[BIP-392] Enable a new BRZ-jBRL Stable Pool Gauge | 2% cap (Polygon)

BAL Gauges
1

PR with Payload

Summary:

Enable a Balancer gauge for the new BRZ - jBRL stable pool (coined 2brl) on Polygon due to BRZ’s contract update.

BRZ and jBRL are both Brazilian Real stablecoins. BRZ is backed 1:1 by Brazilian Real (BRL) and issued by Transfero. jBRL is backed by various collateral types (BRZ, USDC, etc.).

Transfero and Jarvis Network co-write the proposal.

References/Useful links:

Jarvis Network

Website: jarvis.network

Transfero

Website: transfero.com

Description:

Transfero

Transfero Group is an international financial solutions company based on blockchain technology in the Crypto Valley, Switzerland. Its mission is to connect emerging economies to the global market through a platform of financial solutions based on blockchain infrastructure, providing greater efficiency, flexibility and access for people and businesses.

Transfero also developed BRZ, a stablecoin backed 1:1 by the Brazilian real (BRL), to provide South Americans a reliable asset for the blockchain industry.
BRZ was launched in 2018 and lives on Ethereum, BNBChain, Polygon, Aurora, Avalanche, Moonbeam, Tron, Solana, Algorand, Stellar, Ripple and Rootstock. BRZ was featured in a panel at the World Economic Forum in 2020.

A month ago, the EVM versions of BRZ began the process of going through an update and migrating addresses to use proxy contracts in order to improve functionality and secure a listing on ByBit.

Dubbed “BRZ v2”, it’s currently live on Ethereum and Polygon. We’ll be migrating the remaining EVM contracts in the coming weeks.

BRZ is integrated with fiat on- and off-ramps (ByBit and several others, in addition to Transfero’s own platforms) and crypto-card solutions (Wirex) and can be borrowed and lent on money markets (Midas).

Jarvis Network

Jarvis Network is an ecosystem of protocols and applications to bring decentralized finance to real use cases. Its first protocol, Synthereum, allows borrowing and exchanging synthetic fiat currencies (jFIATs) on multiple EVM-compatible networks.

The Synthereum protocol consists of four modules:

  1. Liquidity Pools: exchange jFIATs back and forth for USD-stablecoins or other jFIATs with no price impact on the Chainlink price feed.
  2. Credit Lines: borrow jFIATs against various collateral types.
  3. Wrappers: convert non-USD stablecoins for their jFIATs equivalent at a 1:1 ratio.
  4. Printers: mint uncollateralized jFIATs for flash loans, seeding money markets, or liquidity pools.

Most jFIATs have a fiat on-ramp and off-ramp (Mt Pelerin), can be lent or borrowed on money markets (Midas), can be used for on-chain and off-chain payments (Request, Superfluid, Mt Pelerin) or for earning yield (Beefy).

Motivation:

The role of the 2brl pool is to:

  1. Increase the stability of BRZ
  2. Increase on-chain liquidity of both BRZ and jBRL
  3. Connect Transfero and Jarvis ecosystems

Together, these 3 points allow for building a Brazilian DeFi ecosystem.

On-chain liquidity

BRZ

Since jBRL can be exchanged for USDC with no price impact, then exchanging jBRL or USDC for any other token has the same price impact; users can swap BRZ for jBRL and then for USDC to access the liquidity of the latter, or vice versa.

jBRL

jBRL’s main source of liquidity is the Jarvis Liquidity Pool (primary market); without going into too much detail, if the pool performs well, it will increase the number of jBRL minted, which will increase the liquidity in the liquidity pools and wrappers; also, it is essential for us to have more sources of liquidity (secondary markets).

Connecting ecosystems

The 2brl pool connects Transfero and its BRZ (essentially a fiat on and off-ramp for Brazilian DeFi users) to the jBRL’s ecosystem, enabling multiple use cases.

Lending without FX risk

Borrow jBRL, swap for BRZ, then redeem BRL.

DeFi on-ramp

Use BRL to mint BRZ, then access yield or on-chain liquidity.

Remittance

Connect BRZ fiat on-ramp and off-ramp to any other jFIAT or USDC fiat on-ramp and off-ramp (we have already performed payments between Brazil and Mexico and Brazil and France on the BNB Chain).

BRZ peg

Since jBRL can be exchanged for USDC back and forth on the BRL/USD Chainlink price feed and without price impact, arbitrage can be performed between the Balancer pool and the Jarvis liquidity pool to help maintain the BRZ peg.

Specifications:

Governance:

Transfero

Is a centralized entity.

Jarvis

No on-chain governance (vote via snapshot) and decisions are executed through a ⅝ multi-sig (only one team member in the signers).

  • Polygon: 0x2709fa6FA31BD336455d4F96DdFC505b3ACA5A68
  • Ethereum: 0x2CA74be68f0A0e053F030D143C1376806BaBEdc9
  • Gnosis Chain: 0xaE1026699f47B1fC572D65E1784b12c3A2574A25
  • BSC: 0x38329F26a075D53324EFd6e5F53869354Fa1cfBc
  • Avalanche: 0x2507A0d8E2aBe9464Ba2d9ddcA38A5ee5e60A434
  • Optimism: 0x40bd131fA9933D592344783E38f0c0F27767d9FA

Oracles:

jBRL uses BRL/USD Chainlink price feed; BRZ token has no price feed

Centralizing vector:

jBRL is primarily collateralized by USDC.
BRZ is a fiat-backed stablecoin issued by a centralized entity.

Market history:

jBRL has been live since February 2022 (on the BNB Chain); it has traded a bit off its peg during the FTX crisis due to a too-high supply of jBRL on a money market vs. a too few number of jBRL minted through the liquidity pool — the number of jBRL that you can sell in the liquidity pool = the number of jBRL people have bought; so if people borrow a lot of jBRL from the credit line or minted by the printer and sell them all through the liquidity pool, it can prevent other jBRL holders from selling jBRL through the pool, preventing any arbitrage.

The problem was solved by withdrawing jBRL from the money market, forcing users to repay their loans by buying jBRL from the liquidity pool.

At the same time, BRZ had an problem with its peg due its primary off-chain market was FTX, and the pool used a wrapped BRZ from Solana. Now, however, BRZ’s primary off-chain market will be ByBit.

Otherwise, both stablecoins have maintained their peg. We have learned how to prevent these situations from happening again or how to fix them quickly.

Value:

The 2brl pool will act as the main route for arbitrage and the use cases mentioned above (on-chain liquidity, lending without FX risk, etc.).

On the BRZ update, its changes and benefits

1. Transition to Proxy Contract:

  • Upgradable: Allows the contract code to be updated without deploying a new token.
  • Address preservation: The contract address remains the same after updates.
  • Cost efficiency: Reduces gas expenditures for contract deployments.

2. Switch to Multisig for minting:

  • Improved security: Protects against loss or theft of private keys.
  • Shared governance: No single entity has full control over the creation of new tokens.
  • Prevents unilateral actions: Prevents a single person from taking drastic actions.

3. Minting exclusively for a specific treasury wallet address:

  • Control of new tokens: Allows for permissioned control over the creation of new tokens.
  • Transparency: Increases transparency in the creation of new tokens.
  • Governance and monetary strategy: Allows for the implementation of a strategy of utilization of the created tokens.

4. Recovery of Tokens sent erroneously to the contract address:

  • User protection: Protects users from losses due to token sending errors.
  • Increased trust: Increases trust in the platform.

5. Change from 4 to 18 decimal places:

  • Industry standard: Increases compatibility of BRZ with other contracts, services, and Dapps.
  • Enhanced precision: Allows for greater precision in transactions.
  • Price flexibility: Allows for greater flexibility in adjusting the token’s price.

6. Global regulatory compliance:

  • Broad accessibility and acceptance: Opens doors to markets that would be closed due to regulatory concerns.
  • Legal risk reduction: Reduces the risk of legal complications.
  • Trust and credibility: Increases trust and credibility in the project.
  • More international exchanges: Compliance will allow more international exchanges to list the BRZ token.

Final note

The BRZ - jBRL (aka 2brl) pool already existed. This proposal is supposed to be an update in order to be compatible with BRZ v2. 2brl moved a total of 3 million BRL (or 600k USD), it has proven to be a quite healthy and relevant pool, these numbers should increase drastically with Bybit’s listing. Therefore, we’d like to relaunch it with BRZ v2.

Contracts

  • 2brl Balancer Pool (Polygon): 0x42942cDeC85078Cf0e28e9CB5ACd40CB53997Ed6 (AMP 200 because both tokens are redeemable).
  • jBRL token (Polygon): 0xf2f77FE7b8e66571E0fca7104c4d670BF1C8d722
  • jBRL (Polygon Synthereum Liquidity Pool): 0x30e97dc680ee97ff65b5188d34fb4ea20b38d710
  • BRZ token (Polygon): 0x4eD141110F6EeeAbA9A1df36d8c26f684d2475Dc
  • Gauge: 0x317e4966AE76fBf5110D2412c0c9332047399643

Specification:

The Balancer Maxi LM Multisig eth:0xc38c5f97B34E175FFd35407fc91a937300E33860 will interact with the GaugeAdderv4 at 0x5DbAd78818D4c8958EfF2d5b95b28385A22113Cd and call the addGauge function with the following arguments:
gauge(address): 0x317e4966AE76fBf5110D2412c0c9332047399643
gaugeType(string): Polygon

2

I have serious concerns about the transparency and risks of the BRZ stablecoin after reviewing their website and purported proof of reserves.

The link claimed as “proof of funds” at BRZ - Brazilian Digital Token is highly misleading - it only contains a PDF discussing the risks of BRZ, with no actual proof of backing funds provided. Transfero has not published any verified attestations, proof of reserve, or on-chain transparency tools that are now standard among major fiat -backed stablecoins.

This lack of transparency is a major red flag. BRZ claims to be backed 1:1 by Brazilian Real, but without published attestations, there is no way to verify this. The company could be fractionally reserved or not fully backed. And now with the proxy structure, BRZ token can be upgraded by Transfero without a warning.

Additionally, I’m alarmed that Transfero is using its own unverified BRZ coins to farm yields and incentives across DEX platforms. This is essentially printing coins to accumulate governance power and platform control.
Think this as if Tether or Circle start minting coins and join LPs to farm governance tokens for them.

In summary, I would warn fellow BAL users to exercise extreme caution with BRZ. The lack of any public proof of reserves or backing and manipulative farming behaviors are bright red flags.

I’m open to hearing Transfero’s perspective and any counterpoints they may have.

1 Like
3

Hello! Sorry for the late reply.

You had extremely pertinent questions and I’m glad you asked.

BRZ has a different dynamic compared to other stablecoins, especially those pegged to the US Dollar. While the USD-backed stablecoins are used as a store-of-value in centralized exchanges and DeFi protocols, emerging market currencies’ stablecoins are often used as a pass-through between local FIAT currencies and other assets such as BTC, ETH, USDT/USDC, among other tokens.

Referencing macro-economic theory, we can say the BRZ has a very high velocity, in the sense that once the user acquires the BRZ, he rapidly changes it to another asset. From Transfero’s point of view, we receive the money related to the newly minted tokens and within a few hours or days we need to repurchase them from Market Makers or Arbitrators.

Our daily operations pretty much resemble that of a Payment Service Provider (PSP). That is the reason why Transfero is on the verge of acquiring a license in Brazil for “Payments Institution” (Instituição de Pagamentos). The size of the float of the BRZ in circulation varies a lot depending on the demand for FIAT on-ramp from our partners, since the money that we receive today will soon be called back within a short time period.

Since most of the time the money is sitting either on transactional accounts or are being remitted internationally, making an End-of-Day (EoD) report fuzzy, we decided not to prepare this report on a daily basis. We also decided not to audit our collateral, since this would be expensive and the size of the BRZ is still small to justify that action.

BRZ is a centralized stablecoin and Transfero and its affiliates are subject to supervision by government-related agencies in different countries, including Brazil, Argentina and Switzerland. In Brazil, Transfero is subject to the law 14.478/22 which determines the guidelines for crypto companies to operate in the country. In Switzerland, Transfero holds a Virtual Asset Service Provider (VASP) License and is also supervised by the Self-Regulatory Organization (SRO) VQF, recognized by the Finma.

If you have further questions, please ask!

4

https://snapshot.org/#/balancer.eth/proposal/0xab53ac0a1f6ae70a0738799dc0a098b0b479ad69326e9b956c0954b760fcbb85

5

Thanks for the time answering the questions

Despite your claims of regulation and supervision, Transfero continues to demonstrate a lack of transparency around BRZ’s reserves and circulation supply.

This wallet (https://debank.com/profile/0xb90b2050c955cd899b9bc8b5c743c25770ebc8aa) contains ~ $100 million in BRZ on EACH chain - these are clearly pre-mined coins with no evidence they are backed 1:1 with fiat as claimed.
Why don’t they publish proof of reserve at least monthly, because you can see that there are many BRZ that don’t have this high velocity.

and you did not replied about the biggest concern, that is wallets thats look like Transfero (like this one 0x5c448044b87aeabbb4ed7a8be0f5e5e393c737d0), farming BAL with their own mintable stablecoin.

In summary, Transfero’s actions do not match its rhetoric around compliance and responsible governance. The pre-mine, yield farming, proxy contract, and lack of transparency are red flags.

1 Like