[IP] KNOX Collateral Basket Change Proposal #1

KNOX Dollar KNOX Dollar RFC
1

Summary

Diversify the KNOX collateral basket away from USDC.

Current Basket:
33% Compound USDC
67% Aave USDC

New Basket:
33% Compound USDC
33% Aave USDC
33% USDM of Mountain Protocol

Abstract

USDM of Mountain Protocol:
The USDM token is a rebasing ERC20 token, redeemable at a pegged 1:1 USD value by primary users. USDM is fully collateralized by “USDM Reserves”, held in segregated, bankruptcy remote accounts. The reserves are composed exclusively of short-term US Treasuries. Short term US government debt is considered the lowest risk USD-denominated asset. USDM rewards are generated by the interest paid by the US Treasuries held in the USDM Reserves.

The Mountain Protocol platform allows users to gather digital asset wallet addresses and wire details to fund their accounts. All funds in the platform are auto-converted to USDM once settled.

Problem Statement:

The current basket for KNOX contains 100% USDC across 2 different protocols: Aave and Compound. The collateral basket is not diversified, and some might have the opinion that USDC, a fiat-backed stablecoin, is not considered a Real World Asset(RWA).

Rationale

The addition of USDM into the KNOX collateral basket accomplishes diversifying away from only USDC, and adds a Real World Asset into the basket.

Mountain Protocol is built to be safe and has completed an audit by Open Zeppelin.

Risks

USDM is considered a Security as it is backed by US Treasuries. How will holders and governors feel about adding such an asset into the collateral basket?

The other risk is that if USDM were to be included in the collateral basket, it would lower the overall yield profile. It would be the lowest yielding asset, however, even though the yield would be lower the basket will become more diversified.

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I’m for this proposal.

Thanks Tom for putting this proposal forward. The collateral basket at inception was understandable given the plugins available at the time, however isn’t optimal given Knox Dollar’s mandate.

Now the USDM plugin is available I think we should take the opportunity to diversify the basket and move away from a collateral basket consisting of 100% USDC towards a basket containing RWA’s as in the spirit of Knox.

To my knowledge if Knox was to include USDM it would be the first rToken to do so differentiating it from it’s peers, hopefully aiding it to find product market fit.

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