Support USDD 2.0 as a deposit-only asset in the Venus Core Pool on BNB Chain

Overview

Chaos Labs supports the deprecation and delisting of the legacy USDD from the Venus GameFi, DeFi, Stablecoin, and Tron Pools while facilitating the listing of the new USDD 2.0 as a deposit-only asset in the Venus Core Pool. Below, we present our analysis and parameter recommendations to support this transition.

Motivation

USDD recently began its migration from the version listed on Venus (referred to as USDDOLD in their documentation, and henceforth in this recommendation) to USDD 2.0. As a result, it is necessary to reassess the currently listed USDD markets on Venus and begin their deprecation.

USDDOLD has exhibited virtually no supply growth on BNB Chain since shortly after it was first introduced to the network, with a current total supply of 110M.

Centralization and Governance

While USDD 2.0 documentation refers to a Governance process, currently, the contracts deployed governing the protocol rely on a single EOA controlled by the Tron Foundation. This presents a situation in which parameters could be changed with no warning, either from direct action by an EOA, user control, or an exploit.

Additionally, some of the protocol’s contracts are not verified on the Tron block explorer. Hence, their code and functions cannot be analyzed to ensure a lack of potential risk vectors.

Collateral Factor, Liquidation Threshold, and Liquidation Bonus

These factors describe why we recommend that the asset be listed as deposit-only until its market cap and on-chain DEX liquidity on BNB Chain have grown sufficiently to assess its peg stability. Attracting deposits and supply to BNB Chain will thus rely upon incentives provided by the protocols boosting USDD.

Supply and Borrow Cap

We propose setting the supply cap at 20M, a high cap given the asset’s limited liquidity but justified by its other parameters which virtually eliminate risk.

It is not feasible to allow borrowing at this point in time, as liquidating a position with USDD debt would require a user to purchase USDD to repay the debt, potentially causing an upward depeg in USDD because of its illiquidity on BNB Chain. However, we provide starting IR curve parameters should borrowing be enabled.

Pricing/Oracle

The proposed setup of this market does not necessitate the use of a USDD oracle, as users will not be able to borrow the asset or use it as collateral. Thus, we recommend pricing it according to the existing market and transitioning to a USDD 2.0 oracle when available.

Specification

Parameter	Value
Asset	USDD
Chain	BNB Chain
Pool	Core
Collateral Factor	0.0%
Supply Cap	20,000,000
Borrow Cap	-
Kink	80%
Base	0.0
Multiplier	0.15
Jump Multiplier	3.0
Reserve Factor	25%