The Rebuilding of fUSD — OIN Finance Governance Vote on Fantom!

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OIN Finance

6 min readMar 15, 2022

A governance vote has been launched on the Fantom protocol (found in their web wallet) for the OINDAO to inherit the fUSD brand, its future development, and maintenance. Our CDP-based stablecoins will allow FTM holders to easily leverage their holdings to mint a stable fUSD!

Background

As our Collateralized Debt Position-based (CDP) stablecoin minting platform grows, we’re always assessing the market to find the best direction for the OINDAO to head in. Many factors come into play, such as the size of the network, userbase, and the general “fit” of the community with OIN Finance and our products.

During one of our regular probes of the DeFi landscape last Christmas, we came into contact with the Fantom Foundation and their fUSD predicament. Despite their thriving community, userbase, and fame, the stablecoin wasn’t able to maintain its peg to the dollar.

After several rounds of discussions, we at OIN have decided to take up the challenge in restoring the fUSD back to its peg and status as a stablecoin by inheriting the fUSD brand and future deployment.

Captain OINvenger’s previous missions were all about exploration and bringing new stablecoins to unexplored lands — this time, it’s all about rebuilding.

Fantom & the fUSD

Fantom has one of the most vibrant DeFi scenes in the crypto space, surpassing Ethereum in daily transaction volumes on numerous occasions. As part of their innovations and sprint towards a DeFi paradise, they introduced the fUSD back in 2020 — their very own native on-chain CDP stablecoin.

The introduction of the fUSD allowed users to not only enjoy some great farming opportunities through stablecoins, but also introduced a CDP-backed stablecoin onto Fantom. CDP-based stablecoins provide an amazing tool for those chasing yields, as it allows users to keep their favorite token, while using the stored value. Users essentially take out a loan against their holdings (leveraging) to create a stablecoin that they can use.

The Decoupling of fUSD & USD

As their fUSD hit the market it saw an explosive growth within their ecosystem — everyone was minting the fUSD through the fMint. Despite its popularity, there were some significant features / missing features that led to the stablecoin losing its peg:

Lack of liquidation mechanisms
Lack of easily accessible arbitrage opportunities
Lack of interest rate (or comparable mechanism)
Users are incentivized to maintain a healthy C-ratio only through rewards, without penalties for over-leveraging

Although the intentions are clear and high & safe yields brought a great many users, the overall approach forced the decoupling of the fUSD from the USD, and led to the falling price of the stablecoin.

In general, a crypto-collateralized stablecoin must include both a carrot and a stick to both reward its usage, and to hinder activities that create price volatility. The stability of the price lies not in the underlying value of the stablecoin, but within the balance between the minting + selling pressures vs. repayment + buying pressures.

The most sure-fire way of facilitating such an environment is through the addition of #1–3 above, which provide with the second portion in our equation above, leading to #4 solving itself. Liquidations provide buyback & repayment incentives, variable interest rates provide incentive (or disincentivize) to repay, while arbitrage opportunities allow savvy traders to capitalize on any remaining volatility while stabilizing the price.

Despite all the challenges the fUSD has faced, and despite its current predicaments, the fUSD still possesses great potential and the anticipation to match from the Fantom community, which is why the rebuilding of the fUSD is a critical mission.

The OINDAO Approach — The Next Chapter for the fUSD

We at OIN Finance have launched a governance proposal on Fantom to take over the fUSD brand and its future technical as well as commercial development.

The OINDAO V3 in its current form offers the key components of what makes a stablecoin stable: single-vault liquidations, variable interest rates (community governance), and a focus on providing accessible paths to arbitrage. We do all this and more in a unique way that’ll strengthen the fUSD and its platform like no other.

Single-Vault Liquidations & Stability Pool

Our liquidation mechanism has its first line of defense through the Stability Pool. The Stability Pool (which users can stake into) provides the resources for liquidations, and distributes proceeds of the collateral to the stakers. Users take staking rewards and liquidation proceeds from staking the minted stablecoin into the Pool.

This mechanism provides:

Speed, efficiency, and deployability of settlement funds in liquidations
Democratization of liquidation (in addition to bots and institutional funds, ordinary users can now also have access to low-risk liquidation profits)

Stability Fee

Our Stability Fee (payable in the stablecoin in question) acts in place of interest rates, being governed by the community through the OIN token. As with many other platforms, it serves as a method to control the money supply (akin to central banks controlling interest rates to adjust inflation). With the OINDAO, it starts at a set rate, and once the usage numbers reach a certain level, we open up community governance and the Buyback & Burn program, in which the fees are used to repurchase the OIN token on the market.

Arbitrage Opportunities

Our launch of stablecoins have always been accompanied by DEX listings, often with lucrative farms. These provide a reasonable depth in liquidity, while giving an easy path to arbitrage for the more advanced traders.

All the factors above come together to provide a significant support level for the peg in the OINDAO system, and bring together the key components of the stablecoin in a nice and flexible package.

fUSD’s Future Powered by the OINDAO

As always, we’re looking to improve the usability of our stablecoins, as well as provide the users the most sought-after solutions.

Once the FTM-backed fUSD launches, we will be adding LP tokens as collateral (e.g. fUSD-USDT LP tokens), staked FTM tokens, and other interest-bearing collateral types to offer an even greater leveraged trading and yield-farming experiences, significantly boosting liquidity efficiencies for users on Fantom. As we built the OINDAO with future multi-chain composability in mind, it also offers great flexibility in the future of the DeFi ecosystem at large.

The Great fUSD Migration

Once the on-chain governance vote is approved, we will work with the Fantom Foundation to kickstart a 3-month migration process. The migration will usher the existing fUSD holders to repay all the minted fUSD back to the fMint, and the fMint interface will be retired at the end of the 3-month period. Eventually, the new fUSD will become the new focus within the ecosystem, overtaking the old in short order.

The OINDAO will host the new fUSD, and provide a home for one of the industry’s best layer-1 protocol’s very own stablecoin.

AMA: Have questions regarding the migration? Come check out our AMA March 22nd, 11:00 AM EST on our Twitter Spaces! Ask your questions by replying to the Tweet found here!

For more information regarding the OINDAO’s plan for fUSD deployment and migration, check out the Fantom Foundation’s forum.

For more information regarding the OINDAO, its features, and just exactly how we build a stablecoin and its systems, check out our GitBook.

ABOUT OIN FINANCE

OIN is a decentralized multi-chain stablecoin issuance platform. With a robust set of features such as single-vault liquidations and own-brand-labelled stablecoins, we bring the turnkey stablecoin issuance solutions for all, including layer-1 partners.

For all the recent updates and progress, connect with OIN Finance and become a part of our community at:

ABOUT FANTOM

Fantom is a high-performance, scalable, and secure smart-contract platform. It is designed to overcome the limitations of previous generation blockchain platforms. Fantom is permissionless, decentralized, and open-source.