[CLOSED] Exposing VST to Centralized Stablecoins

As a matter of decentralization, I don’t believe adding GLP in particular is that much of an additional step considering Vesta already has GMX and gOHM. OHM has significant amounts of exposure to USDC through its treasury (mostly DAI through Maker’s PSM, some FRAX, some actual USDC). GMX value would also crater if something went wrong with USDC because it’s so important to the LP basket.

Practically speaking, I don’t think it’s possible for a DeFi protocol to be truly insulated against a USDC-based black swan event unless that protocol makes significant capital efficiency tradeoffs to remain “pure” like LUSD or RAI. Vesta didn’t set out to make a simple copy of LUSD, so I believe it would be a mistake to attempt to mimic every decision made by Liquity.

One benefit of onboarding GLP as opposed to a more direct stablecoin onboarding is that it outsources some of the risk management to GMX. If USDC begins to appear risky, GMX can rebalance or re-allocate the LPs to account for that risk without Vesta needing to act.

The bottom line is that adding GLP is a relatively negligible concession for Vesta in terms of decentralization while being an enormous opportunity for growth. I’m in favor of adding it.

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