LIP-004: Inclusion of FDUSD as a Collateral Option for Borrowing lisUSD (COLLATERAL-EXPANSION)

Summary:

This proposal seeks to include FDUSD as a new collateral option for borrowing lisUSD on Lista DAO, expanding the range of assets that can be used and enhancing the platform’s flexibility and appeal.

References:

• FDUSD Website: https://www.firstdigitallabs.com/ • Whitepaper: https://firstdigitallabs.com/workspace/uploads/FDUSD-Whitepaper-25216064ca0cc8.pdf • Documentation: https://www.firstdigitallabs.com/legal/ • Ethereum contract addresses: https://bscscan.com/token/0xc5f0f7b66764F6ec8C8Dff7BA683102295E16409 • Oracle data sources https://oracle.binance.com/data-feeds/detail/bsc/FDUSD-USD • Smart contract audits https://www.firstdigitallabs.com/workspace/uploads/PeckShield-207912a52540a.pdf

Abstract:

We propose integrating FDUSD as a collateral option for borrowing lisUSD on the Lista DAO platform. Launched in June 2023 by First Digital Labs, FDUSD is a stablecoin designed to maintain a 1:1 peg to the U.S. dollar, backed by cash or cash-equivalent reserves held by First Digital Trust. currently at a 2.7 billion market cap according to CoinMarketCap. FDUSD is a trusted and audited stablecoin, FDUSD offers a high level of stability and security, making it an ideal candidate for collateral in decentralized finance (DeFi) protocols.

Adding FDUSD as a collateral option will allow users holding FDUSD to leverage their assets for borrowing lisUSD, thereby significantly increasing the utility of FDUSD within the DeFi ecosystem. This integration will also enhance liquidity on the Lista DAO platform, attracting a broader range of users and further cementing Lista DAO’s position as a leading DeFi protocol.

The implementation process will involve updating the collateral management smart contracts to recognize FDUSD as eligible collateral. This integration will ensure that FDUSD is seamlessly incorporated into the platform’s existing framework, providing users with a reliable and stable collateral option.

For further details on FDUSD, including its market performance and current standing, you can refer to its profile on CoinMarketCap.

Motivation:

Addressing Limited Collateral Options:

1. Current Problem: Lista DAO currently offers an extremely limited range of stablecoin assets that can be used as collateral for borrowing lisUSD. This restricts user flexibility and potentially limits the platform’s growth.

2. Proposed Solution: By including FDUSD, one of the largest stablecoin (in TVL) on the market as a collateral option, we can attract a broader user base and increase borrowing activity on the platform.

Value-Add:

1. User Growth: Introducing FDUSD as a collateral option is expected to draw new users who hold FDUSD, thereby increasing the platform’s user base and liquidity.
2. Stability and Trust: FDUSD is fully backed by cash or cash-equivalent reserves, providing a stable and secure asset that can be reliably used as collateral. This stability is crucial for maintaining the integrity of the borrowing and lending processes within Lista DAO.
3. Growing Adoption: Since its launch, FDUSD has gained significant traction in the crypto market, with increasing trading volumes and integration across multiple platforms. This growing adoption enhances its liquidity and makes it a valuable addition to the Lista DAO ecosystem.
4. Market Demand for Stablecoin Collateral: As the DeFi ecosystem continues to grow, there is a rising demand for stablecoin collateral options. Integrating FDUSD meets this demand, providing users with a trusted and stable asset to secure their loans.
5. Alignment with Market Trends: Stablecoins like FDUSD are becoming increasingly popular as they bridge the gap between traditional finance and the crypto market. By adding FDUSD as collateral, Lista DAO aligns with market trends and ensures that it remains competitive in the evolving DeFi landscape.
6. Enhancing Platform Flexibility: Including FDUSD as a collateral option increases the flexibility of the Lista DAO platform, allowing users to choose from a wider range of collateral assets. This diversification can help mitigate risks and attract a broader user base.

Specification:

Proposed Collateral Integration: Parameters: Minimum Collateralization Ratio: 110% Loan limit: 5M Mint Fee: 0 Loan Interest Rate: 7% Withdrawal Options: FDUSD Withdrawal Fee: 0 Min Borrow Amount: 15 Min deposite Amount: 100 FDUSD

Benefits (Pros):

1. Increased Platform Utilization: Offering FDUSD as collateral is likely to attract more users and increase borrowing volumes, contributing to the growth and liquidity of the platform.
2. Broader User Base: This move will appeal to users holding FDUSD, thereby expanding the Lista DAO community and increasing engagement.
3. Enhanced User Experience: Providing more collateral options improves user flexibility and makes the platform more attractive to a wider audience.

Downside (Cons):

1. Market Risk: The addition of FDUSD introduces new market risk, which will require careful monitoring and management.

2. Implementation Complexity: Integrating FDUSD as collateral may involve complex adjustments to the platform’s smart contracts and risk management protocols.

Voting:

1. Yes: Approve the inclusion of FDUSD as a collateral option for borrowing lisUSD, with the necessary updates to the platform’s smart contracts and risk management protocols.
2. No: Reject the proposal and maintain the current list of collateral options without including FDUSD.