USDC Liquidity Baking

Gonna vent a little bit here because I’ve been frustrated,

Here’s the problem with USDtz LB and it’s the same problem with tzBTC LB. It’s just a dead end. There is no demand for tzBTC, it trades literally nowhere else in the world with meaningful liquidity and it’s hard to obtain and redeem. Of course there will be no volume, because nobody cares.

The requirements for successful liquidity baking are as follows:

  • The ability for nearly anyone, large or small wallet, to trade large amounts between pairs
  • The ability for arbitrageurs to easily arbitrage the pool
  • Both assets in the pool most be highly desirable

tzBTC fulfills none of these requirements, and neither does USDtz sadly. USDC is IMO the clear and obvious choice. It can be bridged to Tezos easily (pegged bridge, so arbitrarily large amounts can be arbitraged), and is widely accepted on nearly every single exchange in the world and over every chain. As a benefit, USD pairs are the most widely traded on dexes and are highly volatile so they collect lots of fees and as a result will burn lots of XTZ.

I get that we don’t want to “play favorites” but this is missing the forest through the trees. The forest being that if we are able to create deep, usable liquidity on chain the pie grows for everyone.


I have been hoping for the same thing. Is there any reason why tezos is waiting? Is there some USDC integration that we are waiting on?

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We are waiting on this USDC integration.

Yes, 100% agree. Right now, we are funding LP’s without benefit. The TVL is not being used by traders to get liquidity from, is not generating trading volume, precisely because tzBTC is not a desirable asset.

tzBTC is a grade D asset, nobody wants it, so it will never be traded in the Liquidity baking contract, and it will never offset the inflationary tax that is used to fund LB, not only that, low trading volumes in the liquidity baking contract means that the BIG capital is not using the liquidity to buy large quantities of XTZ, with grade AA asset USDC on the other hand, it will open the doors to many whales to invest in XTZ, since USDC is a more global, demanded asset, unlike tzBTC.

The point is to make XTZ more liquid, so only the asset that is against XTZ has to be desirable.

I don’t know why we can’t just stop losing our money that we print to fund LB, let’s just pause LB until USDC is here. Pausing LB doesn’t mean that it cannot be started again in the future. Why this continuous attitude of sacrificing ourselves for an end that it will not be achieved with tzBTC or Usdtz?

This is called, the culture of self-sacrifice, when you give yourself something of value, without actually benefiting from this whatsoever.

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It seems that tzBtc is a good test bed for USDC liquidity baking. If there was an issue having it occur on a lesser used asset would minimize risk. It seems to have proven itself so far. After the USDC integration I bet it will be part of LB.

The thing is that, when USDC proposal comes, it will be injected to share the subsidy with tzBTC, there won’t be option to vote for USDC receiving the whole subsidy. And everyone will vote to keep funding failed tzBTC all its long journey to become an AA world-class like asset USDC, which could take years and years, and we’ll be losing money all along the way, while limiting the full potential of USDC by only giving it half subsidy.

This is already decided, is going to be like that, tzBTC gang is real. They won’t let this subsidy go that easily. That’s what happens when you charge an inflationary tax, there’s public money now and gangs will form around it.

What do you think of wUSDC (USDC wrapped via the WRAP protocol)?

Otherwise good points, though I think USDtz LB would still be useful to traders who want to easily enter or exit the XTZ market without dealing with a centralized exchange. It’s true that nobody outside of Tezos trades USDtz, but that’s not required if you just want a stablecoin inside the Tezos universe. LB would incentivize enough USDtz creation that the slippage for smallish traders would be minimal.