Add USDS to Moonwell Core Market on Base

I am pleased to propose the addition of USDS (Sky Dollar), the stablecoin of Sky Protocol, to Moonwell’s suite of core lending markets on Base. This proposal is an opportunity to enhance market utility, foster ecosystem growth, and provide users with a decentralized, stable asset aligned with the protocol’s mission.

USDS is an ERC-20 compliant stablecoin designed to maintain a soft peg to the U.S. dollar while enabling interoperability across DeFi platforms. It is backed by surplus collateral and fully upgradeable through the UUPS proxy pattern and ERC-1967 standards, USDS provides a robust and flexible solution for stable value transfers.

General Information

Token: USDS

USDS is the stablecoin of the Sky Protocol, designed to maintain a soft peg to the U.S. dollar while enabling users to engage seamlessly within the ecosystem. It combines stability, flexibility, and decentralization to empower users across decentralized finance (DeFi). Key functionalities include:

• 1:1 DAI Conversions: The USDS/DAI converter allows seamless and unrestricted 1:1 conversions between DAI and USDS, ensuring ease of liquidity movement.
• Participation in Sky Savings Rate: USDS holders can earn rewards through the Sky Savings Rate, providing a decentralized, non-custodial savings option without sacrificing control of their funds.

Benefits to the Moonwell Community:

1. Enhanced Stablecoin Liquidity: Listing USDS will expand the protocol’s stablecoin offerings, creating additional lending and borrowing opportunities while ensuring access to a robust, decentralized stable asset.
2. Increased Protocol Engagement: By integrating USDS, the protocol can attract users from the Sky Protocol ecosystem, including those seeking to leverage the Sky Savings Rate for stable returns.
3. Decentralization Alignment: As an upgraded version of DAI, USDS represents a permissionless, non-custodial alternative that aligns with the principles of decentralized finance.
4. Reduced Systemic Risk: Backed by surplus collateral and supporting secure 1:1 conversions, USDS offers a stable, reliable asset that mitigates risks associated with over-leveraged or under-collateralized stablecoins.

Resources and Socials

• Sky Website
• Token Documentation
• Sky Twitter
• Sky Governance Forum

Sky Social Channels Metrics

• Twitter: 285k followers

Market Risk Assessment

Market Metrics

• Market Cap: $1,002,682 (On Base, across all networks the market cap is $5.2B)
• Minimum/Maximum Market Cap (Last 6 months): $0M (June 14th) / $5.2B (December 14th)
• Circulating Supply (on Base): 1,002,682 USDS
• Maximum Supply: ∞ USDS
• 30D Total Volume (CEX/DEX) on Base: $2,555,337
• 24 Hour Trading Volume: $28M

Liquidity on Decentralized Exchanges:

• Uniswap V2 (Ethereum) -2% Depth: $3,158,079

Herfindahl Index:

The Herfindahl-Hirschman Index (HHI) measures token concentration among holders, with higher values indicating greater centralization. Currently, the HHI for this token on the Base network stands at 0.99, a level typically considered extremely centralized. However, this can be reasonably attributed to the majority of the token's supply being held within its bridge contract.

Given that the token was recently introduced into the Base ecosystem, it remains in its early stages. Importantly, there is clear evidence of the Sky Protocol team's commitment to decentralization. On the Ethereum network, the token's HHI is 0.32, a significantly lower and healthier value compared to its current state on Base.

USDS Ethereum HHI

USDS Base HHI

Decentralization

• Top 10 Holders
• Token Contract: 0x820C137fa70C8691f0e44Dc420a5e53c168921Dc
• Privileged Roles in Token Contract: The USDS token contract includes privileged roles that retain the ability to freeze accounts. This means that the contract administrators can restrict the use of USDS for specific wallets/smart contracts.
• Blacklist Functionality: Yes, the USDS token contract includes a blacklist feature. This function enables the freezing of wallets/smart contracts preventing them from transacting with USDS.
• Token Standard: ERC20 USDS Stablecoin (USDS) Token Tracker | BaseScan

Smart Contract Risks

• Codebase and onchain activity:
  • Github Repo
  • Total transactions: 593
  • Age of token in days: 39 days (on Base)
• Security Posture: Sky Protocol has conducted a significant number of audits from notable parties like Cantina, Sherlock, and ChainSecurity. A list of audits may be found here. Bug bounties for Sky Protocol may be found here.
• Upgradability:
  • Is it upgradeable: Yes, the USDS contract is upgradeable, governance mechanisms in the Sky ecosystem can manage these upgrades. To read more about the SKY governance process, see here: Maker Governance Help Portal.
  • Upgrade Process: Sky Governance can upgrade the contract if an onchain vote passes. The upgrade process involves setting the governance pause proxy module as a ward, meaning contract functions can be modified through governance decisions. All upgrades would have a timelock of 30 hours.

Oracle Assessment

• Oracle Price Feed Addresses:
  • USDS-USD, Base Feed address: 0x2330aaE3bca5F05169d5f4597964D44522F62930
    • Relevant Documentation: https://docs.chain.link/data-feeds/price-feeds/addresses?network=base&page=1&search=usds

Proposal Author Information

• Name: 0xMims
• Telegram: Mims0x
• LinkedIn
• Twitter: 0xMims
• Delegate Address: 0x657D07095b082BB71ebD93F549f407A97f49094F
• Relationship with Token: I am a Moonwell community member and delegate. I bear no relationship with the USDS token on a personal or professional level.

Conclusion

The inclusion of USDS as a core lending market presents an opportunity to enhance stablecoin utility anddrive liquidity growth on Moonwell. By supporting USDS, we can empower users with new financial opportunities while reinforcing stability and innovation within the protocol.

I am opening this proposal to the community to review, discuss, and provide feedback on this proposal to ensure its success and alignment with our shared vision for a secure and decentralized onchain financial future.