Sweep protocol for stablecoin savings
Today, we are releasing documentation for the Sweep protocol. Stablecoin holders can swap into SWEEP to get improved interest pass-through, proof of reserves, and asset protection.
As of December 2022, stablecoin holders have about $130B in fiat-convertible stablecoins paying zero interest. Stablecoin vendors are extracting a larger and larger spread from these customers by investing in money markets paying 4.5%.
A traditional bank “sweep account” will lower this cost by moving unused funds from low-interest checking accounts to higher interest savings accounts. Maxos gives stablecoin holders a similar opportunity to “sweep” their stablecoin holdings into interest-paying assets.
Sweep pays interest through an increase in the value of the SWEEP coin. The interest rate is modified once per week in order to balance the demand for savings with the supply of investment. SWEEP is designed to pay a competitive rate under most market conditions.
Savers can buy and sell SWEEP from an AMM on participating blockchains. Savers exchange fiat-redeemable stablecoins such as USDC, USDT, and BUSD.
The customers for a product like SWEEP are software based wallets, apps, and protocols. Maxos will give these users a simple AMM channel and straightforward value accrual, without gates or games. Sweep does not have a front end.
Sweep is designed to provide a worry-free rate of interest, with redemption at the expected price within one week. To achieve these goals, Sweep allocates to safe money market securities.
Sweep can shift allocations from CeFi to DeFi as relative rates change.
Maxos has developed innovative tools to place money with expert managers via fully collateralized loans.
Compare with fiat-backed stablecoins
Savers compare Sweep to a typical fiat-backed stablecoin on some important dimensions
Interest pass-through: Sweep passes through a competitive rate of interest.
Proof of reserves: Transparency is the DeFi superpower. Sweep will report every day on all of the collateral that it holds through borrowers and custodians.
Asset protection: Sweep receives a collateral pledge of off-chain assets from reliable securities custodians with no commingling.
Capital buffer: Capital protects savers from market losses and mistakes. Circle, Tether, and Paxos run with capital buffers ranging from 0.3% to 1.7%. Sweep gathers more capital from a decentralized network of margin borrowers.
Liquidity: Sweep is designed to meet all redemption demands in a one-week time window. Sweep can sell at a discount if a lot of people want their money back on the same day.
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