[EXAIP-11] Enabling USDC native in OP Mainnet

Proposal ID: EXAIP-11 Proposer: Exactly Core Team
Date: March 20, 2024

Summary

This proposal will incorporate the native USDC market into Exactly Protocol on OP Mainnet.

Background

As the Exactly protocol evolves, incorporating new markets will enhance its versatility and attract a wider user base. This proposal introduces the native USDC market into Exactly Protocol on OP Mainnet.

On September 5, 2023, Circle introduced native USDC on OP Mainnet, marking a significant step towards seamless USDC transactions without bridging, thus allowing direct issuance and redemption processes with Circle. This move aimed to empower developers with a stable and trustworthy foundation for building on the blockchain. In collaboration with the Optimism Foundation, Chaos Labs embarked on a mission to optimize liquidity incentives and streamline the migration from bridged USDC.e to native USDC on the Optimism Mainnet.

USDC issued by Circle will be native to OP Mainnet and can be considered the official form of USDC for the ecosystem. It is issued directly by Circle and backed 1:1 with US Dollars. This empowers developers to build on a stable foundation they can trust.

Native USDC is a building-block asset in DeFi and will provide immense value to the Exactly protocol with its addition as a market.

Proposal

The proposal aims to integrate a native USDC market into the Exactly Protocol on the OP mainnet. This integration will involve the following essential components and objectives:

• Establishing a secure and efficient mechanism for users to deposit native USDC as collateral within the Exactly protocol.
• Implementing smart contract interactions and protocols to enable the utilization of native USDC as collateral for borrowing and lending purposes.
• Providing clear and comprehensive documentation to guide users in utilizing native USDC within the Exactly Protocol.

Benefits

Incorporating native USDC into the Exactly protocol offers several advantages and positive outcomes. However, the primary reason for this integration is that the migration from USDC.e, or bridged USDC, to native USDC, will result in reduced liquidity for the bridged version; enabling native USDC on Exactly will allow Exactly users to borrow/lend the canonical version of USDC supported by Circle, rather than the unsupported bridged version. Native USDC will become the leading USDC version on Optimism and will thus have deeper liquidity, offering a safer and more efficient USDC market on Exactly. Additional benefits include:

• Potential for increased trading volumes and activity within the Exactly protocol.
• Diversifying collateral options gives users more options to secure loans and borrow assets.
• The attraction of a broader user base that doesn’t want to utilize bridged USDC or USDC.e
• Addition of OP incentives on the native USDC market on Exactly–more information about incentives in the following section of this proposal

Incentives

The total amount of OP incentives Chaos Labs plans to allocate to the new native USDC market on Exactly Optimism is just under $116,000 in OP tokens. These additional rewards will be distributed along with esEXA rewards over 12 weeks.

Implementation

The steps for implementation include:

• Integration of the native USDC market into the Exactly Protocol user interface.
• Deployment on the OP Mainnet with comprehensive documentation and user guides.
• Ongoing monitoring and support to address any issues or concerns arising during and after implementation by the Exactly Core Team.

The initial parameters for the native USDC market will be the following:

Asset Risk Factor: 0.91

Interest Rate Parameters:

The contract address of the native USDC is the following:
0x0b2C639c533813f4Aa9D7837CAf62653d097Ff85

The implementation will prioritize security, user experience, and the seamless integration of native USDC markets into the Exactly protocol, ultimately benefiting the Optimism ecosystem and its participants.

Conclusion

In summary, integrating the native USDC market into the Exactly Protocol on OP Mainnet now represents a significant opportunity to avoid the risks posed by the decrease in liquidity that USDC.e will face as the migration to native USDC on Optimism continues. This proposal outlines the rationale, benefits, and implementation steps for incorporating native USDC as collateral within the Exactly protocol. This strategic move aligns with the evolving needs of the DeFi community and positions Exactly Protocol for continued growth.