Listing Proposal - Adding VST to GLP

Proposals
1

We propose to replace MIM in GLP with VST - an Arbitrum native, capital efficient USD-pegged stablecoin that could be minted with a variety of collaterals.

Background

VST (Vesta Stable) is an ERC20 token issued by Vesta. Vesta is a stablecoin-issuing lending protocol that garnered $50M TVL in 12 hours and currently sits at $58M TVL. Vesta’s novel liquidation mechanism ensures instant liquidation, and allows high loan to value ratios for collaterals, making it one of the most capital efficient lending protocols.

Users may collateralize a wide variety of collaterals. For now, the types of collaterals supported at Vesta include ETH, renBTC, and gOHM. The supported collaterals will increase overtime as Vesta ramps up on its partnership effort with other protocols on the Arbitrum ecosystem. Vesta is a L2-first project and has been one of the first native lending protocols live on the Arbitrum mainnet. VST aims to be one of the cornerstone stablecoins for trading on L2s.

VST’s price history is viewable on CoinGecko. Historically, VST has kept its peg true to the dollar. Vesta’s redemption (please see Redemption - Vesta Finance) feature serves as VST’s price floor as users can always redeem VST for the underlying collateral, and the collateralization ratio of 110% on ETH serves as a price ceiling. These two mechanisms ensure VST’s peg to the dollar.

VST’s main liquidity pool is VST-FRAX on Arbitrum Curve. The pool previously reached $35M TVL, and currently sits at $24M TVL, and it is one of the deepest liquidity pools on Arbitrum Curve.

References/Useful links:
Website: http://vestafinance.xyz/
Token Address: 0x64343594ab9b56e99087bfa6f2335db24c2d1f17 on Arbitrum
Twitter: @vestafinance
Medium: @VestaFinance
GitHub: vesta-finance

Abstract

Listing VST would diversify the stablecoin holdings of GLP and allow users to use it as collateral for leverage positions.

If VST are added, a possible updated weightage would be:

  • 30% USDC
  • 9% USDT
  • 10% DAI
  • 3% VST
  • 2% FRAX

As VST is fully collateralized, VST could take up a heavier weight compared to its predecessor.

Vesta is open to conduct co-marketing with GMX and potentially DAO-to-DAO token swap in the future. Listing VST in GMX could push GMX to become one of the main venues for utilizing VST. Doing so ultimately pushes heavier trading volume to GMX as VST is currently one of the cheapest and safest stablecoin to mint.

The token will be listed if it gets more Yes votes than No votes.

1 Like
2

I don’t thing that we need VST.

USDC, USDT, DAI, FRAX is fine and enough. And we have a high Stable rate actually in the GLP. People can swap VST to a GLP supported stable and provide it if they want to leverage.

7 Likes
3

I think we should add Vst. They will be a key player in the arbitrum ecosystem in the coming year and it’s good we are jumping on this early. :beers:

2 Likes
4

I agree with 0xMetavault. I don’t see the point and I think Vesta needs to prove itself a little longer before we consider adding them to the pool.

1 Like
5

We can battle test VST starting with 1% weight and 1million hardcap to limit potential losses in case something goes wrong with VST.
Hardcap equal to $1 million means we couldn’t possibly lose more than 0.7% of Arbitrum GLP pool,
which is acceptable risk.

In return we establish friendly connection with promising money market, getting attention from Vesta community.

2 Likes
6

If a stablecoin is fully hosted on an L2 does this compromise being able to exit back to L1? It that’s right I’d be pretty suspicious of any L2 native stablecoin.

But either way I agree that existing stablecoins in GLP are sufficient and if another is sought would look for longer track record.

1 Like
7

No. We already messed up with MIM, and should learn from it. We should breakdown % into full collateralized stable coin and very small % allocated into so-called algorithmic stable coin.

3 Likes
8

Screenshot_2022-02-26-13-28-09-62_e4424258c8b8649f6e67d283a50a2cbc
Screenshot_2022-02-26-13-28-09-62_e4424258c8b8649f6e67d283a50a2cbc1080×2400 211 KB

I would also argue that the “community” of this stablecoin isn’t very big any moment, so I don’t see any benefits of adding it.

Also check out the attached screenshot - no real market depth or activity.

1 Like
9

I think a good case could be made for adding RAI - broadening the use of fully backed, decentralised stablecoins. They have a strong community but looking for growth opportunities so perhaps there could be benefits from some partnering there.

10

I understand that Vesta is a new protocol, but it’s the best lending service available on Arbitrum. It allows borrowers to take 0% interest loans, just like Liquity (Vesta forked Liquity).

I would be open to a 1-2% allocation in GLP, the allocation can be taken from USDT and/or DAI.

I would also understand waiting until Vesta adds governance for VST to be added to GLP.

11

I would be more open to this proposal if the cofounder of Vesta who created this proposal had more skin in the game with GMX. I see this as a benefit / marketing stunt for Vesta where GMX doesn’t get anything in return other than swapping out a safer stable coin for a risker stable coin. How about Vesta incentivizes us to add this to our pool with some tokens from their DAO? Otherwise this proposal from the Vesta team is too risky, one sided and transactional.

3 Likes
12

In general, I like the idea of adding a native stablecoin asset to GLP, and I see Vesta at first glance as a credible option once certain criteria is met.

However, I’m unable to assess this proposal without:

  1. a peg stability assessment; how well has VST held peg over time and under stressors in comparison to other stablecoins?

  2. a risk assessment; how does adding VST to GLP affect the risk profile? What are the risks? What controls would we need to put in place to address those risks?

IMO both of these items should be included in any proposal to make changes to GLP. Ideally, if the proposal is from a party with a conflict of interest, then these should be done independently.

In general, though, I would expect to see (a) a lot longer track record and battle scars and (b) more liquidity and liquidity diversification before even considering adding a decentralised stablecoin.

Potentially, if this is being proposed by a team themselves, then we could consider requesting the posting of a bond to cover some of the financial risks of adding this to GLP (a backstop so if VST loses peg in a material way it could cover some/all of the loses from an emergency liquidation). This would need a lot more thought tho, and need to be tied into the risk assessment I mentioned above.

13

If you guys are really going to consider vesta which is a totally new stable coin then i think you should consider pusd instead. First of all the name is Pusd. Need i say more?

Second of all it is a much more interesting protocol. Vesta is just some copy pasta bs. Jpeg is the fututre. If you don’t understand it than you’re ngmi.

14

Hey guys, thanks for all the feedback on this proposal thus far. We wanted to respond with some brief points outlining why we think VST will fit well within GLP and why a long-term partnership between GMX and Vesta can provide meaningful value to both protocols.

Why should VST have an allocation within GLP?

  • Robust liquidation and stability mechanism: Liquidation is ensured by the stability pools, which ensure instant liquidations at the oracle price of the asset. Currently, stability pools across the board have coverage ratios of around 50% across all pools, which are more than sufficient in covering the liquidations in the most severe cases. We use Chainlink oracles for all collateral types and protocol functionality.
  • Community alignment: The majority of our governance token is reserved for causes that would aid the growth of the protocol through grants, developer incentives, and liquidity provisioning to allow for the multi-chain adoption of VST.
  • Risk-minimized collateralization: VST is always overcollateralized. It is not “algorithmic,” it is a crypto-collateralized stablecoin that will always have more than $1 worth of collateral for each unit of VST. The Vesta core team has made a meaningful decision to only involve risk-minimized collateral types that do not compromise on decentralization and liquidity. All new collateral types added to Vesta goes through the policy team and are carefully vetted.
  • Simple redemption mechanisms: VST can be used to redeem any supported underlying collateral at any given time. The redemption mechanism ensures a $1 price floor for VST.

The Vesta core team is working on a number of protocol mechanisms such as a dynamic liquidation ratio and collateral caps to further cement VST’s stability and healthy collateralization.

Why are we different other stablecoin-minting protocols?

In addition to a superior liquidation mechanism, Vesta also prioritizes the sustainable growth of TVL. Changes to the protocol will be extensively vetted by our policy group and our advisors. In addition, Vesta does not support looping mechanisms that allow users to easily increase leverage. Excessive leverage ultimately increases the chances of liquidation cascade and decreases the health of the protocol.

GMX <> Vesta

Some members have shown concern about how this is not a win-win exchange. But rather only Vesta is benefiting from this proposal. The truth is that this proposal is only the start of the long-term collaboration. The core contributors of Vesta are preparing to enable GMX to become a type of collateral for VST. The Vesta core team will wholeheartedly push this initiative within our own community. Vesta will allow GMX community members to utilize the value of their holdings without losing exposure to the coin.

We are also receptive to the feedback that our protocol isn’t yet one of the oldest stablecoin-minting protocols and that we need more testing before deserving a larger allocation. As a result we want to let you all know that we are fine with a 1% weight at the initial stage. Once we prove ourselves further we shall apply to increase our allocation in the GLP index.

In addition, we also will seek to establish a GMX-VST pool, which would allow users to easily trade their newly borrowed VST for more GMX. We plan on incentivizing the pool to facilitate further synergy and enable deep liquidity between the protocols.

Conclusion

With these in mind, we believe that a collaboration between Vesta and GMX could bring tremendous value to both ecosystems. Adding VST to the GLP index with 1% weight is only the first step of our partnership. We hope this would lead to collateralizing GMX on Vesta, creating VST-GMX pool, and other potential collaboration down the future.

3 Likes
15

Great writeup Mikey. You’ve got my support for the proposal.

Also, once Yearn opens a vault for GMX (similar to Yield Yak), the vault token would be a great asset to collateralize. Imagine taking a loan on your GMX that could pay itself off, it can’t get better than that.

Sorry if I’m getting ahead of myself, but I want to illustrate how Vesta & GMX collaborating is a no brainer.

1 Like
16

I’m in support of this proposal but I’d love to add that, the proposal can add a bit of risk assessment that has been done on VST to buttress the proposal.

The key aspect I think is really cool is enabling GMX as a collateral asset + creating a GMX/VST pool. It also makes senses for Vesta to do a risk assessment on GMX before deciding to add it and tell us what LTV will be approved.

1 Like