Launching a stablecoin with renBTC

TL;DR

  • The ICHI community would like to request $250k as a grant which it will match with an additional $250k to support the launch of oneBTC, a stablecoin for the Bitcoin community which is collateralized with renBTC.

Description of Problem or Opportunity

  • ICHI supports the launch of stablecoins collateralized with any community token. ICHI creates a Decentralized Monetary Authority (DMA), a DAO for the purpose of managing a stablecoin. We previously launched oneBTC, a stablecoin for Bitcoin holders, on V1 of ICHI but have since created a new set of contracts, audited by Quantstamp, as part of our V2. You can learn more about ICHI here: ichi.org
  • We would like to propose relaunching oneBTC on V2 of ICHI, using renBTC instead of wBTC as the collateral used in minting oneBTC.
  • We would like to launch the stablecoin as soon as possible. We are planning to migrate oneBTC to V2 within the next four weeks and believe renBTC would be a better form of collateral.
  • ICHI recently launched oneFIL, a stablecoin for the Filecoin community. oneFIL takes renFIL as collateral and has seen over $820,000 minted within the first five days of launch. V1 supported over $35M TVL at launch.

Proposed Solution

  • oneBTC is a stablecoin that is minted with two parts: USDC and renBTC. USDC serves as the underlying collateral reserve, generally around 95% of the minting ratio. The renBTC is deposited into a community governed treasury which can be used to provide rewards when spending with oneBTC, incentivize oneBTC use in DeFi, or help guarantee redemption always at $1.
  • renBTC holders would now have a stablecoin they can mint and govern that is tied to the value of renBTC instead of requiring it to be swapped for another stablecoin not connected to the community.
  • We would develop and launch the stablecoin.

Technical approach (if you are building/creating something)

Execution risks

  • The only technical dependency is identifying a reliable price oracle for renBTC.
  • The funds will be allocated to the minting of oneBTC, and therefore do not incur high impermanent loss risk.

Unintended Consequences

  • Limited adoption of oneBTC is a risk, but best mitigated by Ren community support.

Evaluation plan

  • Our target success metrics would be the number of oneBTC minted, usage of oneBTC as a stablecoin across DeFi, and Total Value Locked in farms and other applications leveraging oneBTC and renBTC.

Timeline

  • Launch would be targeted within 4 weeks.

Budget

  • ICHI will provide $250k in value which we would like to request be matched by Ren with another $250k. This will be used for initial minting and liquidity in oneBTC.

Applicant background (if you are building/creating something)

  • Our team has worked across big tech like Amazon, IBM, Microsoft, and Red Hat as well as experience with crypto projects like Hedera, Flow, and more.
  • Website: ichi.org
  • Docs: docs.ichi.org
  • App: app.ichi.org
5 Likes

Mixed feelings.

Why does the market need oneBTC?

3 Likes

I have similar feelings. Sounds like an interesting concepts, but it’s purpose and use case is vague to me.

Would love to hear more about what real world problem it’s trying to solve

Great question!

Today, stablecoins are a massive $40B market. Unfortunately, this market is dominated by stablecoins managed by financial institutions or those that struggle to maintain the peg to a dollar.

No easy way exists for a community to receive and govern all the benefits of their own money: store of value, unit of account, and medium of exchange.

oneBTC provides that stablecoin for the BTC community so there is a stable medium of exchange that can be used in DeFi and payments. The stablecoin creates a community treasury of BTC which can be used for yield in DeFi and discount on payments. More on this here: Community Tenets - ICHI Docs V2

Ultimately, our goal is to enable that original vision of peer to peer cash without needing communities to give up their BTC to use it.

3 Likes

Thanks for the feedback.

Short term, we see most use cases in DeFi. Providing LPs an opportunity to use stablecoins without relying entirely on centralized institutions. Each DMA is community governed and fully decentralized.

Long term, we think crypto needs a decentralized means for peer to peer payments with a stable currency that won’t fluctuate in value (no more buying $100,000 pizza). This similarly benefits by having a decentralized model for issuance.

If there is an opportunity, would love to talk through all of the above on a call or other forum.

Hi farmerdon, thanks for sharing your proposal. I have a few questions and requests for clarification.

Do you plan to use renBTC as collateral even if the grant is not awarded?

Is this pool incentivised? If so the TVL becomes a less useful metric as we don’t know how much of that is due to real use or short-term yield farming.

I can think of many reasons why oneBTC might fail to gain traction in the market, but I do not see how the Ren community could mitigate these. If the market simply decides not to use oneBTC and continues using Dai/USDC/USDT/etc., how do you see the Ren community mitigating this?

My understanding of this question is that we would like to see how we can measure the ROI of our community fund investments. These metrics seem like ICHI’s in-house metrics for determining if the product is a success. Could you please share some evaluation criteria from the perspective of the Ren community? i.e. how will this lead to increased fees, and how can we measure this?

Please provide as much detail as possible on how the renBTC grant would be used. For example, will it be used to incentivise the oneBTC pool, or pay rewards to ICHI users?

Does the Ren community get anything in return for our investment, e.g. ~$250k worth of oneBTC, or voting rights in the DAO? Or is this purely a grant, where funds will be allocated to ICHI, and Ren’s benefit is the anticipated future growth in dark node fees?

And finally - ICHI already has $250k to allocate towards initial minting/liquidity. While I can appreciate that having a larger liquidity pool is beneficial to ICHI, it is not clear to me that increasing the pool by $x will lead to an increase of >$x in Ren node fees. Do you have any calculations you can share that would demonstrate this? If not, what made you decide on the amount of $250k, and what amount of fee increase do you expect to be directly attributable to ICHI?

3 Likes

Interesting idea, one small thing though, the $250k expected from ren community fund probably wont be available until end of this year. Around $50k is expected to be gathered every month so will take a few months to get to $250k, and thats assuming none of the money is spent on sth else…

Thinking about how this might increase market share and volume.
A stablecoin backed by renBTC might increase the minting of renBTC. Why would market participants prefer to use this particular stablecoin over alternatives?
If the ren stablecoin is available at lower cost than fees for bridging alternatives cross-chain stablecoins it might have a market. It seems that might be the main benefit of having a renvm native asset but doesn’t seem compatible with the ICHI proposal.

See responses in below. Let me know if there is a community call where it may make sense to walk through these points:

Do you plan to use renBTC as collateral even if the grant is not awarded?

We are still evaluating which method of wrapped BTC to use. Some of our more recent launches have been more successful when an initial liquidity grant is deposited to the community treasury. This enables a lower minting ratio of USDC:renBTC so that more renBTC is used, further increasing the community treasury value.

Is this pool incentivised? If so the TVL becomes a less useful metric as we don’t know how much of that is due to real use or short-term yield farming.

Yes, we provide liquidity rewards to incentivize initial minting, but use case integration is the end goal. This is where using the community treasury, and broad community involvement is key.

I can think of many reasons why oneBTC might fail to gain traction in the market, but I do not see how the Ren community could mitigate these. If the market simply decides not to use oneBTC and continues using Dai/USDC/USDT/etc., how do you see the Ren community mitigating this?

Agreed, this does represent a risk. However, the design of ICHI is that the community treasury made up of renBTC will continually grow in value through appreciation and yield generation. This means the community can elect to reward usage of oneBTC over other stablecoins which do not have similarly valued treasuries and simply require users to sell all of their tokens in order to acquire.

My understanding of this question is that we would like to see how we can measure the ROI of our community fund investments. These metrics seem like ICHI’s in-house metrics for determining if the product is a success. Could you please share some evaluation criteria from the perspective of the Ren community? i.e. how will this lead to increased fees, and how can we measure this?

The simplest measures could be oneBTC minted, the additional renBTC in the community treasury, and the yield from positions taken with that treasury position. Ultimately this could drive demand for renBTC as BTC holders who want to participate in DeFi acquire the token in order to mint, or use, a stablecoin which has a positive relationship with renBTC.

Please provide as much detail as possible on how the renBTC grant would be used. For example, will it be used to incentivise the oneBTC pool, or pay rewards to ICHI users?

Does the Ren community get anything in return for our investment, e.g. ~$250k worth of oneBTC, or voting rights in the DAO? Or is this purely a grant, where funds will be allocated to ICHI, and Ren’s benefit is the anticipated future growth in dark node fees?

The renBTC could be thought of as a zero interest loan which is deposited to the community treasury without minting oneBTC. This means you can lower the minting ratio (require more renBTC) when minting oneBTC. ICHI would match that deposit to further increase the value of the community treasury. This model worked quite well with our recent launch of one1INCH.

This initial deposit could be repaid at some mutually agreed time.

We could absolutely explore the voting rights over oneBTC that could be provided at this time.

And finally - ICHI already has $250k to allocate towards initial minting/liquidity. While I can appreciate that having a larger liquidity pool is beneficial to ICHI, it is not clear to me that increasing the pool by $x will lead to an increase of >$x in Ren node fees. Do you have any calculations you can share that would demonstrate this? If not, what made you decide on the amount of $250k, and what amount of fee increase do you expect to be directly attributable to ICHI?

We don’t have calculations of the impact on Red node fees, but hope the increased demand in renBTC would present that side of the opportunity. The amount was determined based on what we have seen be successful with previously launched oneTokens, ad. Represents sufficient amount to incentivize a low minting ratio.