Hello Folks,
The GP11 voting window is approaching and, as always, the eligible Folks Finance Liquid Governors will have voting power on the FF proposals. In this GP11 FF voting window, there will be three proposals, and we would like to gather feedback on one of these in particular before putting it to a vote. Below are the details of the proposal.
We look forward to your feedback.
Summary
This publication provides an overview of the decision to enable USDT (Tether) as collateral in the Folks Finance lending market.
Abstract
Tether USDT is a pioneering stablecoin in the cryptocurrency market introduced in 2014 by Tether Limited. It was created to provide stability and liquidity by pegging its value to the U.S. dollar at a 1:1 ratio. The introduction of USDt as a collateral in Folks Finance is intended to provide users with additional flexibility and access to liquidity
Motivation
Liquidity & Flexibility: By allowing it as collateral, users will have more flexibility in forming strategies and will result in an increased liquidity
Market alignment: USDt has proven its reliability and resilience in recent years. This has led most DeFi protocols to list it as collateral.
Portfolio Diversification: Expanding the range of acceptable collateral types allows users to diversify their stable collateral portfolios. This would allow users to use the two largest US stablecoins as collateral, thereby diversifying risk.
USDt market dominance: USDt’s dominance over other stablecoins continues to grow (USDt market cap), and allowing it as collateral will help to capture liquidity flow into the Algorand ecosystem, satisfying demand and riding the growing trend.
Community Treasury revenue: Enabling USDt as collateral will lead to an increase in protocol revenue through the payment of interest on loans against it.
This sounds great! finally USDT dominance is recognized. It has its downside of not so transparent, but even some swiss cantons recognizes it dominance and adoption, so seems fool if DeFi platforms will not recognize it.
I for one do not care to hold $USDT, but at the same time I can’t deny it’s real-world use case…I have definitely used it on other chains, if people want to use it, I won’t stand in the way! I will vote yes on this proposal. I have a feeling that $USDC will remain the majority preferred stablecoin in the Algorand ecosystem, however I’m all for freedom, diversification, and free-market competition! I say yes, and let the markets decide
It’s quite a late decision, in my opinion. People tend to think USDT is not backed and that it’ll collapse one day, etc. Maybe, but if USDT really collapses, does it matter for Folks or any other platform whether they have USDT or not? I don’t think so.
If I remember right, it was common practice across many DeFi platforms not to give it any collateral value. It has been listed but with 0% collateral. Now sentiment is changing in across platforms.
This is a fantastic proposal! I’m excited to see USDT a as collateral on Folks Finance. It’s a crucial step towards expanding the platform’s offerings and attracting a wider user base. The increased liquidity and flexibility for users, combined with the diversification benefits, will undoubtedly be a boon to the Algorand ecosystem. I’m confident that this decision will be a positive move for the entire Folks Finance community. I will be voting yes on this proposal!
Yes, for several reasons:
USDT’s reputation has improved significantly in recent years as a result of increased transparency and growing adoption. The market has reacted accordingly. Initially, most DeFi protocols only listed it as a borrowable asset (including FF), and some did not even list it in the lending market, precisely because of the uncertainty and rumours swirling around it. So, in agreement with the community, we decided not to list it as collateral so as not to jeopardise the protocol.
Also, the demand for USDC on Algorand and the interest was much higher than on Usdt, so this slowed down a potential listing as collateral
Now it’s important to recognize Usdt as the biggest stablecoin player and put it at the same level of Usdc to attract more liquidity into the ecosystem, also thanks to its continued growth and increasing demand
Every time there’s a new listing it adds a new risk to the protocol in case liquidations don’t work as intended. But at FF, we have several parameters in each asset that can prevent and limit this situation
European MiCA regulations regarding stablecoins come into effect in July. The future of USDt in EU under these regulations is unclear. OKX has delisted USDt in EU because of it. Isn’t it better to wait and see how this plays out?
Thank you for mentioning this, but I don’t see how it could affect the protocol (unless you have in mind a specific scenario). In this particular case, spot pairs have been removed
