Dear fellow Kintsugi innovators,

As most of you know, KBTC is currently secured by KSM collateral.

In an effort to further de-risk vaults and improve liquidity, there have been proposals to add KINT and USDC collateral support (see previous proposal).

(Read more here: https://medium.com/interlay/kbtc-multi-collateral-support-proposals-for-usdc-and-kint-9aa18a8f1e28)

Problem

Unfortunately, there has been a slight setback for USDC Vaults

The initial plan was to use anyUSDC, bridged over as follows:

Ethereum --Mulitchain/anyswap--> Moonriver --XCM--> Kintsugi. 

The first path ( Ethereum --*Mulitchain/anyswap*--> Moonriver) already works.
However, it is currently not possible to use Moonriver ERC20 tokens with XCM. The Moonriver team is actively working on adding this feature and coordinating with bridge projects. They are keeping us updated but at the time of writing, we cannot predict how long this might take.

Review of alternatives

Considering the demand for a USD-pegged stablecoin as an option for Vault collateral, we have the following alternatives on Kusama:

1. USDT via Statemine.

Pros:

• This would be a native representation of USDT, meaning we avoid additional centralized bridging risk.
• No technical blockers known so far

Cons:

• Currently no liquidity
• Tether is waiting for Ledger to release the Statemine app before they can mint more USDT. This process seems slow. Meaning: we will see liquidity earliest in July.
• Would need trading pairs with liquidity on Kusama for risk management

2. aUSD via Karura

Pros:

• Readily available, no technical blockers known
• Decentralized, asset-backed stablecoin
• Dotsama native asset, arguably good for ecosystem growth
• Buying aUSD as a Vault (not minting, see below) and using it as collateral is good for diversifying risk.

Cons:

• TVL is a bit low at the moment (~4.18 million aUSD minted)
• Trading volume is low on exchanges (https://www.coingecko.com/en/coins/acala-dollar#markets)

Other stables via Wormhole via Karura

Pros:

• We could get USDC
• Integrating with Wormhole is probably useful in any case, e.g. to make kBTC/iBTC available Solana

Cons:

• Currently no liquidity
• There is some technical work necessary by Acala to make Wormhole assets compatible with XCM.
• Would need trading pairs with liquidity on Kusama for risk management
• Centralized bridge risk (we also have this with anyUSDC though)

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Summarizing, this means we can:
(a) wait for USDC from Moonriver, USDT from Statemine, or USDx from Wormhole
(b) move forward with aUSD as a collateral asset

These are non-exclusive options - but we need to decide what to do first.
Would love to hear thoughts & input before this is put up for a vote.