adding USDC as collateral was an important decision to provide liquidity in emergencies and to prevent the peg from going too far above 1$.
however, having USDC (or any centralized stablecoin) have several disadvantages, for example:
1- illegal earned USDC can easily be used to open a vault and mint DAI… which might expose the USDC in the vault to be frozen
2- arbitrators will have a limited ability to help with liquidity and the peg if there is a systemic problem that could keep the peg above 1$ for a long period of time
so to have the benefits of centralized stablecoins vaults and to decrease their disadvantages, I am proposing to have arbitrage reservoirs
Arbitrage reservoirs: simply it is a contract that let you swap USDC to mint DAI at a fixed rate (let say 1.02)…
and let you swap DAI to get USDC (if there is any in the reservoir) also at a fixed rate for example 0.98
This means that once the peg is over 1.02 it will be possible for anyone to use this contract to get a cheaper DAI by using the reservoir to mint DAI at the fixed price of 1.02.
so this will offer the same advantages of stablecoins collateral in providing liquidity and will be a more powerful tool in regard to helping with the peg since the peg will always be below 1.02
also will let us get rid of some of the centralized stablecoin disadvantages that I mentioned above
and the money that will be generated from the arbitration could represent another stream of income to the protocol