IC Stable coin idea

I was thinking of one idea recently. About how could we have a stable coin pegged to USD on IC in a more reliable way than usual. It’s not like a proposal or something, just wanted to share with someone. Let me know what you think.

There is a lot of stable coin projects on Ethereum and other chains. Some of them work by holding real USD in their bank accounts, like Tether. Some of them over-collateralize using volatile currencies, like DAI. There is also a relatively new thing with algorithmic stable coins, like UST. Also, on the IC we kinda have a stable coin in form of cycles. Yes, it is not intended to be used as a fully-featured currency (although there is XTC from dank), but worth noticing anyway.

It seems like there are many approaches to this problem and nobody knows which one is better. Some say, that you have to have a real dollar available for each of your coin, like in USDT. But other argue that USDT is very unreliable and gonna fail like literally tomorrow. Some say that algorithmic stable coins are the future, but we all know what happened to UST.

Each of them have their weaks and strongs, some of them may fail, but other will survive. So it got me thinking, what if on IC, since we’re able to interact with eth-like networks, we could create a stable coin that will be pegged not to real USD, but to a basket of these existing stable coins instead? To diversify the stability, as one can say.

Just like they did with XDR. Let’s create a basket of, for example, five existing coins: USDT, USDC, BUSD, DAI and TUSD. Let’s vote (and re-vote each month or so, or even make it dynamic based on volatility of each token) on what the target proportion this basket should always have (e.g. 30% USDT, 30% USDC, 20% BUSD, 10% DAI, 10% TUSD). So, if, for example, Tether de-pegs by 10%, our token will de-peg only by 3%.

And let’s add an algorithm to support these proportions. If you’re depositing these stable coins and you keep the proportion (by simultaneously depositing each of these 5 tokens), then you get the exact amount of the IC’s stable coin back. If you’re depositing coins and break the proportion (depositing, for example, only USDT, when there is already enough USDT in the basket), you get a little bit less of the IC’s stable coin back. And if you, in contrary, restoring the proportion (there was not enough USDT, and you’re adding it up), you get a little bit more of the IC’s stable coin back.

With an algorithm like this some people might want to start arbitraging the proportion which will always keep the basket in shape. And since the basket is always stable, we should always be able to tell how much loss will happen if one of these underlying stable coins goes down.

It is not clear to me, what do you do if, in such a system, one of underlying assets goes down really hard, like how it was with UST. It seems like there should be some kind of additional reserve (maybe volatile), that we could use to create an incentive for people to replace de-pegged tokens with healthy ones. But in any case, even if one of them goes down 100%, for our coin it will only do a fraction of the damage, since everything is diversified.

I understand, that any idea like that has to be carefully refined. This is economics, and everything should always sum up to a non-negative value. Transactions on these networks are paid by the transactor, so if we want to make these transaction from our canisters, we have to find the money somewhere. But it also seems, that we could find some of these money in the proportion keeping algorithm and collecting fees from transactions made with this new stable coin itself. Also we could only target cheap eth-networks, like Matic and Binance chain.

Implementation seems simple in idea, but tricky in practice (as it is always with ethereum). Starting from the fact that we would have to interact with some semi-centralized node providers, like Infura and we would have to listen for eth events somehow. But it seems doable.

What do you think?


I think it is very interesting. But doesn’t someone already offer the service within ethereum?


The idea of synthetic assets with stablecoin is often used in sidechains as well as ETH, and I have experience with it. (That synthetic asset also included UST🫠)

DAI, which is generally considered a trustless stable asset, has temporarily lost price due to the impact of USDC as collateral, and as you said, a perfect stablecoin would be difficult to achieve.

My personal opinion is that issuing a stable secured by ckBTC is the best at the moment in terms of superiority and uniqueness.


The superiority I think is that CKBTC is the only token that I know of that is trustless but is collateralized one-to-one with BTC. So I believe CKBTC can be wrapped and transferred to ETH, L2, sidechains, etc. to do the same. I can imagine many other applications besides issuing stable coins.

I think increasing the mintage of ckbtc would be an effective marketing tool to develop the ICP economy.

Could you please provide a link to one of such services? It would be really interesting to see how they do that.

How does this work? I mean… how do you arrange a system like that to create a stable coin? People lock their BTC in a smart-contract and get a stable coin in exchange? And if they don’t want this coin they can go back and release their BTC in exchange for their stable coin. But how does the economics behind this work? Why the price is stable?

Sorry if this sounds stupid.

As far as I know, this is probably the most famous Dapp by synthetic assets (as the name suggests lol).
It seems very complicated to choose any asset as collateral or synthetic asset, but ckBTC would be a valid option, wouldn’t it?

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A very simple and famous example is Maker DAO (DAI).If there is no change due to the update, we can issue proportional DAI by making WBTC at least 150% collateral (asset back).

One example is that 200DAI can be minted by depositing $300 WBTC in the protocol.
If the price of BTC falls below a certain collateral rate, a protocol liquidation will be carried out and the collateral BTC will be forced to be sold.

WBTC is not strictly a wrap Bitcoin because, as you know, we need to trust Bitgo, who is a custodian.The ckBTC, which wraps with a canister protocol rather than with HYPE, is the true wrapped BTC.

The potential value of ckBTC will be significant because of the understanding that synthetic assets have advantages and values depending on such differences.

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