Concerns about shezmu guage

I’ve noticed that ShezmuUSD, a stablecoin by Shezmu, has recently been added to the core pool of Balancer. This prompted me to take a closer look at their protocol, and I quickly identified some red flags. The majority of their stablecoin supply (around 500K out of 667K) is issued against their own NFT, which is itself issued by locking up their own token. This setup immediately raised concerns for me, as it reminds me of the issues we saw with old USDM.

Digging further, I came across a wallet (0x38B6C456Cb66A0AbCf604b6E1E0B0eE7DD988b87) that appears to belong to the Shezmu team. This wallet is used for their buybacks and currently holds around 300K of ShezmuUSD debt, which is already past the liquidation price. When I reached out to their Telegram group for clarification, they assured me that this wallet is used for buybacks and that there’s nothing to worry about. However, I remain concerned.

Currently, ShezmuUSD is trading above its peg, and the promise of high yields has attracted many users. But from what I can see, there doesn’t seem to be enough backing assets, which could be risky for the Balancer community. Given these concerns, I believe we should seriously consider whether it’s in Balancer’s best interest to continue supporting this gauge—or if it might be wiser to remove it before it potentially becomes a liability.

What do you all think? Should we kill the gauge or not?

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@manawenuz thanks a lot for bringing this to the community’s attention.

To make a better assessment of the situation, here are the current Shezmu gauge vote specs and pools that receive BAL rewards

Network Pool TVL ($) Daily BAL rewards
Ethereum shezUSD:sDAI 1.05mln 113.18
Ethereum shezETH:wstETH 786k 104.53

What is worth noting is that both pools have very low native token (shezUSD and shezETH) liquidity.

As a general reminder, pools are marked as core pools if 50% of their assets are yield-bearing and exceed $100k in TVL of which both pools are eligible to. The core pool list is generated weekly automatically through the Maxis operations tooling.

@Shezmu could you provide some context to the concerns raised by @manawenuz ?

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