[Proposal] SIP-X Remove MIM from arbUSD pool

Summary

I propose removing MIM from the default arbUSD pool and creating a new arbUSD pool to remove the risks of using MIM.

Background

MIM, once proven to be a competitive stablecoin, has recently been uncovered as having a lot of risky collateral backing it (LUNA/UST), sketchy intentions (recent Sifu drama), and has also dramatically lost peg a few weeks back. Additionally, the arbUSD pool is very imbalanced, being composed of 43% MIM and other stablecoins being under 20% each.

Motivation

The base pool of a stableswap should not include assets much farther out on the risk curve than USDC, USDT, or DAI. I am personally uncomfortable being exposed to MIM when several hundred million dollars of unbacked UST is given as collateral to mint it.

Specification

For: Remove MIM and create a new arbUSD v2 pool with solely USDC, USDT, and DAI, 3 battle tested stablecoins. Remove liquidity mining rewards for the current arbUSD pool and give those rewards to a new USDC/USDT/DAI pool.

Against: Keep MIM in, needlessly exposing users to known risks.

Poll: None yet

2 Likes

How do you intend to remove MIM? Surely this will punish users who are late to withdraw as they shall be stuck with MIM or being forced to take a bad conversion ratio if they request another token to withdraw?

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I mean to slowly wind down the pool, as in removing SDL rewards and promoting a different pool composed of USDC/USDT/DAI.

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For the sake of discussion, why do you consider MIM further on the risk curve than USDT?

USDT is a purely centralized stablecoin, handling tens of billions of dollars with a company of allegedly 12 employees and a mysterious CEO that may or may not be a real person. Their headquarters are nowhere to be found. They’re infamous for refusing audits over the years, and hopping between shady banks.

One article among many: Bloomberg - Are you a robot?

Pragmatically, the entire supply of USDT, all $79.4B worth, should be considered as backed by nothing. There is reason to believe USDT is exponentially riskier than MIM. The devil you know vs the devil you don’t, coupled with the systemic risk the size of Tether represents for the ecosystem. If a reckoning ever comes, it will be difficult for any protocol using USDT in a significant manner to survive.

To be sure, I have nothing against this proposal. MIM goes already too far for my own risk profile.

However, USDT goes even further. If the goal is to derisk, perhaps we should use the opportunity to consider a base pool of USDC/DAI solely?

Arguably, there is little organic activity for Tether on Arbitrum anyhow. Out of the ~200m supply, 3 EOA addresses hold ~45% of it. Another ~30% is in Curve or bridges. Arbitrum dapps tend to prefer USDC or DAI.

USDT is lindy, too big to fail. It’s also the coin with the most volume so only natural to have it in a stableswap.

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To be fair Tether has definitely stepped up their transparency practices and has published recent 3rd party audits:

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