This is a proposal for adding lend/borrow support for the Origin Dollar stablecoin on the Flux Finance market. Enabling lend and borrow support for OUSD on Flux will provide a new lend market for OUSD holders, a new borrow market for OUSG holders, and will lead to an increase in TVL for the Flux protocol.
1. What is the link between the author of the FIP and the Asset?
Peter is a member of the core Origin Protocol team
2. Provide a brief high-level overview of the project and the token
Origin Protocol was founded by Web3 veterans Josh Fraser and Matthew Liu in 2017 and is one of the most venerable projects in the space. Josh and Matthew are joined by the fully doxxed Origin team and community, which includes hundreds of thousands of members and open-source contributors. Origin has raised $38.1M from top investors including Pantera, Spartan Group, Foundation Capital, BlockTower Capital, Steve Chen, Garry Tan, and Alexis Ohanian, and currently maintains a multimillion dollar treasury. As a technology partner, Origin Story has helped launch some of the largest NFT projects to-date:
• Paris Hilton Launches ‘Past Lives, New Beginnings’
• 3LAU Launches Record-Setting $11.7M Auction
• Charlie Bit My Finger NFT Sale Makes Headlines and Sets New Record
• Macallan Cask NFT Sells For $2.3 Million
• First Real Estate Sale via NFT Marketplace
Origin Protocol’s second product, the Origin Dollar (OUSD), was launched in 2020 and is an ERC20 stablecoin that generates yield while sitting in your wallet. OUSD is backed 1:1 by USDC, DAI, and USDT at all times; holders can go in and out of OUSD as they please. Yield is paid out daily and automatically (sometimes multiple times per day) though a positive rebase in the form of additional OUSD, proportional to the amount of OUSD held.
OUSD yield, currently ~5% APY, comes from a combination of:
- Lending collateral to Aave, Compound, Morpho, Curve, and Convex
- Reward tokens (AAVE, COMP, CRV, and CVX) are automatically claimed and converted to stablecoin
- A 25bip exit fee is charged to those who choose to exit OUSD via the dapp (completely avoidable if using DEX or CEX), this fee goes back to OUSD holders
- OUSD sitting in non-upgradable contracts (about half the OUSD in existence) does not rebase, instead the interest generated from those tokens is provided to those that can rebase
These 4 yield generating functions combined enable OUSD to generate higher yields than lending directly to any single protocol. Each week a governance vote is held to determine the best allocation of OUSD collateral between the whitelisted strategies, voted on by OGV holders. OGV is the governance token for OUSD, and any token holder can participate in these votes after staking their OGV for veOGV. OGV holders also have the ability to propose new yield strategies for OUSD.
There are no lock-ups, terms, or conditions with OUSD; it’s completely non-custodial. Any web3 wallet should be able to support OUSD and its rebasing function, including hardware wallets and multi-sigs. There’s no need to ever again give up the keys to a 3rd party platform, such as Celsius, Blockfi, or FTX, to earn yield.
3. Explain positioning of the token in the Flux ecosystem. Why would it be a good borrow or collateral asset?
At the moment, the sole use for OUSD is to hold it within your wallet to generate yield, or to LP it to a DEX to collect trading fees – there are no lending or borrowing markets available. Adding an OUSD market will provide OUSD holders a place to lend their tokens, which they may choose to do when the variable APY on Flux for OUSD is higher than the current APY OUSD is paying via rebase. When the variable APY for borrowing OUSD on Flux is lower than the current APY OUSD is paying via rebase, users will choose to borrow OUSD from Flux as it becomes profitable.
Any OUSD lent to Flux will not rebase while sitting in Flux smart contracts. Since lent USDC, DAI, and soon USDT cannot be used as collateral on Flux at the moment, we are not proposing to use lent OUSD as collateral at this time.
4. How is the asset currently used?
OUSD is currently used differently by different verticals of users. Retail users are treating OUSD like a bank account or high-yield savings account within their wallet. Yield farmers are using OUSD to save on gas fees by replacing active farming with passive farming. DAOs are swapping their idle treasury stablecoin into OUSD to extend their project runway. Funds and asset managers are incorporating OUSD into their portfolios to hedge against centralization risk and obtain superior DeFi APYs.
5. Emission schedule
There is no set emission schedule for OUSD. Similar to stETH, OUSD is minted on demand when users lock their stablecoin into the protocol, and burned on demand when users exit OUSD for the collateral stablecoin.
6. Token (& Protocol) permissions (minting) and upgradability. Is there a multisig?
The protocol is upgradeable by a 5 of 8 multi-sig and there is a 48-hour timelock on any changes. You can read more about that in the admin sections of our docs. Launching a new OUSD strategy requires approval from this 5 of 8 multi-sig, but there is a limited strategist role that can shift funds between approved strategies. All new strategies go through a rigorous process involving multiple audits and smart contract reviews, economic analysis, and a community governance vote on Snapshot.
Soon the 5 of 8 multi-sig will be handing ownership of the contracts to OGV stakers (veOGV holders) so that governance of new strategies will be completely decentralized. The strategist role will continue to have the ability to reallocate funds as directed by the community and also take emergency actions like withdrawing from strategies or pausing the protocol.
7. Market data (Market Cap, 24h Volume, Volatility, Exchanges, Maturity)
Because OUSD is backed 1:1 by its collateral assets at all times, and OUSD and its collateral are stablecoins, OUSD market cap = OUSD supply = OUSD TVL. Analytics for the current OUSD allocation and backing assets are always available on-chain via analytics.ousd.com. As of February 17, 2023, OUSD market cap is $52,439,720.
The main 4 liquidity sources for OUSD are:
• Curve Finance, $35.06M
• Morpho Aave, $8.6M
• Morpho Compound, $7.2M
• Convex, $1.04M
Obtaining OUSD is seamless, users can convert their stablecoin into OUSD via any of the following methods:
• Minting on OUSD.com
• Purchasing on CEX
• Swapping on DEX
• OTC desk thru Origin’s market maker
There are four risks when using OUSD, and Origin is making sure to reduce each risk as much as possible:
Counter-party risk - OUSD is governed by stakeholders around the world. Everything from yield generation to fee collection and distribution is managed by a set of smart contracts on the Ethereum blockchain. These contracts are upgradeable with a timelock and are controlled by hundreds of governance token holders. While the initial contracts and yield-earning strategies were developed by the Origin team, anyone can shape the future of OUSD by creating or voting on proposals, submitting new strategies, or contributing code improvements. We intend for all important decisions to be made through community governance and limited powers to be delegated to trusted contributors who are more actively involved in the day-to-day management of the protocol.
Smart contract risk of the yield strategies - Origin is only using platforms for yield generation that have a proven track record, have been audited, have billions in TVL, maintain a bug bounty program, and provide over-collateralized loans. Over-collateralization in itself, combined with liquidations, provides a reasonable level of security for lenders.
Stablecoin risk - Origin has chosen 3 of the largest stablecoins to ever exist to back OUSD, and they have stood the test of time and maintained their peg quite well through multiple bull and bear cycles. They have also demonstrated significant growth in circulating supply, so the Origin team is confident that the 3 stables will maintain their peg and that OUSD will remain stable. OUSD is also using Chainlink oracles for pricing data for DAI, USDC and USDT to ensure accurate pricing at all times.
Smart contract risk of OUSD - Origin is taking every step possible to be proactive and lessen the chance of losing funds. Security reviews of OUSD are prioritized over new feature development, with regular audits being done, and multiple engineers are required to review each code change with a detailed checklist. There are timelocks before protocol upgrades are launched, and deep dives into the exploits of other protocols are constantly being done to make sure the same exploits don’t exist on Origin contracts. Security is extremely important to the Origin team. 7+ audits have been done since 2020, all of which can be seen on Audits - OUSD, and OpenZeppelin is now on retainer. On-chain insurance protocol InsurAce awarded OUSD the highest possible security rating of AAA, of which only 5 projects on the InsurAce platform have received.
If the Flux community would like, OUSD supply and borrow caps can be implemented for the first 90 days, or until the Flux community becomes more familiar and comfortable with OUSD. Since OUSD is backed 1:1 by USDC, DAI, and USDT, we recommend the following market parameters:
Interest rate curve that follows the one used on USDC, DAI, and soon USDT:
- 0% utilization → 0% APY
o 90% utilization (kink) → Overnight Benchmark Funding Rate (OBFR) - 50 bps
o 100% utilization → OBFR + 300bps
- Borrow Cap: No cap
- Collateral Factor (LTV): 0%
- Reserve Factor: 0%
Mandatory parameters with no impact given the 0% collateral factor
• ProtocolSeizeShare: 1.75%
• Liquidation Incentive: 5%
We look forward to engaging with the community on this proposal, and invite any and all thoughts or comments.