The mStable and ProtocolDAO teams had started the up-gradation of mUSD’s binding curve, as described in MIP7 (mAsset AMM Upgrade) as authored by Onur Solmaz.
The process involved several stakeholders in the mStable ecosystem and saw MTA governors, the Genesis team, and the Synthetix team collaborate and execute the upgrade.
Setting Things In Motion
The upgrade was authorized through a series of snapshot votes. These also decided the composition of the new mUSD market. The new basket composition’s key change was swapping TUSD out and replacing it with DAI and sUSD.
After a lot of thought and a lot of back-and-forth on the new basket’s composition, the team decided to implement the following mUSD basket composition.
Preparing The mUSD Contracts For The Upgrade
As mentioned earlier, the critical change was swapping out TUSD and replacing it with DAI and sUSD. To complete this process, bAsset liquidity needed to be migrated to match the target weights required. This was achieved through a series of token swaps that leveraged flash loans.
The token swaps were done with c.43 million mUSD on-chain and in circulation. The complexity of the process was further increased as at the time of migration, sUSD was slightly over peg. This severely hampered the mStable Genesis Team’s ability to source 10m sUSD because the cost of swapping that would have been incurred through slippage would leave the mUSD basket undercollateralized.
Reaching Out To Synthetix
To help solve the potential issue of the mUSD basket being undercollateralized, the mStable Genesis team decided to reach out to Synthetix to check if mStable ProtocolDAO and Synthetix sDAO could collaborate and tackle the liquidity issue.
Synthetix sDAO agreed to help mStable source the liquidity that the mUSD basket required ahead of the update. The team would then swap a little over 10m sUSD for TUSD in a 1:! Ratio. Specific reasons involving TUSD markets on AAVE dictated that the liquidity had to be split across multiple transactions.
mUSD, Live, And Kicking
Thanks to the timely assistance from Synthetix sDAO, the migration could be executed successfully. mUSD is live with sUSD in its core basket, along with an ecosystem to feeder pools around it. Without Synthetix sDAO’s assistance, the mUSD upgrade would have been dead in the water.
DeFi Is Stronger Thanks To the Collaborative Nature Of The Ecosystem
Many people attribute DeFi’s growth to its composability, which, while true, isn’t the only reason for its rapid growth; the open and collaborative nature of projects plays a significant role in the rapid growth of DeFi.
The collaboration between ProtocolDAO and Synthetix sDAO will certainly not be the last instance of cooperation between DeFi protocols.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.