Idea to significantly lower centralized stablecoins risks as collaterals while scaling DAI

This idea is an improvement to my last topic

we all knew that scaling DAI using only Ether and other decentralized coins and tokens wasn’t possible

using centralized assets with the right risk parameters was always the plan to further scale DAI like governments bonds

but the technical and legal environment is not mature yet to get these assets now… and it may take too many years to get them

I think that centralized stable coins are our best shot at scaling DAI in the medium term

but these stable coins have two problems that make it difficult to use them as collateral:

first problem: the security problem… we could have a government force the issuer to blacklist Maker holdings of these stable coins … or the issuer of the centralized stable coin could turn out to be a scam to get hacked or whatever reason that will make the centralized stable coin lose its value

second problem: it is difficult to generate fees from these stable coins because who would borrow DAI using another stablecoin and pay fees unless there is a big arbitration opportunity
… and we saw how we were forced to lower SF on USDC to 0% to attract more arbitrators

I think I have an idea that could significantly solve these two problems

instead of having vaults for centralized stable coins we build like a reservoir with hardcoded rates for swapping DAI with usdc
(for example)
in this reservoir, you can mint 1 DAI for 1.01 usdc
and you can sell DAI for 0.99 USDC

this means that DAI peg can’t go above 1.01 because anyone will use this opportunity to mint cheaper DAI using this reservoir

this was my original proposal as I mentioned above
the original proposal doesn’t solve the first problem ( the risks of using centralized stable coins) and partially solve the second problem by generating fees from arbitration

The improvement I am suggesting to the original idea is to lend most the these centralized stable coins

lets say that we have 20 million usdc in the reservoir we can lend significant portion (may be 80%) to secondary lending markets like Compound and compound will lend it to its users

what will we achieve here?

for the first problem: if coinbase was forced to blacklist Maker holdings they will only be able to blacklist 20% of the holdings because 80% of Maker holding are lent to other users

for the second problem: this will generate additional revenue for the protocol, the arbitration fees + the lending fees

of course we can further lower the risks by having a basket of centralized stable coins like USDC, USDT, Binance USD, TUSD to any other stable coin with significant liquidity

or maybe instead of lending it to compound we create a lending platform (a competitor to Compound and aave)

and set the lending value for each centralized stable coin to 1$

that means if usdc lose 50% of its value for any reason, the borrowers will have to pay back 2 times the original usdc amount

this will offer protection against most centralized stable coins risks

I would like to hear feedback

Sory my feedback is not about implementing your idea but more about your assumptions and stablecoins in general.

I think that’s a wrong assumption in the medium term (2-4 years). ETH is far from reaching trillions of USD in MCap. Sure if we offer stablecoins as collateral, many speculators will use that option - it might help MKR earn fees, but will it help DAI build its reputation and security?

I think the reason why DAI has only about 150M supply is its inability to keep the peg. We can try to fix the peg by using centralized coins and risky collateral or change the DAI design. I am definitely for changing the design otherwise we just have a slightly more decentralized USDC/USDT. In that case I guess it’s better to just use a basket of semi-centralized coins and handle the risk through insurance or diversification.

I think porting DAI to layer 2 is more important as high fees will make DAI suitable only for whales.