GIP-118: Should sDAI be replaced by sUSDS in the bridge?

Executive Summary Since MakerDAO became Sky and started issuing their USDS stablecoin, they have also introduced the Sky Savings Rate (SSR), which is now typically 1.5% higher than the DAI Savings Rate (DSR). This proposal aims to replace the current sDAI in the bridge on Ethereum’s side with sUSDS in order to increase the yield for the Gnosis sDAI 3. The native Gnosis Chain token would remain xDAI.

Introduction Gnosis Chain has used xDAI, which is DAI bridged from mainnet, as its native token since inception. However, with the recent changes by MakerDAO / Sky, and their push for USDS instead of DAI, it has become clear that we need to stay current with the broader ecosystem in order to remain relevant and get access to the best yield.

Proposed Changes The bridge would require an upgrade, that would include:

• Swapping all the sDAI currently held by the bridge to sUSDS
  • Similarly to an upgrade made last year (Deposit DAI of the xDAI bridge in sDAI vault from Spark 3)
• Adding support for depositing USDS in addition to DAI
  • DAI would get swapped 1:1 for USDS and then sUSDS in the bridge
• Replacing the currency for withdrawal from DAI to USDS on Ethereum

As an alternative, we could also introduce an option to automatically swap back to DAI instead of USDS, although this might incur a fee later down the line.

Impact and Benefits The main benefit is that we would get higher yield (typically 1.5% more) on the stablecoins in our bridge. Currently, the SSR is at 8.75%, while the DSR is at 7.25%.

The main impacts are:

• We would be trusting USDS, which has a blacklist function, instead of DAI, which is more neutral. However, one could argue that the trust assumptions are similar, as the same company ultimately manages the underlying assets. It would also be an extremely bad precedent for them to blacklist a bridge.
• Users that bridged DAI into Gnosis would now be forced to withdraw USDS. This could also potentially impact smart contracts, that could rely on the bridge to provide them with DAI instead of USDS, which could result in them breaking. A thorough analysis will be conducted beforehand to make sure that no smart contract currently relies on this.

Implementation Plan

• Finish testing and auditing. Should be done in around one month.
• Deployment in 2 phases, separated by 1-2 months to give every user and app ample time to move the router instead of using the bridges directly.
  1. Implement a router for the bridge. This is a single smart contract that will route to the xDAI Bridge or the Omni Bridge depending on the token, and can be reconfigured in scenarios like USDC/USDC.e. It will be used to allow deposits in USDS and DAI.
  2. Move away from (s)DAI as the primary token to (s)USDS, while keeping a 1:1 bridge from DAI to xDAI possible through the router.
• Implement and test a bridge upgrade that covers the proposed changes. Will be done in parallel with phase 1.

Risks and Challenges The main challenge is to make sure that the community agrees on this change, which is why we’re gauging interest with this GIP.

Obviously, there’s always a risk in deploying and upgrading smart contracts, but our team is experienced and has successfully implemented many such upgrades. All changes will of course be audited and tested thoroughly on Chiado.

Team / Organization This would mostly be taken care of by the bridge team.

Conclusion We believe that it is time to leave DAI behind in favor of USDS, which is now being pushed by Sky, in order to benefit from the higher yield on sUSDS in comparison to sDAI.