USDtz for Liquidity Baking

[KevinMehrabi]

You are correct. There are many other factors. This however is pointed out merely as a data proxy.

Secondly, take a look at Quipuswap analytics and the history of Tezos liquidity-volume ratio. USDtz has literally outperformed every other coin on Quipuswap. That’s another proxy.

Taking a snapshot of Messari right now, at at time when Tezos is doing very well in terms of overall volume, we can see how individual markets are doing. It’s clear that there is much more trading of XTZ-USD than XTZ-BTC.

Another way to look at the subsidy of LB and whether we are ‘doing well’ in terms of neutralizing the subsidy (a built in mechanism of LB is that the .1% fees charged by AMM traders are burned to offset the subsidy in part or in full), is to see if LB volume is living up to it.

The subsidy is 2.5 tez per block, which is 7200. At 30 second block-times, there is a ~2,880 total subsidy of XTZ per day. Since the fee (which is burned) is 0.1%, 1000x that daily subsidy would need to be produced as volume per day. 7200*1000= 7,200,000 XTZ volume needed per day average needed to offset the subsidy.

At $7.67 price XTZ, that would be $55,224,000 in volume per day Average that Liquidity Baking AMM would need to achieve in order to completely offset the subsidy.

Looking at the Messari chart again, not a single XTZ-BTC market appears to achieve that in this snapshot. In fact, combining multiple XTZ-BTC markets hasn’t achieved that. However, several XTZ-USD or XTZ-USDT markets have been achieving that individually.

For good measure here’s another such snapshot from yesterday when the price of XTZ was lower. At the price of 6.60 per tez, 6.61*7,200,000 XTZ = the neutralizing volume number to meet or beat would have been $47,592,000

The highlighted line shows (below it) the first XTZ-BTC market making its appearance.

[Barry_Badrinath]

The way I see it at this point is that if bakers do decide to subsidize and swap out tzbtc, (which is legal for anyone in the world to own, but hard to get) with usdtz which is not legal for US residents and is void according to the terms and condition, we are putting trust in the person who holds the admin key (Kevin) which can burn anyone’s Usdtz, that he wouldn’t bow down to pressure if US regulators come checking in on him. That’s a mighty great leap with literally 0 reassurance or guarantees. That’s a no go for me, unless Kevin can offer more reassurance/guarantees.

[coredump]

I also want to know why this restriction exists, seems USDC itself does not come with this restriction, then what’s the reason with a wrapped USDC has more restriction than the original coin itself ?

[anonymoussprocket]

i can’t speak authoritatively regarding the legal issues with USDtz. my understanding is that ownership is fine, while minting has restrictions. there are specific KYC’ed entities that mint USDtz to seed the platform with tokens and then anyone on Tezos can hold them.

regarding the effort to move the management of the token contract to a multisig, it will be based on the same one used for the Kolibri protocol. all contracts are open-source and can be reviewed by anyone who’s interested. i’m also confused by the idea that stabletech the company can willy-nilly burn token balances. it’s a company, if you have a problem you can seek satisfaction in a court, multisig or no.

[Barry_Badrinath]

I would re-read the terms and conditions. I may not be a lawyer, but I don’t think it takes a lawyer to be able to understand his terms and conditions and how it relates to US residents. Literally the first two paragraphs read:

THE OFFER AND SALE OF USDtz HEREIN HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR UNDER THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION. THIS OFFERING IS BEING MADE ONLY OUTSIDE THE UNITED STATES TO NON-U.S. PERSONS (AS DEFINED IN SECTION 902 OF REGULATION S UNDER THE SECURITIES ACT)

{This says nothing about minting, but the actual sale of USDtz.}

IF YOU ARE A U.S. PERSON (AS DEFINED IN REGULATION S PROMULGATED UNDER THE
SECURITIES ACT YOU MAY NOT UTILIZE USDTZ SERVICES (AS DEFINED BELOW) AND ANY
PURPORTED TRANSFER OF USDTZ TO ANY SUCH U.S. PERSON IS VOID.

These paragraphs literally say if you’re a US resident you cannot own it, if you do it’s void. Pretty clear to me.

[KevinMehrabi]

Yes, this is also in the Tether FAQ, separate from the previous screenshot. I’ll post it here FAQs | Tether

This is not atypical in crypto.

And to reiterate why Tether matters as an example here, XTZ-USDT is already achieving the desired liquidity and more importantly the desired volume that Liquidity Baking has been intended/expected to achieves and it has been demonstrating so in several different markets. Therefore, if nothing else, any restrictions that USDT has had (which are similar to USDtz restrictions) have not been an impediment to achieving those desired ends.

[anonymoussprocket]

not a lawyer either, definitely consult one if you have concerns.

[kalouo]

Mind you, the question of restrictions on U.S. persons is largely immaterial to this debate because entities minting tzBTC also prefer not to deal with US persons.

[Barry_Badrinath]

How is it immaterial? Basically any US holder is at risk of getting their usdtz burned by Kevin who holds the admin key. At least tzbtc is not at risk of any sort of burn by an admin. What’s immaterial is trying to compare the subsidy to usdt that is not even at vote right now. This has the hallmarks of being a disaster for any US resident.

[Barry_Badrinath]

I have and the concern is clear, if you’re a US resident, you risk of getting your USDtz burned by the person who holds the admin key simply because you voided the terms and condition.

[kalouo]

What I meant is that, like all non-US financial entities, tzBTC minters (mostly based in Switzerland) have the same concerns and restrictions in regard to servicing US persons.

[Barry_Badrinath]

You’re still not seeing the difference, so let me try to explain it once again: yes, tzbtc minteries are tough for US residents to get tzbtc directly from them, although it’s not impossible as you need to be an accredited investor status. However, in their terms and conditions for tzbtc, no where does it say that any transfer of tzbtc to a US resident is VOID. When you compare it to usdtz, it says it’s VOID on transfer to a US Resident, meaning, if you get it the usdtz on the secondary market, it is still void if you’re a US resident and therefore Kevin can burn the USDtz. Do you see the difference?

[jzay]

I do think this is a huge issue as a large percentage of the Tezos community resides in the US effectively leaving them ineligible for XTZ-USDtz liquidity baking.

Without fixing this I don’t see how this proposal makes any sense. Especially given the increased counter-party risk.

USDC tokens on ETH locked in a smart contract on ETH to issue a new Token with another smart contract on Tezos is just too convoluted in my opinion and way more risky.

[Barry_Badrinath]

Listening to your twitter space kevin, this is extremely troublesome that you are being disingenuous and flat out lying. First, claiming that Sophia Gold backs your proposal is a stretch. Second, claiming that this is what all the core devs wants is a flat out lie. If this is what they wanted they would have said something or blogged about it. Here’s a portion of your twitter space transcribed.

[KevinMehrabi]

This is a fair point, which is why we’ve been exploring US-entry options. Keep in mind that between the 2 proposals on the table that there is still a big difference between

tzBTC: 1 single gatekeeping financial firm can mint and redeem, who charges predatory prices of .65% to buy and .65% to sell. This firm ostensibly does not care in the slightest about Tezos nor the success of Liquidity Baking.

USDtz: Bakers all over the world can enroll to mint and redeem as ‘Minteries’ and use their fees (average .25%) as supplemental income. Bakers who care for Tezos, who are trusted, and are engaged in the community.

Yes there are qualifications permitting. No this is not available yet to bakers in the US. So it is not perfect. I hope though that the spirit of what’s been done and where it’s headed is clear and agreeable.

[tigran]

I like the idea of having liquidity baking with a USD pegged coin, but I would rather use one of the coins that can be easily wrapped using the WRAP protocol… could be DAI, BUSD, USDT, USDC… It is a very low entry point for anyone.

It would be nice to use USDtz, as a native USD coin in Tezos, but it is not really an option to most people… as an example, RIGHT NOW on Tezex, the total liquidity is 294 USDtz and 0.88 USDC… And going through a mintery is bureaucracy that doesn’t make sense… not to mention that as of right now, there is 10x liquidity in WRAP for USDC than there is in USDtz

https://etherscan.io/address/0x5A8D152604404A07855903C18681eC51F132f334#tokentxns
https://etherscan.io/address/0x5dc76fd132354be5567ad617fd1fe8fb79421d82#tokentxns

[Barry_Badrinath]

@KevinMehrabi

tzBTC: 1 single gatekeeping financial firm can mint and redeem, who charges predatory prices of .65% to buy and .65% to sell. This firm ostensibly does not care in the slightest about Tezos nor the success of Liquidity Baking.

This is getting embarrassing Kevin. This is a flat out lie, again.

The fact that this doesn’t allow US baker or residents speaks for itself. You can try to sugarcoat this in any way, shape, or form, but the fact remains, your USDtz is a danger for US residents and to add this potential risk to the protocol itself makes this dangerous.

[KevinMehrabi]

It would not work with WRAP tokens as mentioned earlier because that circumvents the KYC/AML procedures of minting set up for those individual coins, especially and including BUSD/USDT/USDC, as well as (even though you didn’t mention it) PAX/GUSD. Wrap is a fantastic piece of technology but it doesn’t work for this purpose. Financial institutions looking for a risk-free (or closest thing in this case) return, wouldn’t engage with those coins.

The TEZEX model is still beta, and the liquidity changes constantly each day. You might go in and see 100k, or you might go in and see $5. It’s a peer to peer network with 3 liquidity providers on average. We are scaling it with a standalone TEZEX Changemakers app so liquidity providers can track returns and manage liquidity.

[KevinMehrabi]

As explained many times, despite the display you see here, not a single one of these firms other than Woorton is actively engaged in minting. In fact, you can look at the blockchain and track minting from the launch of the contract. Look through the block record.

This was in the original post. I encourage you to read the full article as well as the questions and answers.

[Barry_Badrinath]

Is it that hard to read the screencap that I posted? Woorton does not mint. It even says it in the screencap. Woorton is just a gatekeeper that distributes from the institutions that mint.

You still haven’t addressed the elephant in the room, which is the risk associated for any and all US residents who hold usdtz.