Synthetic USD is one of the most interesting ideas I've seen in this space in the last few years - love to see you guys pushing some of that forward into your application.
So many bitcoiners (and crypto people, in general) are chasing fool's gold by trying to hold USDC/USDT on chain. In each and every case, the asset has a chokepoint in the physical world that is subject to seizure. Taro to hold USDC, IMO, is wasted effort. We need to find ways to make bitcoin, itself, a derivative that tracks USD in a trust minimized way.
In a twisted irony, a synthetic USD coin (built on an inverse-perp swap of BTC) is the most disrupting thing that could happen to the USD. Imagine: A USD equivalent that no matter how hard they try, the US Gov can do nothing to stop it.
A few questions for you on the synthetic USD front:
  • Is this something that can be spec'd as a protocol and open sourced as opposed to being something built native within Kollider instances? (Is this already being done? Is there documentation here?)
  • Can the marketplace for these perp swaps be hosted and run in a decentralized way? Is there some way for this to be done in a more P2P fashion opposed to relying on a centralized coordinator (ie where Kollider or someone else doesn't to be the middleman for an exchange?)
  • What are the risks of depegging a synthetic USD? How are these risks handled programmatically (ie. stop loss / posting of addtional collateral, etc).
Have been following your project with great interest for the past few years. Most interested to see how you can use your talents to create open infrastructure that doesn't lock people into your particular ecosystem!
Thanks for your contributions so far, and excited to see what comes next, OW
Appreciate the kind words and the support! We also agree on the USDC and USDT part. To your questions"
The synthetics and the backend of the wallet are actually handled in an open source project that we maintain. Its called Lndhubx and you can find it here: Anyone can deploy this and issue their own synthetics. This would also work for a single person who has a node and wants to hedge some of their node balance.
Yes we think so. DLC's are quite promising. However there is a lot to learn as well in terms of behaviour of these synthetics as well as building up the liquidity. Right now we think that the most important thing is to get people in as smoothly and easily as possible. Once DLC's are ready and battle tested we can just swap out the backend, users and liquidity providers will be there in masses. Also as mentioned above, part of the counterparty risk can be mitigated by just plugging into many exchanges, not just Kollider. For example, you could hedge part of your synthetic on Kollider, some on Okex, some on Deribit and so on. Distribute the risk. We think this can already make a meaningful difference if shit hits the fan with any of those. You could have a DAO with an insurance fund that pays out if one of them vanishes.
There are 3 scenarios where a depeg occurs: a. Bitcoin price tanks and longs get liquidated to a point where buy liquidity vanishes and no one takes on these short (synthetic stable coin holders). In this scenario Kolliders risk engine will deleverage everyone and synthetic stable coin holders will be paid back Bitcoin of the amount of synthetics they hold at that time. b. Exchange gets hacked or disappears. c. Long periods of negative funding. For a) and c) we think that a model where there is an insurance fund that is managed by a DAO could mitigate the damage of these scenarios by paying for the losses. For b) using a basket of different venues could significantly de-risk this scenario.
Thank you for the thoughtful answer!