Some additional information to clarify some points form the proposal after some questions were raised elsewhere
Safe Expansion:
Currently the mint cap for baoUSD is $2m. The mint cap directly affects the variable interest rate as changing the supply also changes the utilization ratio that interest rates are linked to. With this in mind, the supply cap should fluctuate over time, increasing interest rates at times of low demand to protect the peg.
Incentives outside of the Bao platform are key to growing the baoUSD supply safely & Bao has chosen Balancer to focus these efforts due to the flexibility of balancer liquidity pools over other platforms. This is important because Bao plan to incentivize liquidity for their new “base pairs” on the Bao platform starting with a BAO/baoUSD-LUSD gauge. Other projects can also propose gauges for baoUSD-LUSD liquidity and use Bao tokens to vote for their weights similar to balancer.
Decentralization Plans:
[note: these plans are in the research stage still and may change. It is our aim to remove all centralized control]
- Restrict collateral to only bSTBL, bETH, ETH by removing multisig control from the baoUSD Vault.
- Add governance contracts that execute actions automatically once they are approved via vote. Give it the ability to pause collateral deposits and expand and contract the borrow cap on the baoUSD vault and PSM.
- Revoke baoUSD ownership, preventing any additional minter contracts from being added.
- Pass maintenance of Baskets to a governance contract
After all four steps are complete baoUSD will only ever have ETH, the safest stablecoins (bSTBL) and the safest LSDs (bETH) as collateral. Beyond the community controlled supply/interest rate and the underlying composition of bSTBL and bETH, nothing else can change.
baoUSD will be immutable, decentralized and not reliant on any single collateral type.