to “mint” USDT on Polkadot/Statemint using the Polkadot Ledger app
  • The Polkadot Ledger app didn’t have support for XCM until Thursday, Nov. 3rd, when it was updated by Ledger
  • It still may take some time for Bitfinex to upgrade and test their signing Ledgers

Seeing this, I think the user experience for xcUSDT is bad enough/confusing enough that it should be removed from this proposal, and the focus should be on the wormhole assets only.

I think there’s a world where polkadot eventually has a good user experience for native assets like xcUSDT, but there’s also a chance they never do, and pragmatically I think if xcUSDT is listed, there’s a real risk of it never building up enough liquidity to be used as collateral.

I think the most ideal version of this native asset flow would be an ability to withdraw directly from exchanges to Moonbeam somehow, doesn’t matter if it happens via some sort of LayerZero type messaging rube goldberg machine, but if I have an ability to land something like xcUSDT on moonbeam directly from an exchange account, that’s generally going to be the rail that I take instead of a bridge.

Same deal with institutions and general ecosystem liquidity - if liquidity can more quickly move on chain to moonbeam then that means there is a higher likelihood that liquidations function as intended since there’s less friction to get liquidity to where it needs to go.

6 Likes

11/8 Bitfinex Tether(USD) on Polkadot 4,110,503
NOW stellaswap Stable AMM reached a considerable balance.
12132
xcUSDT developed in a good direction,but the distance Asset Listing Framework still need time.
let’s wait. :heartpulse:

2 Likes

Gauntlet is currently working on providing analysis and initial risk parameter recommendations for these Wormhole Asset listings. Strategically, it is best to wait until the markets are less volatile to deploy these recommendations in order to ensure an efficient launch for Artemis and the community. We will be monitoring the markets and running our analysis to produce recommendations next week.

3 Likes

Good. Why me not vote #5,#6

Is there any concern with wormhole solvency given the recent FTX blowup?

It would be great to get a confirmation on the wh assets are 1:1 backed.

1 Like

There’s no need to post baseless/low quality speculation here. The Wormhole bridge continues to be fully backed and operating normally. Edit: meant to post this link: https://twitter.com/WormholeStatus/status/1590721128430858240

I think as a community it pays to be cautious during these uncertain times, so delaying adding the Wormhole assets for now seems prudent. There is no need to rush into things; we can watch from the sidelines and let the dust settle in the broader markets and crypto exchanges before we rush to enable collateral on these assets.

3 Likes

In times like this, it pays to communicate proactively and address community concerns. It might be speculation, but important questions to ask if we want users to feel safe to use the bridge.

2 Likes

Wormhole has some metrics that might be useful for the community. First, their dashboard shows the health of the network and how much daily transfer limit is available per L1 supported: Wormhole Dashboard

Second, you can see the Wormhole contracts here: Deployed Contracts - Wormhole Development Book

You can verify the funds are held in those contracts. It would be nice to see a Dune analytics or Nansen.ai dashboard showing the “proof of reserves” in all these contracts, maybe someone in the community would like to help with the creation of one?

2 Likes

Thanks for providing the detail! Love the things you built and keep up the good work!

4 Likes

Moonwell community, please see the below updated analysis on the listing of these new assets. We’d note that the timing of launching new assets is a strategic community decision that should incorporate factors including market conditions.

Artemis Asset Listing Analysis, Nov 18, 2022

For new asset listings, Gauntlet’s goal is to ensure that insolvency and liquidity risks are minimized and that when liquidations occur, they can be done healthily with incentivized liquidators. We always recommend that Collateral Factor be set to 0 on the initial listing but should the community wish to enable these assets as collateral, we recommend implementing conservative initial parameters with the expectation that we will adjust the values over time once the initial inflow of market supply and demand has been realized.

We consider the following metrics and assess the risk factors when recommending parameters:

  • Market cap of the token
  • Total supply
  • Largest liquidity sources (exchanges including CEX and DEX)
  • Volatility (30 day, 90 day, 1 year)
  • Average daily trading volume on CEX and DEX
  • Other DEX metrics

Gauntlet does not assess bridge risk but we would recommend that the community take a conservative approach to initial listings because of inherent risks to bridged assets.

The underlying native assets represent 4 of the top 10 assets by market cap. The 30-day-average daily volume and 2% depth across CEX and DEX exchanges provide ample liquidity for both these stable and non-stable assets. This level of liquidity reduces the risk of oracle price manipulations.

Screen Shot 2022-11-18 at 6.01.56 PM

Volatility of the native assets, as shown in the below table, are within normal expectations. The recent market downturn has impacted the volatility of BTC and ETH.
Screen Shot 2022-11-18 at 6.03.13 PM

The bridge assets listed on the StellaSwap DEX have relatively low liquidity, as shown in the tables below. StellaSwap is the only major DEX market for these assets on Moonbeam. The liquidity of these assets were impacted further by the market downturn with liquidity decreasing by 38%-45% on Stellaswap. As shown in the Nov 16th table, the fully diluted market cap (# tokens on Moonbeam × token price) for these bridged assets is relatively low when comparing to xDOT ($16M) and FRAX ($6.8M). StellaSwap has at minimum 83% coverage for all four assets. We will continue to monitor on-chain liquidity of these assets moving forward.

Gauntlet has performed preliminary price slippage analysis on the StellaSwap DEX to capture the current price slippage for these Wormhole assets. The price slippage for these tokens are relatively high for BTC.wh and ETH.wh with the assets exceeding 5% slippage at $50k. High slippage can lead to liquidator inaction and insolvency and will impact our parameter recommendations.

Conclusion

Gauntlet has identified 3 potential risks for listing these new assets on Artemis. The 3 risks include macro liquidity risk and usage of new bridge for collateral assets:

  1. We do not have sufficient liquidator data to assess the use of the bridge when liquidating collateral on Artemis to access liquidity on other chains. Gauntlet’s review of previous liquidations has identify Artemis liquidators as utilizing Stellaswap. Without any data or information on the use of wormhole bridge to provide liquidity during a liquidation event, we will need to rely on liquidity within the Moonbeam chain.
  2. Onchain DEXes have extremely low liquidity. Stellaswap in particular currently only has $18M of liquidity across the entire system. Stellaswap has additional liquidity in the stableswap pool but this additional market liquidity does not address the liquidity risk for non-stable assets which could lead to insolvencies.
  3. The full fallout from the FTX blowup is yet to be concluded and potential further market distress could lead to additional liquidity outflows that we have yet to foresee. Right now we recommend being very conservative in order to hedge macro risks that are harder to quantify.

As such, we recommend the below initial parameters. Once we see more market dynamics such as pool usage and market liquidity, and ensure that there are no outstanding issues, we expect to adjust these values.

Screen Shot 2022-11-18 at 6.07.31 PM

5 Likes

It’s unfortunate what’s been happening in the crypto space these past few weeks. I imagine FTX+contagion has contributed to the liquidity withdrawing from the ecosystem.

Based on Gauntlet’s market analysis, it’s probably best to hold off launching these markets for bit longer. I think we should wait for further analysis before continuing.

4 Likes

I agree with this approach. We had hoped to see (ideally) ~$10m liquidity in each of the new asset market pairs on StellaSwap prior to launching on Moonwell. Back in June, when Artemis first launched, the DEX liquidity was in the $10-12m range per market, and as a community we were able to launch with 60% CF and achieve ~$40-50m TVL across each of the bridged assets.

Given the FTX fallout and market volatility, there has been a significant outflow of between 38 - 45% TVL between Nov. 8th and Nov. 16th. The trend should be going in the other direction, in order to safely support activating these new markets. The risk is that if TVL continues to decrease, and liquidity continues to leave the Moonbeam ecosystem, the Moonwell community might have to decrease collateral or face insolvency risk in these new markets.

I think it is wise to take a “wait and see” approach for at least another week or two, as we just don’t know what news will come out that might cause crypto prices to crash further, and more liquidity to leave the Moonbeam ecosystem. It’s a very unfortunate circumstance the entire industry is in right now.

If liquidity is still there in about a week, as a community we could launch with these very conservative collateral factors and the ~$250K borrow cap per market, but realistically we shouldn’t expect TVL to be significant in these new markets. StellaSwap had ~100% APR on USDC/GLMR and there were still significant outflows since the FTX situation began. This might inform a reduced amount of GLMR rewards per market, and an extension of the Moonbeam Ignite liquidity incentives beyond 24 weeks. As a community, we should still honor the grant and distribute 100% of the rewards, however, the schedule might need to be adjusted based on market conditions.

4 Likes