USM, a minimalist stablecoin

USM, a "stablecoin vending machine", the world's simplest decentralized stablecoin.

[USM, a minimalist stablecoin @usmfum]

PSA - if you're thinking of buying some FUM (either to help collateralize the USM system, invest in FUM as "leveraged ETH", or just to experiment with the smart contract), might want to do it before Oct 31: after that the FUM/ETH price starts floating and fees will increase.

[USM, a minimalist stablecoin @usmfum]

Note that the FUM price is fixed at 0.00025 ETH (currently ~$0.90) until Oct 31: after that the FUM/ETH price starts floating. So no rush between now and then. Defunds (FUM->ETH) are also disabled until November.

[USM, a minimalist stablecoin @usmfum]

@geoff_l Of course in that scenario in some sense liquidity is already split across Solana + Eth, so you could argue Polygon is no worse than Sol. Esp if Polgyon becomes the dominant Eth L2.

There are also some limited L2-L1 interop annoyances to worry about with Polygon...

Long topic

[USM, a minimalist stablecoin @usmfum]

Man these fees eh. So how would a stablecoin system like USM work on an L2?

Our smart contract needs to:
1. Read Uniswap v3 oracle prices, based on latest-block-fresh Uniswap v3 trades
2. Similarly Chainlink prices
3. Update ETH/USM/FUM balances (for itself and for users)

[USM, a minimalist stablecoin @usmfum]

@geoff_l Something like Polygon *might* serve as well as Solana. It's a long topic. One aspect of the difference is, if Uniswap is on Solana it's only on Solana once, but if Uniswap is on Polygon liquidity is probably split across multiple Eth L2s + L1...

[USM, a minimalist stablecoin @usmfum]

@geoff_l Hoo boy great question but that's a few miles down the road... Being able to send via M*t*m*sk-for-phone (or something similar) on a widely-adopted L2 would be close enough for the near term!

[USM, a minimalist stablecoin @usmfum]

OK after a bit more thought, integrating USM with an L2 doesn't actually seem *that* bad. A sketch in one tweet (+ a thread)...

[USM, a minimalist stablecoin @usmfum]

I know people talk about the abstract challenge of "composability", for both L2s and sharding, but this seems like a very concrete and simple example. If we can't make even USM work on an L2 maybe we should just all switch to Solana 🤷

[USM, a minimalist stablecoin @usmfum]

But anyway to get this started doesn't seem too bad!

Need to pick an L2... (And finish security audit)

And then we can actually demo USM to our friends w/o gas sob stories. (I split a bill at dim sum today, would have loved to get people to pay with USM... Instead: Venmo 🙄)

[USM, a minimalist stablecoin @usmfum]

In principle this setup could work with multiple L2s. The main annoyance to that is USM/ETH trading liquidity gets fragmented across further DEXes -> worse prices for users. (As a former market maker I hate fragmenting liquidity! Bad for everyone)

[USM, a minimalist stablecoin @usmfum]

@PatrickAlphaC @DefiDrew @alexroan Cool! Yeah the engineering challenges here seem applicable to many projects, we all have an interest in sorting it out. Also it's fun to think about

I had another idea about how to L2, see tweet coming soon

[USM, a minimalist stablecoin @usmfum]

@DefiDrew And we did a lot of work to not have to depend on Chainlink as a single point of failure.

But in either case, how could our L2 read the *latest L1 block's* numbers? Because this is what we need. Lots of apps need this sort of contract interoperability, and on L1 it's easy...

[USM, a minimalist stablecoin @usmfum]

@DefiDrew No, we don't trade on Uniswap. (Part of what makes USM a simple case!) We read the Uniswap v3 TWAP. But we need it to be fresh, and that TWAP is calculated based on the latest v3 trades, so it needs to read them.

[USM, a minimalist stablecoin @usmfum]

I know people talk about the abstract challenge of "composability", for both L2s and sharding, but this seems like a very concrete and simple example. If we can't make even USM work on an L2 maybe we should just all switch to Solana 🤷

[USM, a minimalist stablecoin @usmfum]

Making each Uniswap pool a single seamless market across layers every block seems like a stretch. But if liquidity on each pool (eg USDC/ETH 0.05%) is fragmented across L1 + every L2, a priori that will severely reduce robustness of our oracle prices, opening USM to exploits...

[USM, a minimalist stablecoin @usmfum]

@RhysLindmark We do have a discord! https://t.co/gI0tTaC3Zd It was active earlier this year, we should get it going again. USM is a public good, there is no company, it will live or die by whether devs & users get involved - join us! Lots of cool aspects to discuss.

[USM, a minimalist stablecoin @usmfum]

@RhysLindmark We do have a discord! https://t.co/gI0tTaC3Zd It was active earlier this year, we should get it going again. USM is a public good, there is no company, it will live or die by whether devs & users get involved - join us! Lots of cool aspects to discuss.

[USM, a minimalist stablecoin @usmfum]

It's now been a week since the USM system's "prefund" period ended, the FUM/ETH price has been floating, and the system just saw its first defund! (FUM->ETH redemption.) Everything seems to be working fine so far... https://t.co/7cRptJrVBG

[USM, a minimalist stablecoin @usmfum]

And we still welcome suggestions to add to the FAQ! https://t.co/sHUzy3a4Bp

[USM, a minimalist stablecoin @usmfum]

We're now going to start shifting gears from staying up at night worrying about USM to getting the word out about it. If you know any podcasts that would like to do an interview about a new decentralized stablecoin, get in touch...