after reading the final version of the today published pathway paper:
Pathway: a protocol for algorithmic pricing of a DAO governance token
In this paper, we will consider a governance token pricing algorithm that conducts liquidity operations on AMM (CPMM) DEXs (automated market maker decentralized exchanges) with liquidity that belongs to a decentralized autonomous organization (DAO),…
it came to my mind, that this approach basically provides a very general Market Making approach for Market Makers working on CPPM based AMMs, right?
Therefore, what if we would use the pathway protocol as a base for a new kind of algorithmic stablecoin? The peg is extremely easy to calculate: always $1 (for a dollar based stablecoin). Hence everything necessary is a pool in which we own 100% of the provided liquidity and a pathway implementation managing this pool.
The only problem that i currently see is that the protocol keeps the liquidity by changing the price of one of the tokens, which does not make sense for a stablecoin. That is something we would have to solve.
This approach is pretty interesting for stablecoins actually or any other pegged coins since pathway is an algo to evaluate and keep the price to the peg instatnly.
You re right what with low liquidity (in the beggining) there is slippage risk for using of the stabelcoin.
I very much like the concept, and I think that if we’ll add an opportunity to mint stablecoin without slippage and let it to be liquidated back to the collateral with minimum slippage this could be an solution.
How it can be reachebale:
1 - we can use lending protocols to mint such stablecoin
2 - we can use pathway to keep the peg/collateral ratio
3 - we have to add utility to such stablecoin to let it profitable just hold it/use it/stake it or use it as main trading asset
Why GC DAO need stablecoin in the first place?
GTON is limited supply currency, so it’s deflationary. We have to introduce “payment” currency into the ecosystem which will be collateralized by GTON and other GC DAO tokens.
I like your idea very much since it’s very capital efficient for the liquidity of such derivatives. In Q1 we have to release GCMoney
Original idea was to use fork of MIM (abracadabra), but now I’m thinking we can do it better and faster with pathway infrastructure.
i’m not sure if this problem is only with low liquidity.
I think the main problem is that if we would set up a pool USDG / GTON (where USDG is the new Graviton USD stablecoin), we can not ensure that the liquidity remains stable after the second step of the pathway protocol.
Nevertheless, minting should be easy: if someone mints new USDG, he just has to provide some GTON, those GTON go to the treasury, and the corresponding amount of USDG is send to the user. Then another user (or potentially also the same user) can provide “single sided liquidity” to the pool, by providing USDG. The corresponding amount of GTON for the other side of the pool could be taken from the treasury.
If someone wants to exchange his USDG back to the corresponding amount of GTON, he could do this via the pool, which rebalances following the pathway steps, but liquidity would probably be lower (see above).
well, i guess that is a completely different approach for having a stablecoin on the GTON infrastructure. Actually, i must say, that i don’t really see a usecase for a stablecoin backed by other stablecoins. What would we gain by this? What would make that new stablecoin interesting?