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AIP-23: Sunsetting Leveraged Yield Farming Support for TUSD

Background:

TUSD is relaunching a native token (instead of a Binance issued) on BNB Chain. The old TUSD token (currently on AF1.0) will be deprecated, with Binance planning to auto convert all TUSD deposited on the exchange for users.

Rationale:

  • Even though TUSD is a top-tier, safe stablecoin, if the liquidity in the pool gets too low relative to the position size, there is still a risk of liquidation from price impact when swapping to pay back debt.
  • TUSD borrowing amount is already low (< $100k USD), so discontinuing support TUSD will have small impact on the protocol revenue.
  • This is only impacting AF1.0. We will plan to support the new TUSD on AF2.0.

Implementation:

We will follow the same implementation structure for when we sunset WaultSwap (Ref.)
  1. 1.
    We will upgrade the TUSD farming contracts to allow for a privileged address (i.e., dev controlled address) to liquidate any TUSD’s farming positions.
  2. 2.
    Given there are still TUSD liquidity left on DEXs, we will swap TUSD to base asset as required to pay back debt. However, if at the time of execution, there isn't enough TUSD liquidity, we will change the liquidation method. Instead of swapping non-borrowed token in the DEX (this is the cause of bad debt or large slippage due to low liquidity), we will use oracle price and let the new liquidation strategy deduct the necessary amount from our wallet as determined by the Oracle.
  3. 3.
    Farming positions will now have all base assets and be able to pay back debt and close the positions.
  4. 4.
    Any remaining value after debt repayment is sent back to users.

Voting:

This AIP will be a single choice voting.
  • A YES vote would sunset the LYF for TUSD on AF1.0
  • A NO vote would leave the TUSD farms as is

Resolution:

  • The community voted to sunset the LYF for TUSD on AF1.0.

References: