[SLP-DAI-USDC] MIP6 Collateral Onboarding Application for Sushiswap DAI-USDC LP Token
- Who is the interested party for this collateral application?
- Provide a brief high-level overview of the project, with a focus on the applying collateral token.
Sushiswap is a decentralized protocol that allows for permissionless asset exchange and passive market making. It was forked from the Uniswap v2 codebase, and uses identical swap mechanisms and formulas. It uses an invariant function (
x * y = k) to quote prices of asset pairs based upon the relative quantity of those assets in a liquidity pool. If the price differs from the prevailing market price, arbitrageurs are incentivized to trade against the pool to correct the price discrepancy. Any user can join a liquidity pool by depositing equal valued amounts of each asset.
To incentivize users to provide liquidity, 0.25% of each trade is retained by the pool as a fee, increasing the underlying token balances of all participating LPs. However, being an LP is not without risk, as the pool will programmatically buy assets as the price falls or sell as the price appreciates. This leads to a phenomena known as “divergence loss”, where larger price moves cause LP tokens to underperform versus a benchmark of simply holding 50% of each asset.This tends to be a lower concern for stablecoin pairs.
Sushiswap v2 pool contracts are mostly permissionless and non-upgradable - the switch for protocol fees has already been activated and governance has no further control over pool assets. Uniswap’s contracts (the basis of Sushiswap) have been audited and are among the most battle tested of any application, but it is possible that an undiscovered flaw could lead to loss of funds.
- Provide a brief history of the project.
Uniswap was first deployed to the Ethereum mainnet on November 2, 2018. On May 18, 2020, Uniswap v2 was launched. Sushiswap was launched as a fork of Uniswap v2 in late August, with the fee switch turned on and a native SUSHI governance token to incentivize deposits. Liquidity and usage fell off after launch and bottomed out in November, before rebounding to rival Uniswap’s TVL and usage levels.
- Link the whitepaper, documentation portals, and source code for the system(s) that interact with the proposed collateral, and all relevant Ethereum addresses. If the system is complex, schematic(s) are especially appreciated.
Source Code: SushiSwap · GitHub
SLP-DAI-USDC token contract: https://etherscan.io/token/0xaaf5110db6e744ff70fb339de037b990a20bdace#balances
- Link any available audits of the project. Both procedural and smart contract focused audits.
Defisafety: SushiSwap Process Quality Review - PQ Reviews
Quantstamp: GitHub - quantstamp/sushiswap-security-review
- Link to any active communities relating to your project.
Gov forum: https://forum.sushiswapclassic.org/ 1
Discord: SushiSwap Community
- How is the applying collateral type currently used?
SLP-DAI-USDC LP tokens allow users to deposit equal values of the two constituent assets and earn trading fees proportional to their liquidity provided. As both assets track 1 USD, there is lower risk of impermanent loss for depositors. SLP-DAI-USDC is not currently integrated with other defi apps.
- Does one organization bear legal responsibility for the collateral? What jurisdiction does that organization reside in?
Sushiswap LP tokens are permissionless assets, with no legal issuer or freeze/blacklisting functionality.
The USDC token is issued by the Centre consortium which includes CirclePay and Coinbase. Further details can be found here: USD Coin (USDC) | Fully Reserved Fiat-Backed Stablecoin
- Where does exchange for the asset occur?
SLP-DAI-USDC can be exchanged for its underlying constituents permissionlessly via the Sushiswap contracts and front end UI. DAI and USDC are traded on a wide variety of decentralized and centralized exchange venues. USDC can also be redeemed or created 1:1 for USD on Coinbase.
- (Optional) Has your project obtained any legal opinions or memoranda regarding the regulatory standing of the token or an explanation of the same from the perspective of any jurisdiction? If so, those materials should be provided for community review.
- (Optional) Describe whether there are any regulatory registrations for the token and provide related documentation (including an explanation of any past or existing interactions with any regulatory authorities, regardless of jurisdiction), if applicable.
- (Optional) List any possible oracle data sources for the proposed Collateral type.
- (Optional) List any parties interested in taking part in liquidations for the proposed Collateral type.
I think this might be a good initial Sushiswap LP pair to onboard, because the pair does not receive incentives so we wouldn’t need to deal with harvesting rewards.
Disclosure: I hold tokens mentioned and am a participant in related governance systems. This collateral application is for informational purposes only, and does not constitute advice of any kind.
Copyright and related rights waived via CC0.