SIP-189: Add LUSD/sUSD Wrappr on L2

Simple Summary

Adding a LUSD wrappr on L2 that mints 1 sUSD for each 1 LUSD deposited and releases 1 LUSD for each sUSD burned (excluding fees).

Abstract

This SIP proposes to add the LUSD/sUSD wrappr using the wrappr factory specified in SIP-182.

Motivation

Although the original ETH/sETH wrappr specifies wrapping a synth with it's respective underlying, this SIP proposes wrapping sUSD with a derivative of US Dollars (LUSD). Therefore there are certain risks involved that need to be highlighted to the snx community:

(1) In the case where the LUSD is trading at a discount against USD, the debt accounting will be flawed until a patch is in place (unwinding the LUSD with negative burn rates). This might lead to significant sell pressure on synths, if a substantial amount of the synth supply is minted by LUSD. After unwind the debt on snx stakers is expected to increase.

(2) In the case where LUSD is trading at premium against USD, the LUSD wrappr might not be optimal in peg alignment.

Nevertheless, the fundamental benefit of adding the LUSD/sUSD wrappr, is that it allows unwinding a censorship prone DAI wrappr, SCCP-147, which exposes snx stakers to the risk of DAI depeg stemming from USDC censoring.

Specification and Overview

The sUSD/LUSD wrappr will function similar to the sUSD/DAI wrappr, where a users can mint 1 sUSD for each LUSD deposited and where users can burn 1 sUSD to receive back 1 LUSD (excluding fees).

Rationale

Supporting, LUSD/sUSD wrappr can still be considered to be acceptable in terms of risk, if it is used with limitations on the cap amount. Furthermore, diversification with other censorship resistant stable coins might also help spreading the risks involved and lowering the overall exposure on snx stakers. It is important to stress the need to rely on stablecoin wrapprs, as opposed to more volatile crypto-currencies, due to the negative skew impact on the debt pool when relying on a substantial amount crypto-currency wrapprs (as is the case on L1). In the long run, these stable coin wrapprs might not be needed as following the implementation of SIP-165, L1 sUSD and L2 sUSD can be interchanged and therefore sUSD supply on optimisim is expected to grow organically.

Technical Specification

N/A

Test Cases

N/A

Configurable Values (Via SCCP)

• Max Capacity := 0

• Minting Fee := 5 bp

• Burning Fee := 5 bp

Copyright

Copyright and related rights waived via CC0.